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BIGDEAL Tuesday, April 16, 2013
THE MAGAZINE FOR WA’S SMALL AND MEDIUM ENTERPRISES
Find out why this little coffee shop became a Big Deal P 6–7
Q&A on IR • Harnessing social media • Tips to win a tender • Hitching a ride with Big Oil
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BIGDEALCONTENTS CAFE CULTURE UNCOVERED The apparent rivers of cash generated by a good barista have got many would-be business owners thinking about taking the plunge into the cafe business. P6-7 Cover picture: Rob Mayberry at Northbridge’s Bookend Cafe.
STRIKING OIL How small business can get a slice of WA’s energy riches. P8
NO DIRTBAGS HERE Meet the teenage entrepreneurs who hell-bent on succeeding in business and aren’t letting their ages stand in their way. P10-11
NEGOTIATING THE IR MINDFIELD Expert advice on how to deal with industrial relations issues and make the bane of small business manageable. P12
VIEW FROM THE TOP WA’s Small Business Commissioner outlines his priorities for the coming year. P13
TO FACEBOOK OR NOT TO FACEBOOK The West Australian’s Marketing & Media editor, Daniel Hatch, on harnessing the power of social media. P14-15
TRY A LITTLE TENDER-NESS Winning a big tender can make or break a small business. Find out how to give yourself a competitive advantage. P18
457S: NOT JUST FOR THE BIG BOYS Employing overseas workers is a political hot potato but could be a viable option for the smaller end of town also. P23
LETTER FROM THE EDITOR I’m not sure who said that we shouldn’t worry about failure, but about the chances we miss when we don’t even try. I could not help but think of this when interviewing teenagers as part of this edition’s feature about teenage entrepreneurs. The teens were not scared at the thought their ventures could fall over, referring to the possibility of failure as the chance to learn. The great shame, in their eyes, would be not even trying to get their businesses off the ground. It would appear that their overwhelming compulsion to take action, their positive outlook and the ability to quickly bounce back from setbacks, are scientifically validated qualities observed in all entrepreneurs. With more than 200,000 small businesses in WA, there must be hundreds of thousands of local people with the same inspiring outlook on life. Big Deal is the liftout for this impressive bunch of people who are involved in setting up and running small and medium enterprises. In the masthead’s second edition, we cover issues affecting every stage of development of an SME. There is a feature about business incubators for start-ups, information on how to crack into the resource industry and the franchising sector, and a Q&A on industrial relations. There are features on how to win a tender, give a speech and run a social media campaign. This edition also looks at potential pitfalls for SMEs which make offers through group buying websites. The cover story spills the secrets of cafe society. A lot of thought has gone into Big Deal and I welcome your ideas for future editions.
Kim Macdonald P14-15
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JAIL BREAK FOR SMALL START-UPS Kim Macdonald sees a new cell culture growing in Freo as innovation finds a home
Iconic building: Surveyor David Cadman says clients are fascinated by the office.
avid Liem can come and go as he pleases from cell 34 at Old Fremantle Prison, despite the bars on the window and a spyhole on the door. But the fresh-faced young migrant couldn’t be happier to be holed up on the first floor of the maximum security wing at the old jail. He is using one of the 103 cells as an office, after a section of the heritage-listed prison was turned into a business incubator when the jail was decommissioned in the 1990s. The incubator concept started in the 1950s in the US and there are now more than 7000 worldwide, providing typically cheap office space and a range of business support services for start-up and early-stage businesses. The Fremantle facility, run by the not-for-profit agency Business Foundations, has two resident consultants and a range of low-cost seminars and workshops. Mr Liem pays $320 a month for his cell, which is less than a quarter of the price charged for a simple office in the area. Executive director of Business Foundations, Phillip Kemp, said the facility was believed to be the world’s only incubator set in a former prison. In line with its heritage listing, the 1907-built new division wing retains its original features, including most of the caged section which once separated the twelve inmates who started the infamous prison riots of 1988. The radial exercise yard is still surrounded by wire and old solitary confinement rosters adorn the interior walls. But the 7sqm single cells and the 12sqm double cells are now filled by aspiring entrepreneurs. Mr Kemp said that while the unusual environment often stole the
April 2013 BIGDEAL
Not so solitary: Sly grogging is no longer the main businesses at the old Fremantle Prison. Pictures: Michael O’Brien
Happily holed up: David Liem pays $320 a month. limelight, the incubator concept was about more than bricks and mortar. He said it was about a philosophy that society was better off for having financially self-reliant residents. “Business incubation is a management training program that happens to have a residential component,” he said. “So what a business incubator is offering is a two or three-year engagement with the owners of start-up or an early-stage business, to help them grow and develop that business. “What we know is that the best way to achieve those results of growth is to make it residential, so we offer them an office. “They are not paying rent, they are paying for the management training and it comes with an office.” Mr Liem said that before moving into the facility to set up his business, Creative Forte, he had
been working from home and scraping by on freelance jobs. The Indonesian-born businessman was not perturbed by the fact some of the worst offenders in WA history once filled the walls, including serial killer David Birnie, whose former lock-up is only metres down the corridor. “We have a really friendly bunch of people here, and a lot of the mentoring that goes on is done informally over lunch,” he said. “And all my clients love my office, and they always want to see where I’m working.” Surveyor David Cadman, who runs Innovative Compliance Solutions from the second floor, said his architectural clients were also fascinated by the iconic building. In a new twist on the old-ball-and-chain marriage riff, he shares a double cell with his wife Isabelle, who is the office manager. The pair pay $600 a month for the
office, inclusive of utility bills, and make regular use of support in areas such as marketing, social media, digital enterprise and finance. “It’s been a great set-up and we’d like to stay here for many years, but there may come a time where we move out just to give other people an opportunity,” he said. BF’s operations manager Gabor Hernadi said tenants chose to move out when they made the natural progression from start-up to independent business. He said the facility’s business advisors were also available to help members of the general public, who could book an appointment or walk in off the street. The facility is one of dozens of business incubators around Perth. Nest, in Victoria Park, is an incubator which takes the notion of “hot desking” to a new level. Business owners can rent desk space at the Nest office for a few days of the week. Rental prices change according to the amount of business, marketing, training and secretarial support provided. Small Business Centres have more than a dozen incubators, each one accommodating between 15 and 50 businesses and tenants staying up to three years. Peak body Business Innovation and Incubation Australia said a facility with 20 to 50 tenants would create employment for up to 900 people and turn over $200 million a year.
THE SECRETS OF
They are the small business du jour but life behind an espresso machine is not always frothy. Kim Macdonald looks at coffee commerce in Perth
f you blink when you pass by the Bookend Cafe in Northbridge, you could quite literally miss it. At only 1.5m wide and 1.8m long, it is not much bigger than a telephone box. It is not a regular-sized coffeeshop, but like the small bar revolution that preceded it, mini cafés are finding a niche of their own. Co-owner Rob Mayberry said that while the cafe was big enough for only two chairs and a lightbulb, it drew healthy sales of nearly 150 coffees a day to passing pedestrians “The main ingredient to running a successful café is to keep it simple,” he says. “Provide good coffee at a good price. That’s it.” The nation’s deeply entrenched coffee culture developed after World War Two and has rolled with the times to cater to today’s grab-and-go customers. Perhaps it is this resilience that helped coffee shops hold their own during the global financial crisis, with IBISWorld research showing steady growth in the sector even as discretionary spending dipped in the restaurant, recreation and other retail sectors. Nationally, revenue in the sector grew by 2.2 per cent over the five years to 2012-13, with WA accounting for 13 per cent of the take. IBISWorld economists claim this growth is due to coffee’s status as an affordable luxury and daily ritual, with most people preferring to cut back on restaurant spending than their morning cup of joe. The business consultancy firm forecasts the sector will enjoy a stark acceleration from next financial year, averaging 3.6 per cent annual growth in the five-year period to 2017-18. But growth across the entire sector does not mean all coffee shop owners are in for an easy ride. The Small Business Development Corporation said the low barriers to setting up cafes meant debutantes sometimes found themselves operating in an industry they did not understand. SBDC advisor Frank Green said the low barriers included relatively little set-up costs, especially when equipment was leased and the proprietor took advantage of free, branded items from coffee companies such as windbreaks, umbrellas, uniforms and barista training.
