Finance - staying afloat OR Associate Professor Majella Percy Cash - - PowerPoint PPT Presentation

Finance - staying afloat OR Cash is KING?

Associate Professor Majella Percy Griffith Business School, Griffith University

Department of Accounting, Finance, and Economics

Question?

• You earned $1,000,000 in the financial year 2017 – 2018?
• Now you are being forced into bankruptcy? How can this be?

» (a) You have been robbed » (b) You have put it under the mattress and forgotten about it » (c) You have not collected from your customers (One.Tel) » (d) You did not record the $1,000,000 loan from your bank on a post-it. » (e) Answers (c) or/and (d)

Department of Accounting, Finance, and Economics

Or – what I wished I knew earlier….

1. CASH IS KING! 2. Therefore get paid upfront (eg, hotels, plane flights) 3. Congratulations on being here – the statistics for small businesses are pretty daunting

» While the vast majority of businesses in Australia are small -- accounting for 97percent of all businesses -- they're shutting their doors in alarmingly high numbers. According to the Australian Bureau of Statistics, more than 60 percent of small businesses cease operating within the first three years of starting. (Sep 28, 2015)

Department of Accounting, Finance, and Economics

Harvard Business Review, Churchill and Mullins, https://hbr.org/2001/05/ how-fast-can-your-company-afford-to-grow

• ”…..Few people understand that a profitable company that tries to

grow too fast can run out of cash—even if its products are great successes.

• A key challenge for managers of any growing concern, then, is to

strike the proper balance between consuming cash and generating it.

• Fail to strike that balance, and even a thriving company can soon

find itself out of business — a victim of its own success.”

Department of Accounting, Finance, and Economics

Why Small Businesses Fail In Australia,

By Libby-Jane Charleston, 28 September 2015 https://www.huffingtonpost.com.au/2015/09/28/small-business- failure_n_8187166.html

• “The Australian Securities and Investments Commission released a report into

corporate insolvencies for 2011-2012 that found: » 44 percent of businesses suffered poor strategic management, » 40 percent had inadequate cash flow or high cash use and » 33 percent suffered from trading losses.

• Greg Hayes from Hayes Knight Accountants & Advisers told The Huffington Post

Australia there are varied reasons why most Australian small businesses struggle to survive. » “One of the key reasons is that many small businesses start with a bad idea -- an idea that was never going to work. » But the biggest reason for failure is a lack of capital.

• It’s a common story that many people go into business under-

capitalised and they just run out of money,” Hayes said. » “There’s also the issue of a lack of proper training. They get carried away with an idea ….and with the 'romance' of owning their own business. Yet they lack education and awareness and that leads to a quick downfall.”

Department of Accounting, Finance, and Economics

Who is this?

Department of Accounting, Finance, and Economics

Regulators

Department of Accounting, Finance, and Economics

Why are you setting up this business?

• POINT OF DIFFERENCE (DIFFERENTIATION)
• Point of difference...don't be a commodity... build a moat
• Cost of scaling is expensive. Tough when competing on price. If you are

a monopoly in your niche you can charge more etc. and advertise more

Department of Accounting, Finance, and Economics

“Masters closing down was pretty significant for Australia ….Masters failed to deliver any differentiation to what Bunnings had already been delivering. 'Worse than Masters' - Wesfarmers' British Bunnings nightmare deepens Sydney Morning Herald

By Patrick Hatch, 6 February 2018

How do you get cash upfront!

SYSTEMS

• Act like you are transition the business for sale even if you are not interested in do so.
• Act like you are transitioning the business for sale even if you are not

interested in doing so.

• Put in place good business procedures and the correct way of thinking about

business.

• Think about software to help automated day to day businesses (Xero,

Salesforce = CRM has a lot of apps to automate)(a lot of blogs talking about this for any business types)

• Scaling:
• Blogs about automating day to day repetitive tasks.
• Automation + Software
• Austrade EMDG pays 50% of overseas marketing costs
• Partnerships/collaborations/affiliates/JV

Department of Accounting, Finance, and Economics

Department of Accounting, Finance, and Economics

Department of Accounting, Finance, and Economics

Get paid up-front!!

Department of Accounting, Finance, and Economics