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Basics are basics…

Jun 1

Posted by Steve Gray in Finance, Growth, Leadership, Risk Management, Starting out in business | No Comments

It’s June 2009 the global financial crisis is still happening. Watched a documentary on Chinese businesses going under, huge factories closed down, lots of out of region migrant workers now displaced. Sure this was one province (Guangdong) and particularly one city Dong Guan, so probably not a big cross section to measure by. The show was on SBS Australia’s Dateline (May 31) and showed a range of businesses closed and gutted out.

Here’s a quote from the show “In Guangdong province alone, 60,000 factories have now closed down and millions of migrant workers are searching for work.”

My first thought was what were they making? well it’s interesting the businesses included a printing plant, toy factories, and jewelry manufacturing… My second thought was do they make for the local market or export, export… third question, is the product a need or a want, mainly want.

So it comes down to the basics if the majority of what is produced is not for needs when a downturn comes the wants are dropped first. When an external order from overseas is pulled then the whole thing can collapse quickly. as the local economy is hanging on wants, the failure of one is felt across all.

Learn from this huge scale disaster and make sure you have a balance of income from needs based sources as well as wants based sources. If you have shares in a grocery company Co for example it seems logical that they supply the needs of people, then take your own business think about how you can supply to the needs based customers. Think carefully about this as a form of insurance to ensure you can balance your wants and needs to ensure sustainability.

Warren Buffets guide to investing, my view…

Apr 21

Posted by Steve Gray in Finance | No Comments

The American Warren Buffet has been in the investing game and winning for a long time, here is his guide to investing and my take on how to go about doing it…

• Hard work: All hard work brings profit; but mere talk leads only to poverty. 
- If the hard work you do does not bring profit  you need to get to doing smarter work, and work hard at that. 

• Laziness: A sleeping lobster is carried away by the water current. 
- Clearly the pain of hard work has caused laziness to kick in and you are debilitated by the hassles it caused, this does not happen all the time, try looking for ways to the pain and get on doing what you love.

• Earnings: Never depend on a single source of income. 
- Easier said than done sometimes… If you first thought was a Multi level business opportunity stop, it’s not the only answer and it’s not for everyone. So think about income from investments, in businesses, bank term deposits, rental properties etc…

• Spending: If you buy things you don’t need, you’ll soon sell things you need. 
- Ask yourself do I really need it, or just want it? Is it for my ego or??? Things you buy should enhance your life, not cripple it!

• Savings: Don’t save what is left after spending; Spend what is left after saving.
- Try putting 10% of what you earn in a separate bank account  you can’t touch easily. Teach your kids to do that ALWAYS, and leave the money there, unless they can earn more interest with savvy investments…

• Accounting: It’s no use carrying an umbrella, if your shoes are leaking. 
- Having an accountant is like having a great tool you always use in your toolbox, in this case the tool should have been something to fix the leaky shoes with!

• Auditing: Beware of little expenses; a small leak can sink a large ship. 
- Keeping track is vital, know if your margins are outside reasonable limits. 

• Risk-taking: Never test the depth of the river with both feet. 
- always have a back up plan, an exit strategy, a way of measuring how the risk taking is going and do great research before jumping in.

• Investment: Don’t put all your eggs in one basket. 
- And don’t harvest just eggs! Spread the load and keep things safe.

There, my take on investing using Warrens guide, notice how we find these things after people have gone to the wall! :)

Always make the “little bit extra”.

Apr 11

Posted by Steve Gray in Finance, Growth | No Comments

Business, Enterprises, Co-operatives, not for profit groups etc… I implore you to ALWAYS make that little bit extra, that “profit” that “margin”, that bit on the end left over after EVERYTHING is paid for.

Here’s why… In tough economic times, those who can stand the test of time are those who put away for a rainy day, simple. Those with that “bit extra” can grow their business, provide more resources for their customers, give themselves more leverage and build an enterprise which is more sustainable.