April 2013 BIGDEAL
Much loved: The Leederville cafe strip on Oxford Street. Picture: Michael Wilson. The lack of formal qualifications required to open a cafe also made for easy entry. IBISWorld figures show coffee shops and cafes have an average profit margin of only 5.2 per cent, which is below the 8.6 per cent average across the broader sector including pubs, taverns, bars, catering services, fast food services and restaurants. With little room for mistakes, cafe owners are searching for the elusive recipe for success. usiness migrant Niall Lawlor comes from a long line of Irish coffee shop merchants. As the owner of the three Tartine Cafes in the city, he clearly knows how to navigate the sector. His advice for running a modern day coffee shop can be divided into six main areas.
1. KNOW YOUR DEMOGRAPHIC
The Tartine Cafes all operate in the city but the three venues attract different types of clientele, and this creates some vital variations in how to best operate them. The Westralia Square venue is mostly frequented by business people and public servants who are paid on the last Thursday of the month. This means special deals are most effective when they are further away from a customer’s last pay cheque. The promotions are scaled down immediately after pay day, when their wallets are flush with cash. Mr Lawlor says the same pattern exists on a weekly scale, with discounts having a bigger impact on Monday and Tuesday, when customers feel a little cautious after their weekend splurges.
He says the industry appeared to be turning away from customer loyalty cards in the belief they were passe, but he has modernised the system to cater to his tech-savvy city clientele with an iPhone app. Paper cards are available for old school customers, like himself. The Tartine Cafe on the corner of Wellington Street and William Street attracts a different type of clientele, comprising backpackers and shoppers. Mr Lawlor says these customers are not necessarily searching for a coffee shop, but could often be impulsive if tempted by the right offer, such as a discounted iced chocolate on a hot day, or soup and a hot baguette on a cold day. Mr Lawlor says all his cafes open before 6am every weekday, without fail, to cater to the early-morning commuters who are traditionally loyal customers. But low pedestrian traffic on weekends makes it uneconomical to open on Saturday and Sunday.
2. FRESH FOOD, GREAT COFFEE
Mr Lawlor says customers are fast tiring of heavily-branded 80s style cafe chains that sell mass-produced processed foods. While these cafes have long dominated Perth’s cafe scene, the new style is for wholesome, nutritious foods which are baked in-house or by specialist artisans. He said the focus at his three Tartine Cafes in the city is about going back to basics, and the menus literally include some of his mother’s own recipes.
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The number one priority at any cafe is motivated personnel.
Hole in the wall: Rob Mayberry at Bookend Cafe in Northbridge. Picture: Astrid Volzke
“We use a natural yeast in our breads, creating hand-made and stone-baked breads on site,” he says. “The breads go through a whole fermentation process, so the bread for tomorrow was started this morning. “The idea is to make preservative-free sandwiches.” If there is one thing he’s more serious about than bread, it’s coffee, with Tartine Cafes offering a range of single-origin beans and a house blend that all come with ethical trade assurances. Mr Lawlor says educating customers about different types of coffee helped to encourage loyal patronage and to press home a point of difference with his competitors. “Sometimes regular customers come to order a cappuccino, but they’ll request it with a single-origin bean from India,” he says.
3. HIRE MOTIVATED STAFF
“The number one priority at any cafe — number one — is motivated personnel,” Mr Lawlor says. He repeats himself to stress the point, for it seems it cannot be overstated. Mr Lawlor says staff who are able to develop a rapport with customers and talk about the food with passion make a big difference to the success of any cafe. To retain good staff and to help motivate them, he matches every tip from customers and at Christmas time there is a “serious bonus” that reflects performance. “I don’t interview people when I
recruit staff, I just chat with them,” he says. “I want to find out if they will blend with the team. “At a lot of premises you don’t get the time of day from the staff, not even a thankyou. “But I believe that going to a café should be a good experience for customers, and staff help to create the ambience.” Mr Lawlor’s philosophy appears to be working, with five of his 15 staff having been with his business since he opened his first coffee shop three years ago.
4. VALUE FOR MONEY STARTS WITH SUPPLIERS
Coffee shop owners benefit from negotiating prices with suppliers that fall as their order grows. Mr Lawlor says negotiating contracts in this way helps to utilise economies of scale, especially where the owner has more than one cafe. It also supports his preferred business model, which is to sell high volumes of food at low profits. “We pay every supplier at end of week religiously, without fail, and for a supplier that is a huge advantage to their cash flow,” he says. “Paying in a timely manner also gives you that leverage in the negotiation of prices. “When we negotiate prices, we say to them that if we hit a certain level of orders, you must give us a return back.” Mr Lawlor says that developing a good working relationship with suppliers was crucial not only to the
bottom line, but also to the quality of the product. He is vigilant about ensuring supply contracts were upheld because the products were the backbone of the business. “If something is due in at minus 18 degree temperature, we will send it back if the temperature is not exactly at minus 18 degrees,” he said.
5. JUMP THROUGH HOOPS
Mr Lawlor may be flat out running three cafes, but he makes the time to hand deliver a single baguette to a valued client, because his philosophy is that coffee shops should do everything to please their customers. His strong belief in providing a personal touch means that he takes on the job of “delivery boy” for corporate clients who order boardroom lunches. “We started out with a $50 minimum order, but we have a very loyal corporate market, and the reality is that if they need a baguette, I will deliver,” he says. “If one of our corporate clients needs a single baguette, you’ll see me sprinting across the city with it.” Mr Lawlor says while it is important to have systems in place, a rigid system can drive away customers. A recent example involves a corporate client who did not meet the order deadline of 3pm on the previous workday. The personal assistant got in touch with him at 9pm on a Sunday
night, and he had no hesitations about taking the order. “If that’s what it takes, then that’s what you need to do to build your business,” he says.
6. DON’T NEGLECT THE PAPERWORK
Expert advice: Cafe owner Niall Lawlor at Tartine Cafe, Wellington Street, Perth. Picture: Dione Davidson
Mr Lawlor says it is important to conduct a regular “root and branch” review of all systems within an operation. A review he is currently undertaking involves renegotiating supply agreements, and in some cases fixing prices for 12 months, as well as renegotiating insurance and banking arrangements. “One big mistake we made was to get insurance quotes when we opened the first cafe, and add on the other two cafes when we opened them,” he says. “But we stepped back this year and redid our insurance, and we managed to get a 45 per cent saving by renegotiating.” He said that like all businesses, he could feel the pinch of rising electricity costs, and had responded by changing his energy use. “We used to have our display fridge on 24 hours a day but we’ve decided to empty everything into the big fridge at the end of the day, and turn off the display fridge. “That means we are saving 16 hours or electricity. “We’ve considered every single light that we use, and whether it needs to be on. “This is a way to create savings without increasing prices.”
BIGDEAL April 2013
GETTING SLICK WITH BIG OIL Kim Macdonald tells local companies hoping to service the energy giants where to find support
mall business is increasing its fight to boost local content on major projects, as international companies up the ante in the battle for a slice of WA’s resource riches. In a sign of growing competition, about 85 international companies have moved to WA or upgraded an existing local presence during the past 12 months. The statistics, compiled by the Export Finance and Insurance Corporation, show that about half of these businesses are in the profitable oil and gas sector. The growing competition coincides with a long-term slide in local content on Australian projects, which were once almost entirely Australian-made but now contain as little as 50 per cent local content in some offshore projects. While suggestions from some unions to mandate quotas is unpopular, industry and business groups as well as State and Federal Governments have launched initiatives to help local companies compete. The initiatives acknowledge that many WA companies cannot beat Asian manufacturers on price, with the steel industry’s own statistics revealing the local sector was 80 per cent more expensive than imports. But the initiatives recognise that local companies can win on high quality and flexibility in delivery. With some projects able to achieve up to 90 per cent local content, there would appear to be plenty of options for local operators. Under the Royalties for Regions program, regional companies can claim up to 50 per cent of eligible expenditure to a maximum of $20,000 to help them break into the resource industry. A separate national initiative, the Industry Capability Network, seeks to promote Australian companies in
Resource-rich: Statistics show a long-term slide in local content on Australian projects.