I guess in an ideal world your “business” should be such others want to buy it, they covet it’s uniqueness, its service ethic and so on, to really do this you need to have the margin built in so the future of the business is assured, either for you or others who take it on as a franchise or as a “straight” business.

Know what your industry standard is for margins, then beat it by a bigger chunk (so you can have a greater edge in the long run.) It’s all about longevity, sustainability, offering the right stuff at the right time to the right customer mix… it’s up to you but a margin goes a long way to assisting you to be a business owner rather than a business operator.

A margin or cash asset can be the ultimate strength you need to borrow funds to grow with, and let the asset grow, let it provide other investment opportunities without having to spend it, let it be the vehicle to propel you forward ad give yo the edge. Most people when they get a profit spend it and enjoy the rewards (short term usually) that brings. I am advocating you put the money away and leave it away, watch it grow and provide the sort of stability every business needs.

Think carefully about the way you build your business and maybe you even have to alter your mindset/s about Cash and finance to be able to effectively put this sort of plan in place, no matter what, make sure you have a margin of some kind.

Conservative or smart…

Mar 26

Posted by Steve Gray in Excellence!, Finance, Innovation and Creativity, Planning, Risk Management | No Comments

As more companies go down, and an unrepentant writhing takes place as people follow the sense of fear pervading workplaces, I am left to ask… Were these big companies not smart, or perhaps should they have been conservative?

Ok a boom is a boom, bust is what it says and no one wants to go bust. So how then do you even out the ride and make things settle down into a form of business which can handle the tougher times. Get conservative, get smart.

There is heaps of info on business smarts, same probably for being conservative (chat to your accountant if you don’t follow…) the idea is to put in action plans to ensure  you cover your butt. Meaning put some cash away for a rainy day. If you have more than enough then you can invest some of the rainy day money (preferably into things which you can sell and turn back into cash readily.) then as the investments grow you might be in a position to take on some longer term assets which return an income (read rental property)

By taking this sort of stance you make sure your business has a back up plan and a solid foundation to build security with.

I guess it all comes down to the aim of the business, do you aim to be in business for the long haul and reap it’s various rewards, or simply take risks and live in the fast lane for a while… Conservative or smart, perhaps it’s both.

Down up, left right which way & what next!?

Mar 12

Posted by Steve Gray in Finance, Growth, Risk Management | No Comments

Positives and negatives abound in the new found financial meltdown news, some people have lost value but not $$ (Big business CEO’s who find their stock options are “a little short on value”) while others have lost $$ but not value (e.g. work has dropped off for some contractors).

Despite all this the average “Joe” is now fighting to keep their jobs or hoping to get another one where the boss is not giving them grief and so the applications for positions has gone down but the number of applicants has gone up. Strange times call for strange answers…

Ages ago I wrote about a tourist town in New Zealand doing Ok, but what would happen in tough times? they supplied to the “wants” of the world and not the “needs” of the world. This put a few noses out of joint, but unfortunately the minute things went haywire so to did the tourists… bye bye, back another day when things pick up. 

It comes down to balance (yeah too easy for me to say huh…) if the overview of the situation is too much one way (providing just wants) then  hassles occur… if you provide to just needs then there are no want type situations to be taken advantage of. (imagine a supermarket, which just provided basics and NOTHING else… It equates to all work and no play.

So much for macro economic theory (of which I know little formally) what about Micro? Well the situation is this. You are in charge of the $$ at home and the things under your control, so you had better figure out how to balance things there (strangely similar? yep!)

Basic investing 101 says “Have a balanced portfolio” so you buy shares across a range of areas, resources banking etc… This helps to balance things if one goes up and the others go down, but if the HWOLE share market goes down, stiff luck. What it really means is, have some $$ in shares, some in business, some in Investment properties, some in the bank. In tough times you can shift things about to suit.

For most people the balanced portfolio idea outlined is nice but few have the ability to fund this many investment options. Challenging and frustrating all at once, so this is where a BIGGER picture plan comes into being. If you have just shares what are you saving for? An investment property… or the chance to put profits into the bank. Either way your plan should show you the way.