April 2013 BIGDEAL
the resource sector through its register of 65,000 companies. Advisors actively spruik on behalf of local businesses during talks with major contractors. Enterprise Connect, which is a Federal Government program, offers free advice and support to eligible Australian small and medium enterprises. Through its network of 100 advisers, the program includes business reviews and grant assistance. At a more grassroots level, the not-for-profit Business Foundations agency is set to soon launch a program to help SMEs break into the resource sector.
Being ‘mission critical’ opens new funding streams. The program, which will involve a fee, will include advice from consultants about how to meet requirements such as safety and how how to use technology to help overcome the Achille’s heel of local businesses — high prices. Director Phillip Kemp said the program could benefit business operators in fields as diverse coffee supply to fence building and high-end engineering. “We’ve found people who understand requirements and who have worked in the industry before,” he said. Incredibly, for Kewdale-based pipe maker called the Binder Group, the help that it required to win a contract on a WA project came from an unusual source — an export agency. As a local company bidding for work on a local project, it did not expect the Export Finance and Insurance Corporation would be able to help. But EFIC was able to provide Binder a warranty bond for $547,000 to cover its obligations for the Gorgon project, in the State’s North West. EFIC’s director of the SME and Mid Market, Leela Hanson, said the case met EFIC’s eligibility requirements because the Gorgon project will be used for export. The company was also deemed eligible for the financial assistance because its core work was deemed to be “mission critical” to the development of the project. In other
Upping the ante: Competition is growing in the profitable oil and gas sector. words, the types of pipes that it designs and makes are crucial to construction. EFIC’s charter is to help eligible local companies fulfil contractual obligations by providing working capital guarantees, bonds, term loans or loan guarantees, when banks were unable to do so. The Binder Group said the support was crucial in helping protect its financial obligations and enabled it to use its existing bank guarantee lines to fund additional LNG export projects. Sales and marketing manager Ian Davey said Australian companies generally needed help to avert the “concerning” long-term slide in local content.
He said he was concerned that Queensland shale gas projects in areas such as Gladstone and Curtis Island had recently turned to US manufacturers for pipes, and feared the same could happen in WA. EFIC’s increased focus on the resource sector is evident from changes to its own operation. For several years Mrs Hanson visited WA for one week every month but made a permanent move to Perth a year ago in a bid to boost the agency’s focus on the State. EFIC had provided assistance to nine local companies working on resource projects. The corporation was in talks with many more to help them take advantage of opportunities.
WHERE TO FIND HELP Industry Facilitation and Support Program bit.ly/14MUsx8 Industry Capability Network icn.org.au Enterprise Connect enterpriseconnect.gov.au
Business Foundations businessfoundationsinc.com.au Export Finance and Insurance Corporation efic.gov.au
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RISE OF THE TEENPRENEUR Kim Macdonald finds a budding party king and a dedicated app developer when looking at teenage business trailblazers
t’s Friday night in Yokine, and there is a lot riding on Tyson Vacher’s young shoulders. He is hosting a party for 300 people, among them a Beijing businessman who is considering an investment in the fledgling party management venture Tyson co-owns with a friend. To top it off, TV cameras and riot police are setting up across the road before the guests have even started arriving, amid fears the Facebook-advertised party will spiral out of control. Tyson calls his lawyer to confirm his legal rights and responsibilities in the face of police threats to close the party down if anything goes wrong. As he juggles the police, the media, an investor, his lawyer, a DJ and 25 bouncers, it is hard to believe that he is only 16 years old. By day Tyson is a Year 11 student, but by night, he is the general manager of Rads Entertainment, and part of a growing breed of teenage entrepreneurs, or teenpreneurs as they are known. His business partner, Radomir Kobryn-Coletti, is a 17-year-old
April 2013 BIGDEAL
student at the University of WA. Together they have hosted about 30 parties. While they have previously managed to only cover costs, they expect to earn profits now that they are formally registering their business and seeking investors. Dressed in smart black suits, they say their party concept is centred on fighting back against the bogan infiltration of youth culture with “classy events” that have strict dress codes, good music and professional photos. When Big Deal watched Tyson in action at the Yokine party his operation appeared a class act. He was not fazed when liquor control police turned up at 10pm to see if everything was above board. In fact, he invites them inside the house to show that alcohol is not being supplied to minors. But the officials find six of the 300 primarily underage guests had alcohol. The underage drinking would have been legal on private property had either of the hosts been 18, but Radomir is a month shy of the milestone age. Both hosts claim the drinks had been smuggled in without their knowledge but it doesn’t make a difference. The breach is enough to have the party declared an out-of-control gathering and it is closed down. By his own admission, Tyson still has some major lessons to learn about business, but clearly, he is on his way.
He got an early start at the age of 14, when he set up his own venture — Black Tie Waiters. The idea came when a relative asked him to serve food at her party because there were no independent waiters in Perth that were not tied to catering orders. “She paid me $50 or $60 for a few hours work,” he reminisced. “I thought I could have paid someone else to do it quite cheaply. “Then I thought I could start a company out of this, so I did. “I set up a website, and got registration, and I hired about 10 people for various jobs.” Tyson employed an adult licensee so that his casual wait staff, all aged over 18, could seek permits to serve alcohol. He turned over $15,000 during the year but gave up the venture when it became too much to handle on top of homework at his academic selective school, Perth Modern. Tyson said he hoped to own a business after finishing high school and university. He was so eager to learn life skills needed to succeed in business that he has already moved out of home, after recently having himself declared an independent minor. “I want the power to change things, and I just don’t think I will have that power in a job where I work 9 to 5,” he said. aomi Henn is an 18-year-old university student and the developer of two phone apps. The first, due out this month, is
called iConnect with Confidence and is a virtual name-tagging tool for the corporate world. Naomi was only 16 when she came up with the concept for the app, which helps users to know and correctly pronounce names of strangers at a meeting or event. The app is designed so that everyone in the room is linked through their phones, with an individual’s whereabouts displayed on screen, in real-time, through the use of a GPS system. “Simply by glancing down at your phone as you go to the meeting, check the GPS location of your networks and read the names attached to their pins utilizing the ‘Unwritten Name Tag’ feature,” she said. “By clicking on their pin, the user’s company and other important information will appear.” The second app, called iConnect Catering, is still under development. It allows sports fans at stadiums to order food from the venue’s canteen to be delivered directly to their seat. Alternatively, app users can opt to be notified when their order is ready to be picked up at the cafetaria. Under her business model, the cost of the app would be charged to the venue, not the spectators. The South Perth student said she got the idea from visiting stadiums and noticing the frustration of sports fans forced to miss out on game time while waiting in line for beer and pies. When Big Deal spoke to Naomi
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Facing page: Party organiser Tyson Vacher with some of his crew. Pic: Ben Crabtree
If you want to do something, if you want to make a difference in the world, why should you wait until you are 21 or 30? NAOMI HENN
Innovator: Naomi Henn, founder of iConnect Catering and iConnect with Confidence. Picture: Ross Wallace she was in Sydney as part of a two-week internship at a start-up venture group called Pollenizer. She won the internship through a competition held by a global group called Startup Weekend. Naomi said that making her dreams a reality had taken a lot of hard work. Last year she worked five part-time jobs, while attending university as a full-time student, in order to pay program developers. With two part-time office jobs and three hospitality jobs, her work week was regularly 95 hours long. “I would get paid for my jobs on Thursday, and I would empty my account to pay the programmers on Friday,” she said. “It was hard because I was making $13 an hour but paying programmers $100 an hour.” To save money she gave up parties and nights out and squirrelled away $18,000 in three months. A $20,000 bank loan on top of her savings helped her to get her projects off the ground. Her work ethic has continued this year, with a four-day-a-week traineeship in corporate tax and law at PricewaterhouseCoopers. At night, she attends Curtin University as a dual scholarship winner in business and sport. She trains most mornings and has multiple records in State, national and international hurdles. Naomi develops her apps in the twilight hours and at weekends. She credits her success to her drive, persistence and hard work,