Lets face it many people have been caught out by the current financial dilemma and many more will feel pain before it’s over, but there are those who have taken a balanced approach and will not be doing things so tough as others. Half their luck. let’s hope in the positive future we can all heed their wisdom and build a sustainable portfolio for long term financial support.

Stimulus package 09

Feb 3

Posted by Steve Gray in Finance, Growth, Innovation and Creativity, Risk Management | No Comments

The Australian Government is due to release details of it’s next economic stimulus package today 3/2/09.

The previous stimulus package drew bad reviews from what many saw was a flawed package (handouts to family’s). The feeling seemed to be that the money went to frivilous purchases (gambling among them) while some saved the money for “A rainy day”.

The answer? Well the new package will be interesting to see, however the view from my side is this… Support and stimulate those with the most to give back to the community (in long term possible effect) the smaller business sector.

Imagine if they provided a range of effective support services to allow them to sustain their businesses through the challenging times, and then provide a platform to grow from when things pick up. In short training the business community to survive so they can thrive.

Over time the statistics on business failures has never been favourable so perhaps now is a great chance to address this issue. For too long it has been too easy for people to THROW away their hard earned dollars on a business idea they figure will bring them riches beyond compare, yet many find they have to work harder than ever to attempt to survive let alone thrive.

There are already all sorts of support packages available to those in the know, however a more coordinated approach beginning with an online overview of successful business practices etc might be a start, then follow this up with enterprise training packages aimed at giving the end user short sharp answers to pressing business challenges. 

I know it may not happen, however the resultant flow on to the community could be immense.

Hard Financial Reality

Dec 13

Posted by Steve Gray in Finance, Planning, Risk Management | 1 Comment

How many times have you heard terms like, “Never give up”, “Play hard”, “It’s all about taking risks…”, “Put your money where your mouth is”, “To make money you need to spend money” “If only we can make it through this rough patch”, “Set lofty goals to get results”, “Put it on the plastic…”, “It’ll be alright on the night”, “If only I had a bit more credit..”

And of course a whole lot more. Many of these are to do with life in general and business as well (often there is a strong connection with both!). The issue, being able to ensure your business is in good position so the above “terms” don’t effect you.

Easy to say but hard to do so lets look at some basics… You sell services or products, your business must therefore make money, you pay for things with that and have some left over all going well. If not  you are running a charity and are waiting for the next “grant” to prop you up, if you are in private business this can only happen for so long before things get too bad to continue.

Running out of cash happens, running up a credit card bill happens too! Often too easily, you max the card out, the bank gives you more, the monthly repayments get stretched and before long its out of control. If  you have become dependent on it, it becomes a drug.

Over the years I have seen drugs claim lives, and the credit drug seems to almost be just as strong as any substance around! The aim therefore is to ensure you can run without the credit card.

I have had to cut up about three credit cards in my life so far and have now vowed to not have a personal credit card of any kind, a mortgage, or line of credit for an asset sure, but only if I know I can service those loans and do my darndest to reduce the amount owing. My wife first alerted me to my “addiction” and cut up the first card, I owed $1,800 and it was creeping out (doesn’t seem much now but back then I could barely make the repayments if at all.) She looked at the monthly account and there was not a purchase on it for the past four months, I was just paying off things well in the past and not keeping up. The third time… you DON”T want to know… (And I am not telling!)

The next time was a card my wife was offered (special deal in the mail..) she wanted it, she got addicted slightly, I closed the account, I had a card for that account as well and it was not long before the bank was offering us a higher limit… that was the signal to get out so we did. Note it was MUCH harder to close the account than it was to open it.

In business however the stakes can be higher, a big loan to do capital works, buy new stock, the list goes on, but the ability to pay the loan/s back should be a critical factor in doing these things. At the time of writing this we are in the depths of a big financial downturn, the government is handing out cash to families etc to prop things up so more than ever having a good approach to credit risk is vital.

Oh and if you think you can have a credit card account and not tell your partner, think again… they will figure it out at some stage, and the proverbial will hit the fan, and don’t think for a minute it will be evenly distributed.