Secure: Tyson Vacher with door staff Jevon Procter, left, and Wesley Majeks. Picture: Ben Crabtree
SIGNS OF AN ENTREPRENEUR ᔢ Strong need for achievement ᔢ Internal locus of control ᔢ Willingness to take calculated risks ᔢ A compulsion to take action ᔢ Can accept high levels of personal debt ᔢ Positive outlook and belief in themselves ᔢ Persistence ᔢ Ability to recognise patterns and trends quickly ᔢ Doesn’t feel the need to conform ᔢ Ability to bounce back after failure SOURCE: CURTIN UNIVERSITY CENTRE FOR ENTREPRENEURSHIP
claiming it wasn’t natural talent that had got her this far. In her early primary school years she had been at the bottom of the class academically and the last to cross the finish line in a race. She soon learned that it was possible to push to the front, if you had the drive to succeed. It is a motto she has lived by her entire young life. “If you want to do something, if you want to make a difference in the world, why should you wait until you are 21 or 30?” she said. “You might make some mistakes, but you will learn from them.” ichard Thorning, from Curtin University’s Centre for Entrepreneurship, said entrepreneurs were best described as individuals who took calculated risks for the rewards of starting something new. Mr Thorning, the centre’s director of entrepreneurship and
executive education, said there were three scientifically validated core traits associated with entrepreneurial aptitude: the need for achievement, an “internal locus of control” and a propensity for risk. The need for achievement is exhibited by behaviours such as competitiveness, strong self motivation and high personal standards and goals. The internal locus of control meant entrepreneurs had a strong belief that they created their own destiny. “Entrepreneurs never see themselves as victims,” he said. While successful businesspeople also share a strong drive and an internal locus of control, entrepreneurs are set apart by the third characteristic — their propensity for risk. “This doesn’t mean that entrepreneurs are big gamblers, but they are comfortable taking calculated risks and have the confidence to back their judgment with a commitment of their time, capital and their reputation,” Mr Thorning said. “Many entrepreneurs willingly accept high levels of personal debt to get a business off the ground.” Mr Thorning claims that people possess entrepreneurial qualities to different degrees, and these were often evident from a young age. “Entrepreneurs are doers, who would rather do something and see what happens than sit around planning it forever,” he said.
“It’s all about taking action, and this is something that you can see in varying degrees in young children. “Entrepreneurs have an attitudinal mindset that there is no such thing as failure, because if something goes wrong, it is a learning experience.” Mr Thorning said entrepreneurialism was equally prevalent in introverts and extroverts, and was often tied to a strong sense of independence. “They do not feel a strong requirement to conform. They are people quite comfortable doing something different to everyone else,” he said. Mr Thorning identifies the “three Ps” — positive outlook, persistence and pattern recognition — as traits often observed in entrepreneurs. He said entrepreneurs had an ability to see emerging patterns, trends and hidden meaning amid the daily data overload, and used this information to create business opportunities. Positive outlook and persistence were key traits behind successful entrepreneurs, and also the qualities which helped entrepreneur Richard Branson. “Entrepreneurs are noted, not for being successful at the first attempt, but for their ability to repeatedly bounce back from failure,” Mr Thorning said. “For their ability to learn from experience, to keep believing in themselves and their future success and to try again, and again, and again.”
BIGDEAL April 2013
TOP 5 THINGS TO CONSIDER WHEN EMPLOYING STAFF
INDUSTRIAL RELATIONS QUESTIONS ANSWERED
Small businesses face myriad regulations, which makes it difficult to convert your dream business into reality. Most businesses need good employees to be successful, which is why you need to have a good understanding of employment law. 1. What rules apply to you? WA is the only State to have two sets of employment laws applying to private sector businesses. For most businesses the national system applies, however, a small proportion of employees, mostly sole traders, are covered by the State system. The rules are different with many employers penalised for complying with the wrong set of rules. 2. Understand your minimum employment standards Minimum employment standards, such as pay rates, allowances, hours of work, overtime and penalty rates apply through industrial awards and legislation. These costs not only affect the number of staff that can be employed but when you can afford to employ them. Sunday work generally attracts a double time penalty, which makes operating on this day a more expensive proposition.
Paul Moss, from the WA Chamber of Commerce and Industry, fields some common workplace relations queries
I run a small aged-care facility and the nurses are threatening to go on strike unless I agree to their pay claim. When is it legal for my workforce to strike and what can I do to prevent this?
3. What types of employees? A decision needs to be made between employing full time, part time and casual staff. For most businesses, a core of full or part time staff provide quality of service with casual staff adding flexibility to meet fluctuations in demand.
Employees generally can lawfully take industrial action as part of negotiations for an enterprise agreement. However, there are some steps that need to be taken first. This includes a formal vote of employees, usually conducted by the Australian Electoral Commisson. The workforce must provide three days notice of any action, they must show they are genuinely trying to reach an agreement and they can only take action after any existing agreement has expired. There are very few legal options for employers where industrial action is lawful, and employers need to prepare for this possibility. The downside for employees is lost wages. If industrial action is unlawful employers can seek return-to-work orders, injunctions or even orders for damages.
I run a graphic design business with 12 staff. One of my employees is a mediocre performer. While she doesn’t do anything wrong, she is a very average worker and has no plans to leave the job. I would love to replace her with someone more dynamic. Can I legally sack her?
The unfair dismissal laws only allow for termination due to poor performance or improper conduct. In a situation where an employee is meeting your minimum requirements, they cannot be legally sacked in order for you to employ a better performer. However, this does not mean that employers have to accept mediocrity. One option is to establish clear and achievable performance targets that hold employees to a high level of performance. Actively measuring employees against these standards allows employers to recognise and reward those employees who meet these standards, and take steps to improve the performance of those who don’t.
April 2013 BIGDEAL
I own a metal workshop with about 50 workers. Only a few of the blokes are in a union, and they want me to negotiate an enterprise agreement with their union. They claim I am legally required to negotiate with the union. Is that true?
Under the national industrial relations system, employers are not obliged to bargain for an enterprise agreement to cover the entire workforce unless employees obtain a majority support determination from the Fair Work Commission. The determination provides proof that the majority of employees want to bargain for a collective agreement. So, unless these employees can convince the majority of their co-workers to support bargaining, the employer is not obliged to negotiate. However, where negotiations are occurring for a different type of workplace contract, such as an individual agreement, the employer is obliged to negotiate with a union — but only on behalf of that employee.
My part-time store salesperson currently works 25 hours a week, three days a week, from Monday to Wednesday. She wants to change her working days to Thursday to Saturday, to fit in with her husband’s new work roster. Do I have to pay her extra penalty rates for working on Saturday? She said she would be happy to change shifts for the same amount of money. She is on an award wage.
The bottom line is that there is no clear answer at the moment. All modern awards have an individual
flexibility provision that allows an employer and an individual employee to agree on alternative arrangements provided that the employee is better off. However, it is currently unclear as to whether non-monetary benefits, such as accommodating family arrangements, can be taken into account. The Federal Government’s independent review of the Fair Work Act raised the need to provide greater clarity regarding non-monetary benefits. The Government has failed to implement this recommendation, but has proposed to increase the obligations on employers to meet employee requests for flexible work arrangements to accommodate personal circumstances.
I am a bricklayer, and want to expand my team. Is it legal to only hire people who have their own ABN? A lot of contractors hire this way, but there are rumours that it’s not legal.
There are a number of factors that need to be taken into account when determining whether someone can be engaged as an independent contractor or an employee. The relevant legislation and case law have established a complex test for determining whether a worker is an employee or an independent contractor. If someone is improperly labelled then the business is generally liable to compensate employees for benefits not provided, such as superannuation or leave entitlements. This is made more complicated because a person may be deemed an independent contractor for one piece of legislation but an employee for another. Businesses need to seek appropriate advice before engaging workers as independent contractors.
4. Put it in writing Written contracts of employment are essential. They don’t need to be complex and for most small businesses a one or two page document will suffice. Employers also need to keep written records of the hours worked by employees and what has been paid to them. Increasingly, the role of unions has been replaced by Government inspectors who enforce compliance with workplace rules. 5. Avoiding unfair dismissal Unfair dismissal claims can really disrupt the operating of your business. Good recruitment practices help prevent hiring the wrong person and are a worthwhile investment of your time. In the national system, employers have a grace period of six months (12 months for business with fewer than 15 employees) to terminate underperforming staff without the risk of an unfair dismissal claim. The rules and regulations associated with establishing a business are complex and getting the right information is critical. Small Business Centres are a good place to start. Most employer and industry associations, including CCI, are able to provide hands on assistance on navigating the employment process. The Government’s Fair Work Infoline can provide information about minimum employment standards. ............................................................................
■ Paul Moss is the manager of
employer relations consulting at the Chamber of Commerce and Industry, WA.
SMALL BUSINESS TSAR BATTLES RED TAPE Small Business Commissioner David Eaton reveals his priorities for the coming 12 months
Voice of small business: Commissioner David Eaton wants compliance burden slashed.
A is the envy of the nation with a strong economy, low unemployment, generous amounts of disposable income and the highest business confidence levels of all States. But while the small business sector in WA is a major contributor to this economic success, it rarely receives its fair share of accolades. Over the coming year, I’ll be working with the sector to strengthen the voice of small business, to bring about the changes needed for the sector to thrive. From the independent position of Commissioner, I’m looking forward to working with other government agencies to help remove impediments to the growth and development of small business in Western Australia. A recent Small Business Development Corporation survey indicated that compliance had
increased over the past five years for 62 per cent of small businesses in WA. They said that complying with government regulations was time consuming, difficult and confusing. I want to ensure the interest of small business is considered when government is designing and implementing regulations and I want to see compliance burdens kept to a minimum. I also want to ensure that small business operators have access to all the information they need to make informed decisions. Information should be delivered in a form they can freely and easily access, at a time and place that is convenient to them. Making sure business owners get the right information before signing commercial leasing agreements or franchise agreements is also an issue I am passionate about. Since establishing the Alternative Dispute Resolution service at the
SBDC last year, I have seen, too often, the result of small business owners in WA signing agreements they don’t fully understand, and suffering greatly as a consequence. In general, small business operators are time poor. Between the day-to-day demands of their business and the after-hours practice of “catching up with paperwork”, there’s little time for updating business skills. I advise any small business owner entering into or renewing a lease agreement or business contract to ensure they understand the details before they sign. The SBDC can provide that information. I do not believe it is the role of government to hold the hand of business owners, or to make their commercial decisions for them. But I do believe in providing access to information and to create an operating environment that is fair and conducive to small business success.
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HOW TO ENGAGE SOCIAL MEDIA Losing face on Facebook or being a twit on Twitter are risks. Daniel Hatch explains
or small business, social media is like skydiving: a lot of people seem to be doing it, many of them claim to get a lot out of it, but you can’t help but think it wouldn’t take much for it to all go horribly wrong. Parachuting isn’t for everyone. Just because your friends are using social tools like Twitter, Facebook, Tumblr, Pinterest, Blogspot, Instagram, WordPress or LinkedIn, doesn’t mean it is right for your business. Gemma Tognini, managing director of strategic communications firm gtmedia, said that for many businesses there is simply no reason to use it — especially in the business-to-business space. “Social media is simply another
channel by which we communicate,” she said. “If the people we need to communicate with are not using that channel, then it makes zero sense to try to use it.” Think about whether social media will provide you with tangible outcomes when considered in the context of your overall business and marketing strategy. It’s just like a helicopter. You don’t invest in a chopper because it is going to make your business look cool, you invest in it because it is vital technology for effective service delivery. If you don’t need it and you don’t use it, it becomes an expensive and embarrassing adornment. (Although Twitter will take up less room in the car park.) Andrew Mathwin, digital strategist for Clarity Communications, said that for the right business, social media was an opportunity to get closer than ever before to customers and stakeholders. “Done well, it means your
supporters can carry and spread your message for you and provide useful feedback on your performance as a company,” he said. “Done badly, it can escalate business deficiencies and drive negative word of mouth. “Businesses committed to using social media are finding it can successfully build customer loyalty, be used for recruiting like-minded staff, create collaboration opportunities with staff, drive referral sales and even act as an early warning system should an issue or crisis break.” The next crucial step is choosing the right one — the one your customers are using. Mr Mathwin’s rough guide is that LinkedIn is great for business-to-business interaction, Facebook is very successful for fast-moving consumer goods brands, Pinterest is good for fashion and design, and Instagram is perfect for visual industries such as tourism. Having decided to take the plunge (let’s assume we’re back with the skydiving analogy, not the
helicopter one) you need to commit to it. Ms Tognini said the biggest mistake businesses made was underestimating the time and resourcing needed to effectively manage social media. “For one thing, you need an experienced person who understands the role of social media in a strategic context and someone who is mature enough to manage
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the difficult situations when they arise,” she said. Like the helicopter, it’s an important tool that can’t be driven by someone without the right level of experience and skill. John Cooke, social media strategist for public relations giant PPR, said the potential pitfalls could be avoided if you planned ahead. “The biggest killer for social media is infrequent use — you need
to use it or lose it,” he said. “There are plenty of people who can build you a Facebook page but if you’re not sending out quality content on a frequent basis and engaging people in conversation, you’ll make about as much online noise as the sound of one hand clapping. “Think ahead about what you want to share with your new online community. You also need to have
some rules in place about what your social media team can and cannot say, which includes how to respond if someone attacks your business in this very public forum. “Never pick a fight and always look to defuse the situation. Most of all, be honest and transparent, because telling a lie online can be forever.” Illustration: Toby Wilkinson
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The biggest killer for social media is infrequent use — you need to use it or lose it. JOHN COOKE, SOCIAL MEDIA STRATEGIST
SECURITY OF THE HERD
Buying a franchise gives you the muscle of a big player with the nimbleness of a small business