Here are a few points to stop the sleepless nights, constant worry and hassle credit can bring to some.

  1. Use it wisely – If you must have credit, never increase the limit past a reasonable amount you know you can readily repay.
  2. Cut it  up – This piece of plastic is probably killing you slowly, the stress, the hassle. GET RID OF IT cut it up NOW. Then make repayments to reduce it’s stranglehold NOW.
  3. Re finance – avoid high interest payments, scrap the card but get a personal loan with less interest to take the pressure off the higher repayments, Ok it’s still a loan but at least the repayments are less and you can’t “dip back in and use it”.
  4. Some people have the strength – Chances are you don’t have the strength to use it wisely and it will creep up on you like some form of insidious cancer, whether you can handle it or you can’t, decide now! AND TAKE ACTION.
  5. Evaluate  your position – If you have to pay it out can you? Is it really for emergencies and what constitutes an emergency? Is it just for business or other use as well? Can you up your profits or turnover to make the repayments if you do max it out?
  6. Plan – To make your business profitable, so you can avoid getting into a credit crunch. If you keep not making a profit, then something needs to alter. Prices up? More sales? New products or services? Better service? Better customers?
  7. Get advice NOW – There are financial support and counseling services available, USE THEM. If you have to hire a business coach to help you I guess that could be useful too (Just don’t put it on the credit card!)

Take action to get your business and or personal life in order so you can avoid being stretched, stressed, hassled and have sleepless nights that don’t help your performance at all. “Stop worrying and start living…” Oops! Another term for the list!

Asset protection

Nov 7

Posted by Steve Gray in Finance, People!, Planning, Risk Management, The Board Room | No Comments

In turbulent times there are the basics that need to be looked after like revenue needs to be more than expenses, but then again that should always happen, but in doing the basics an asset protection policy is always good too, who would like to loose a good performing asset right? but I am seeing too much of organisations not looking out for their assets, in particular the employees. So check this article out, It has a few clues.

Even in our own site we have lots of articles on employee engagement to give you more clues.

In closing I think that the basics are often underrated, so ask yourself what are the basics of a successful business and how can we maintain and then build on the basics, provide protection (security) and communicate that your organisation is here for the long haul, in an environment of fear, the security or sense of it will be well worth it in the long run.

Banks and the meltdown

Oct 10

Posted by Steve Gray in Finance, Planning, Risk Management, The Board Room | No Comments

An interesting letter to the editor in a local paper about Ben Chifley’s (past Australian Prime Minister) idea of a nationalised bank being a must have.. Well we had that in Australia with the commonwealth bank then that was privatised…

Okay so what if We had a bank that had some form of Co-operative approach or structure. One where the people had a say in how it worked, one where the idea of prudency was revered, where cash (and the customer) were king, and other assets were of value too, but the cash side kept building (perhaps to a debt reserve fund or similar). A bank where the people really cared because the bank was the people. A bank where you as a customer felt like the service team really did care, a bank where the service team not only handed out loans for building houses and businesses but turned up to see  it finished…. In short a bank that set it’s own highly rigourous standards without the Government having to intervene, as the bank not only met the stds set but exceeded them with ease at every turn.

In a time of greed, money grabs, plunging values and challenges a co-operative approach could make a world of difference.

Global Meltdown…

Oct 7

Posted by Steve Gray in Finance | No Comments

The USA market is in a big slide, the rest of the world is falling around it and the big question seems to be what to do about it.

It’s a free market, free to go up and free to go down… Well we are seeing that right now, so do we prop it up with billions poured in until the Government loses out? I guess they have a few “bill” to give, but my view, hang on to it. Use these funds that seem to be so readily available to rebuild once the whole thing has bottomed out. The USA market went below 10,000 points for the first time in ages, the Aussie market is down a few hundred points or 26% over the past few days.

Those in “the know” have pulled out early and are holding on to their cash, ready to buy when things bottom out. Perhaps that’s what the goverment should do, buy shares at the bottom of the market, rather than trying to prop up falling structures.

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