ranchises are tipped to win a growing share of the retail dollar as uncertain economic times roll on, according to research by PricewaterhouseCoopers. The PWC report forecasts that franchisees around the country will enjoy an average of 10 per cent profit growth in each of the three years to September 2015, and 9 per cent revenue growth. In comparison, profit for independent businesses which turn over between $10 to $100 million annually is expected to grow 9.3 per cent and revenue by 8.6 per cent in the same period. While the research does not compare actual profits, the faster rate of growth for franchisees indicates increasing success in the sector. Executive director of the Franchise Council of Australia, Steve Wright, said this was due to the ability of outlets to draw on proven business strategies during challenging economic times. One of the State’s leading franchise brokers, Steve Finn, said it was difficult to compare actual profit and revenue, because independent businesses had a much broader range of returns. Mr Finn, of Finn Franchise Brokers, said that someone operating a well-run, full-format franchise, which is a full-time operation employing staff, can expected to make 10 to 20 per cent profit on their yearly sales. Smaller, one-person franchisees, often known as a “man in a van” operation, can expect average profits of 50 to 60 per cent on yearly turnover. However, in real terms, the take-home pay for the man in the van is likely to be lower than the full-format franchisee. Despite the growing success of the sector, franchises were not suited to everyone. “Franchising is not for people who are not good at being in a relationship,” Mr Finn said. “The franchisee is virtually in a partnership with the head office. “If you are the kind of person who always wants to do it your own way, if you want to be a lone ranger and try your own ideas, then you will get more joy out of an independent business.” Under the franchising system, the franchisee is responsible for serving customers, running local marketing campaigns and dealing with staff. The mother company is responsible for matters such as
April 2013 BIGDEAL
national marketing campaigns, the co-ordination of product and supply sales, brand protection, legal issues, operational support and training. Typically, the franchisee pays the mother company five to ten per cent of their turnover each week for the benefit of these services and the use of the brand name. Mr Finn said another major benefit for franchisees was the economies of scale that came from inclusion in a big chain. A small coffee shop, for example, may buy only $20,000 worth of coffee beans but as part of a chain, it would get the group-buying power of a company which purchased $10 million of the product every year. “So while you as the franchisee may only be taking $20,000 worth of coffee beans, you get them at the rate you would get for a $10 million purchase,” Mr Finn said. “This could be two thirds of the price that the independent guy down the road pays, because he doesn’t have the group buying power. “So he sells a coffee for $4 and it costs him $1.50. “You sell for $4 and it costs you 90c.” While the economies of scale set out a compelling case for franchises, it was by no means an assurance of better profits. Mr Finn said there were plenty of examples where an independent coffee shop was far more successful than the many nearby chain stores, after creating a winning formula through its ambience, menu and location. Franchises hold strong appeal for investors, but Mr Finn says franchisors usually reject requests for franchisees to run the outlets under management, at least in the
Familiar fruit: The Boost Juice franchise brand is strong in WA. franchise outlet only once. The purchaser then owns the business and has right to resell to another party and retain profits from the sale. The franchisee can sell at the end of their lease, which typically lasts 10 years, or part-way through the contract. A new owner, who must be
Franchising is not for people who are not good at being in a relationship. STEVE FINN, FINN FRANCHISE BROKERS
first 12 months of the contract. He said this was because franchisees were required to prove that he or she could run the outlet in a way that upheld the company’s name and maximised turnover. Once satisfied that the owner could enforce the same standards from a manager, the franchisor was usually happy for this to happen. Under the franchising system, the mother company typically sells a
approved by the mother company, buys the business from the selling franchisee but pays ongoing weekly royalties to the franchisor. Mr Finn said the cost of buying a franchise could sometimes be misunderstood, because the right to operate under the brand was sometimes separate to the cost of setting up under the brand. A Boost Juice franchise for example, typically cost $80,000. But
it could cost a further $300,000 to fit out a store in line with the Boost Juice brand. This money was paid to tradesmen, not to the mother company. Mr Finn said franchisees did not get the automatic right to renew their contracts once they expired. Southern River MP Peter Abetz said there been some isolated cases where the mother company had refused to renew a contract, and, under an unusual clause in a specific contract, the franchisee was also denied the right to sell the outlet. Mr Abetz said the mother company then moved in to the outlet, changed the locks, and began operating it as its own store, without paying any compensation to the original franchisee. He warned franchisees to ensure their contracts ruled out such behaviour. Mr Finn said he was aware of similar events occurring on only three occasions during his 15 years experience, claiming it was a rare exception rather than the norm. The Small Business Development Corporation has called for better
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PROS AND CONS ADVANTAGES ᔢ Franchisee operates under a name and reputation of a well-established brand. ᔢ Franchisor trains franchisee, and often staff, in areas including manufacture, preparation, accounting, business controls, marketing and promotion. ᔢ Franchisor can help franchisee obtain location and zoning rights, prepare plans for shopfitting and refurbishment, and to calculate stock levels for launch. ᔢ Franchisee benefits from group buying power. ᔢ Franchisor may be able to get better rates of finance from financial institutions on behalf of the franchisee. DISADVANTAGES ᔢ There are restrictions over who a franchisee can sell to, as they must be approved by the franchisor. ᔢ The franchisor’s business model may support high turnover, which can often be more financially beneficial for the franchisor, at the expense of high profit margins, which can be better for the franchisee. ᔢ The franchisor may make mistakes with their policies, such as the introduction of a new product range, which may be detrimental to the franchisee. ᔢ The good name of the franchised business and its brand image may become less reputable for reasons beyond the franchisee’s control. ᔢ A potential franchisee may find it difficult to assess the quality of the franchisor, and whether that company can provide the continuing service that is needed to sustain the outlet. SOURCE: FRANCHISE COUNCIL OF AUSTRALIA
protections for franchisees, through tough new penalties in the national code of conduct, which is under review by the Federal Government. Martin Hasselbacher, acting director of policy and advocacy at the SBDC, wants financial penalties in line with those for breach of consumer laws, in the order of $100,000 for individuals and $1.1 million for corporations. The code seeks to prevent problems which have previously been perpetrated by a franchisor, such as bullying franchisees to contribute to a marketing campaign that does not advertise in the same State as the franchissee. Other problems encountered include inadequate disclosure of full costs and potential revenue to potential franchisee buyers.
Busselton business: Pastacup franchisee Michael McDonnell. Picture: SaraStorm Photography
WELL KNOWN WA FRANCHISES ᔢ Dome ᔢ Bedshed ᔢ Muzz Buzz ᔢ Pastacup
ᔢ Chicken Treat ᔢ Chooks Fresh ‘n Tasty ᔢ Car Craft ᔢ Kip McGrath Education Centre
PASTA PASTIME DOWN SOUTH ichael McDonnell says buying a franchise is like joining a new family. He was happily ensconced in the Subway family for several years, but after moving to WA from New Zealand, he decided to join some locals — the Pastacups. His Busselton Pastacup franchise is due to open later this month, making it the 16th store in the growing local chain. The 32-year-old says he decided to buy another franchise after moving west because the system appealed to his business sense. While reluctant to reveal the exact sums behind his venture, he expects his initial Pastacup investment of about $300,000 will provide a $100,000 annual income. He said he paid between $280,000 to $360,000 as a franchise fee, which also covered the cost of fitting out his Kent Street store. The fee includes an intensive,
three-week training course for himself, and some short-term staff to help train employees. He is required to pay a separate lease to his landlord, a proportion of his turnover to the franchisor, and regular payments to a Pastacup marketing fund. He expects to put in 40 to 50 hours a week for this six-figure salary. Mr McDonnell said his set-up costs were lower than they would be if he set up an independent business, because he was able to draw on group-buying power when purchasing ingredients and equipment. Access to credit was easier, with some banks willing to loan up to 70 per cent of the initial lease and set-up costs. He was also pleased that head office took care of big-picture issues such as marketing. While he believes an appreciation for the food industry would benefit
anyone considering a similar franchise, he claims a passion for small business is even more important. So, does a franchise really provide him with a sense of owning his own business? Or do the processes involved in running a franchise make him feel like the system owns him? “I definitely feel like I own my own business,” he said. “I’m not obligated to work 9 to 5 and I choose my own staff. “My goal is to own multiple stores that will let me have a fantastic lifestyle where I can go surfing every morning, and oversee the franchises.” His Kent St store is expected to employ about 15 people Pastacup said 10 of its stores were fully franchised, three were owned by the franchisor and three were joint ventures between the mother company and the franchisee.
BIGDEAL April 2013
AVOID A TENDER BENDER HANGOVER Bid Write, which specialises in tender and proposal management, offers 10 tips to maximise results when bidding for a tender Get ready for tendering. You don’t just wake up in the morning and run a marathon. It takes training, nutrition, advice and careful preparation to succeed. The same applies to writing tenders and proposals. For example, find out what information you typically need to provide and how to get it. Make sure you are familiar with the terminology and processes. Ensure you have the necessary skills to write clearly and prepare attractive professional documents. Ensure the right computer support and software.
Target opportunities and invest wisely. Tendering isn’t like buying a lotto ticket every week. Writing mountains of proposals, crossing your fingers, and rejoicing when one eventually wins is wasteful. Savvy organisations know that they are better off focussing on prospects with a high likelihood of success based on how well the project fits with their strategies and plans.They use a clear method to help them work out when to tender, rather than spreading themselves thinly over a wider range of projects where the likelihood of success is marginal.
Keys to success: Follow the advice of experts to get results when writing tenders and proposals.
Winning happens before writing. While the business community is concerned with eliminating unfair biases in the tendering process, those bidding for the work should not take this to the extreme by ignoring potential clients. It is important to build relationships, understand client needs and build your company profile before tenders are put on the market. This well help you to become positioned to win before the written tender or proposal is required. However, be aware that many organisations have clear rules regarding how, when and what contact can be made with potential buyers, and these guidelines must be respected.
Follow the rules. If you depart from tendering conditions and rules, you are putting your bid at risk. If the buying organisation wants you to fill in a form, do it. If they want your prices presented in a particular way, do it. If you need to lodge your tender at a particular time and location, do it. Remember that it is really easy for buying organisations to eliminate your tender or proposal because it hasn’t complied with their “rules” irrespective of your offer.
Time is your enemy. Writing effective tenders and proposals requires early planning. Figure out exactly who is responsible for writing each part of the tender and how long it will take to write draft responses. Estimate how long it will take to do internal reviews and approvals and ensure you have up-to-date pricing figures. And then
April 2013 BIGDEAL
double the amount of time you need to write the tender because everyone underestimates. It’s all about your client. Many of us find it easy to talk about ourselves but this is not the way to win work in a tender process. Tenders, proposals and quotes are actually about your client, not you. Have you shown you truly understand the client’s needs? What’s in it for them? How will they benefit from choosing you? Banging on about how good you are, especially with unfounded motherhood statements regarding your products, history and performance does not show that you are focussed on the client, and it is a sure way to lose that next sale.
Win the work first, then do it. A tender, proposal or quote is a sales document that is designed to convey your offer to supply in such a way that it convinces your client to choose you above all others. Many organisations go into minute detail to describe how the work will be done but forget they actually need to win the work first. While you need to prove that you can do the job, do not explain how you will do it at the expense of showing that you understand what the client actually wants.
Ignore competition at your peril. Many tendering processes are purposefully designed to maximise participation by competing businesses. So preparing tenders, proposals and quotes must be undertaken in light of
competitors. Figure out who they are, and what they are likely to say. Find a way to set yourself apart. A tender or proposal that is prepared without an understanding of competitive alternatives is unlikely to be persuasive.
Price is always important. Sometimes price is the dominant decision criteria and sometimes it isn’t. But it is always important. You need to understand how the price (or total cost) of what you offer is likely to be being judged and make sure you not only price to suit — but that you describe your price in this light as well. If you know you are low cost, explain why. If you offer higher value, higher cost services then describe this so the buyers understand and don’t make ill-informed comparisons. Maybe you should provide options to give greater price/value choice. Realise too that an obviously low price is often treated by buyers with the same suspicion as a price much higher than others. A good guide is that to win, you need to price reasonably, sustainably and be “in the ball park”.
One size does not fit all. Clearly, a simple price/availability quote is different to a big, multiple volume tender submitted to a resource giant on a mega-project. So businesses need to tailor the tender to the opportunity. A well-designed template should only be used where the quote is small, or when the bidder gets full control on how it is prepared and structured.
AVOID ACRONYMS IN PERFECT PITCH Complicated business language can be the death of a killer presentation, writes former television newsreader Deborah Kennedy
our audience needs you to KISS.* Many in the medical profession describe pneumonia as the old man’s best friend and, as I recalled that euphemism recently, I realised that pneumonia and the acronym have much in common — they can lead to death. Dying on stage in front of an audience, large or small, isn’t pleasant. A dodgy microphone, a video failing to play or a script out of order. The slightest stumble can feel like an eternity to correct, but losing an audience’s attention — when you’re trying to persuade and convince them to your point of view — is a waste of your time and theirs. The voice and its intonations are the master keys to success in any presentation but language, and how you use it, comes a close second. We live in an ever expanding world of word contraction. It was with some surprise that I heard not one but two commentators recently describing a one day international cricket match as an ODI. I don’t remember ever hearing about a TM in the gentleman’s game. While text messaging has been largely responsible for our contracted writing standards (think LOL, OMG and countless others) that trend should not be allowed to infiltrate “real speak”. All professions have their
traditional acronyms and it’s fair to assume, in the business world, that a large percentage of your audience will know what you mean. But just one or two may not — and they could be the investors you’re looking for. There has to be some deference to the acronym (think RSVP, PM, MP) and in the business world short forms like KPI, CCI, CME have all entered the lexicon. But the key to retaining your listening audience’s attention is to break down the not so familiar ones, on first reference. Then, use the acronym as you need it — perhaps dropping in its full definition once or twice again, for good measure. There are three key components to any presentation — engage, hold, persuade. If your audience can’t understand what you’re saying you’ll instead alienate, frustrate and exclude. The temptation to show off with a plethora of acronyms must give way to the realisation that simple remains best. Break down the acronyms, leave the FIGJAM at home and relate to the one or two in your audience who might just invest, if they know what you’re talking about. *Keep it simple, stupid. .....................................................................................
■ Deborah Kennedy is principal at
Speak Write Communications — [email protected]
Specialist advice for small business If you are a small business owner, or planning to start your own business, the Small Business Development Corporation has a team of experienced business advisors who can provide free and low cost advice and information on: Business licences and permits
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HAVE I GOT A DAILY DEAL FOR YOU . . . Kim Macdonald is told that group buying sites should be marketing tools, not core parts of any business model
roupon, Spreets, Cudo and other “daily deal” sites can help make a business, but as one Perth entrepreneur found out, the voucher deals have the power to break a business too. Brenda Duncan-Smith has warned other small business operators to enter deals with caution after an offer she made through Groupon late last year almost sent her beauty service to the wall. For the uninitiated, group buying websites sell heavily discounted goods and services for a set period of time and usually to a limited number of customers. The rise of the three-year-old industry has exceeded expectations, with one million vouchers sold across the country every month. But while the deals have revolutionised online shopping, and become a hot new marketing medium for small and medium businesses, Ms Duncan-Smith said they could be dangerous if not structured properly. She claimed her Groupon deal went awry because the company failed to follow instructions to restrict the number of $149 cosmetic tattooing packages, worth $450 to $900, to only 50 vouchers. The Nedlands-based dermal technician said Groupon sold 185 vouchers, or nearly four times more than agreed. “The
April 2013 BIGDEAL
next two days were horrible,” said Ms Duncan-Smith. “I had clients ringing non-stop to make appointments. “It got to the point where I was booked up until March and I couldn’t fit anyone else in. “I had clients who were so frustrated that they were crying and yelling down the phone. “They were taking out their frustration on me because I was the only point of contact.” Ms Duncan-Smith withdrew from the deal after servicing about 80 clients, claiming Groupon had breached contract by allegedly failing to make two of the three financial instalments it was required to make to her. “I simply could not afford to service another 100 customers for free,” she said. “Physically and financially, I could not cope. I had hoped that this would help get my cosmetic tattooing business off the ground but it turned into a very stressful time for me as I tried to figure out what was right for the customers and what was right for me.” Groupon Australia conceded there was a
misunderstanding about the terms of its contract with Ms Duncan-Smith, claiming it understood the sales limit was 200 vouchers. It has paid all outstanding money to Dynamic Skin Services, and refunded 109 customers who bought vouchers. “Groupon apologises for our part in any misunderstanding of the deal terms that occurred after the contract
signing,” said a spokeswoman. Stories about botched deals have some analysts questioning whether daily deals are based on a fundamentally flawed business model. This is because businesses often take a loss on the deal in a bid to market their wares, and sometimes take on more than they can handle. Some businesses are left with as little as a quarter of the usual value of a product or service, after discounting it by half and paying a further 25 per cent of the total
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ng f Brenda Duncan-Smith, owner-operator of Dynamic Skin Services in Nedlands, disputed Groupon over a group deal she entered into. Picture: Lincoln Baker
value to the group buying site. Researchers at the US’s Rice University claim Groupon executives have privately acknowledged the heavy cost to small businesses and plan to give them a greater share of the cut. As concerns over the sustainability of the business model have grown, shares prices have dropped. Groupon’s price has dropped from $20 when it went public in 2011, to $5.62 in late March, dragging down
depended on how many coupon holders returned as full-paying customers. He said too many businesses blew their first chance of making a good impression by failing to properly handle the surge in telephone calls to book appointments when a deal went live. He suggested hiring an answering service or call centre for a week could well be worth the money. It was also important for businesses to record email
I had clients who were so frustrated that they were crying and yelling down the phone. BRENDA DUNCAN-SMITH
the company’s value from $13 billion to $3.7 billion. There is also some suggestion that interest from existing customers is waning, with Groupon’s own global figures showing the average spend dropped to $64 in September last year, down from $77 a year earlier. However, analyst Sam Yip, from Sydney’s tech consultancy Telsyte, warns small businesses against writing off the sector. He believes the daily deals phenomenon has a bright future. Mr Yip says reduction from 80 sites to 40 is a sign the sector is consolidating, not dying, and he expects technological advances will further boost the sector’s popularity. He predicts the sites will soon utilise technology to better target suitable customers based on previous buying patterns and geographic location, rather the “spray and pray approach” of mass group emails. Mr Yip said the overall success of the deals for individual businesses
addresses for their voucher customers, so they could be contacted about new offers. But this too would be counter productive if the company could not cope with the surge in demand. “These deals can be like a fire hose because the amount of extra traffic it can bring in is phenomenal,” he said. “Businesses have to consider their capacity to cope and whether they need to put on extra staff while the deal is hot.” Complaints made to WA’s Department of Consumer Protection indicate many businesses are struggling to meet the additional demand from group deals. Acting director of retail and services Lainie Chopping said most of the 185 complaints made about daily deals in the six months to February were from consumers angry they could not redeem in a timely fashion. “We understand that voucher providers claim that only 40 per cent
of customers are likely to redeem, so they sell 300 thinking only 200 will be redeemed,” Ms Chopping said. “But in WA the uptake is much higher. “We spend a lot of time dealing with complaints from people who can’t get service.” The Small Business Development Corporation said the deals sites were usually profitable for small businesses in the long term, if properly managed. Business advisor Sonja Kanban said most operators took a loss on the initial deal in a bid to increase the pool of customers. Profits came if they were successful in getting coupon holders to return as full-paying customers. “The deals don’t make any money really,” she said. “It should be seen as marketing or advertising because what happens is you sign up to do a deal for a service or product, you discount it by about 50 per cent, then you give the daily deal website another 25 per cent. “This leaves you with about 25 per cent of what you would ordinarily sell for, so you’re not left with much at all. “If you can’t convert these customers into regulars, then you are losing money.”
TIPS ᔢ Work out your break-even figure before committing to anything. ᔢ Limit the number of vouchers and the period in which they can be redeemed. ᔢ Read the fine print on the terms and conditions and seek legal advice if needed. ᔢ Negotiate for better terms with the deal website. ᔢ Set conditions so the products/services are redeemable during off-peak times. ᔢ Treat the exercise as a marketing/brand awareness campaign. ᔢ Consider hiring a call centre and extra staff when the deal is hot. ᔢ Get contact details for all voucher customers and follow up by sending them promotional material.
Bargain buys: Technology advances will further boost the popularity of the daily deals sector, according to Telsyte analyst Sam Yip.
SOURCE: SMALL BUSINESS DEVELOPMENT CORPORATION, TELSYTE.
BIGDEAL April 2013
FISHING OFFSHORE FOR WORKERS
ffshoring is no longer the sole domain of big business, with technologies such as video conferencing, cloud computing and skype helping smaller operators to send work offshore. Nicolle Jenkins, the owner of marketing firm The Hub, said she used these technologies to send about 10 per cent of her graphic design work to foreign workers in Asia. Like many small business people, she said she had initially been reluctant to take the step because she strongly believed in investing in local workers and supporting the
local economy. But the realities of running a business in the current economic environment, especially in light of the payroll tax that she would have been made to pay if she had hired another local worker, meant she had to find a cheaper alternative. Ms Jenkins said the key to successful offshoring was to build relationships with key contacts abroad who could help local business operators tap the global talent pool. Hiring workers based on who offered the cheapest rates could end with poor results, she warned. MicroSourcing Australasia, which outsources work for Australian
companies to its headquarters in the Philippines, claims the trend is not killing local jobs. It claims that 43 per cent of its Australian clients — almost all of which are small businesses with less than 200 staff — have expanded their Australian workforce since their first offshoring experience. The Export Finance and Insurance Corporation, which provides help to local companies wanting to expand operations by setting up an office abroad, is aware of the potential dangers of the trend. The Federal Government agency stresses that it only provides assistance when a company is using a foreign office to expand its
operations, not where the offshore set-up is being used in lieu of a local presence. The potential gains for opening an offshore office are high, with the Asia Pacific region forecast to be home to 3.2 billion middle class consumers by 2030. Graham Hornel, owner of Questbay Migration Services, said offshoring may be a suitable option for companies which cannot find local workers and cannot import them through a work visa. Mr Hornel said the subclass 457 visa was available to small business but some were reluctant to use the subclass because of the uncertainty around recent proposed changes.
Tech push: Nicolle Jenkins sends graphic design work offshore.
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CALL TO CUT PAPERWORK SMEs drowning in red tape outline their gripes in a new business poll
he number one priority for small and medium businesses is to have BAS and GST reporting processes simplified. The 2013 MYOB Business Monitor found 70 per cent of respondents put the policy change in their top 10 priorities. The monthly or quarterly reports were seen as a major burden for time-poor business owners, with many complaining they were drowning in paperwork. MYOB chief executive Tim Reed said respondents felt so strongly about the issues that their vote in the Federal election would likely go to any party which supported the proposed policy changes. Mr Reed said the proposals, which broadly call for reforms of the business taxation system and a reduction in red tap, could help turn the election on it head. The sector has major voting power, with more than 212,000 small businesses in WA, which employ about 45 per cent of the State’s labour force. The policy proposal with the second-most support in the MYOB Business Monitor was the abolition of the carbon tax (61 per cent), followed by calls for more Federal Government investment in transport infrastructure in major cities (60 per cent) The sector wants more help for start-up businesses in their first two
years of operation in the form of waiving penalty interest charges on late tax payments (58 per cent). The fifth most popular policy change was the provision of free government-funded training for all small businesses on how to use the internet to grow and enhance their operations (54 per cent). This was followed by call for a reduction in payroll tax, which got 53 per cent support as a top priority and was consistently nominated as the number one priority by WA businesses in separate polls before this year’s State election. The MYOB survey showed half the respondents wanted further cuts to government expenditure in a bid to facilitate a quicker return to surplus. The survey shows only one in five SMEs (19 per cent) were totally satisfied with efforts by the State Government to improve the sector over the past six months, which is marginally better than the national average of 17 per cent. But the good news, according to the survey, was that WA SME’s were the least dissatisfied in the country with their State Government. The survey showed 31 per cent were totally dissatisfied with the WA Government, compared to a 43 per cent national average. The rest of the respondents did not agree with either sentiment. But local businesses were less impressed with the Federal Government, with the survey showing one in two WA SME’s (48 per cent) were totally dissatisfied with the Federal Government’s efforts to help the sector. This compares to a 54 per cent national average. About 13 per cent were totally satisfied with Canberra.
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