Newsletter

February 2019 Newsletter

The Most Important Strategic Questions
Business Leader Insights for Success in 2019
Structure Follows Strategy
Unlock Greater Value with Xero

strategic questions

The Most Important Strategic Questions

By Tony Monisse

Clarity on who are your target customers, your value proposition and your unique key capabilities are the foundations for your success now and in the future.

It is that time of the year when business owners need to start planning for and thinking about their strategic focus for the next financial year.

We recently worked through an exercise with several business owner clients, where they addressed, what I believe are the most important strategic questions:

  • Where will you play i.e. who is your target customer?
  • How will you win in the market where you will play i.e. what is your value proposition?
  • What are the unique capabilities you require that will allow you to win i.e. what key processes, resources and alliance partners are required to win?  I also like to add to this Jim Collin’s (“Good to Great”) question: what can we best in the world at?

These questions can be best illustrated by the pyramid below.

waste triangle

My observation is that businesses that are not clear on the answers to these questions focus on activities outside of the pyramid.  Instead of focussing on high payoff activities that support their the value proposition, they can engage in wasteful undertakings that can be costly to the business

Two business clients have recently gone through the process of re-evaluating their operations based on the above pyramid model.  As a result, one of these businesses decided to focus on complex, short lead time project work for blue-chip customers and offshore less complex long lead time project work.  The other business chose the opposite direction by deciding to focus on routine services, which gave them the opportunity to scale their business and outsource the complex work.  In both cases, once the questions were answered each business was able to create the processes, acquire the resources and engage with alliance partners to deliver on their “how to win” for their specific target customer.

If you would like to discuss this process further, please do not hesitate to contact us.

 

2019 strategy

Business Leader Insights for Success in 2019

By Chris Mandzufas

Business leaders will again be greeted by a challenging business environment in 2019.  However, opportunities abound for leaders who can effectively manage the changes required and deliver strategies for sustainable success.

I thought I would share with you the results of the recent Mindshop survey of global business leaders.  It reveals interesting insights about what it will take for business leaders to succeed in 2019.

Business leaders will again be greeted by a challenging business environment in 2019.  As with all challenges, opportunities abound for leaders who can effectively manage the changes required and deliver strategies for sustainable success.

The recent Mindshop survey of global business leaders states that what is clear is the need for strong, focused leadership delivering well-defined strategies that take into consideration applicable market forces.  Leaders will need to build a stable footing to grow or consolidate their business, embracing the right technology and training their team in the right skills with regard to meeting 2019 head-on.

It will be a year of opportunities for leaders who align the unique strategic needs of their market, customers and organisation.

The Mindshop survey listed the top 8 business leader insights for success in 2019.  These are listed below for your reference

  1. Training needs: leadership, strategy and culture
  2. Are you too lean to grow?
  3. Build your own and your organisation’s resilience
  4. Consolidation or growth?
  5. Agile learning and development
  6. Technology to reinvent your business: hype vs reality
  7. Empowering your team
  8. Boost your probability of personal change success

I would welcome the opportunity to provide you with the full survey or even discuss any of these insights and how they may drive success for your business in 2019.  Please email me.

 

 

strategy roadmap

Structure Follows Strategy

By Tony Monisse

Choosing the right type of structure for your business will enable you to avoid potential future problems with debt reduction and exit.

Often when business owners look to set up an entity to operate their business, they do not consider their long-term business strategy.  As a result, they do not know what is the best entity in their specific situation.

Recently, I had an interesting conversation with a prospective client and a business owner who had purchased a $3 million business using a family trust structure.  The purchase of the business was financed with debt taken out by the family trust.

The owner wanted to reduce debt using the profits of the business, but faced the following challenges:

  • the business structure was a trust and all beneficiaries were on the top marginal rate – this meant all profits distributed to beneficiaries were taxed at 47%, leaving 53% available to reduce the debt
  • the trust could distribute to a corporate beneficiary where the tax rate is 30%, but this would mean having to manage a series of Division 7A loan agreements with increased compliance costs when, ultimately, the tax payable on these distributions would still be 47%

The owner contemplated transferring the business to a company structure where the tax rate would be 27.5% and 62.5% of the profits would be available to reduce debt, but this would incur Western Australian stamp duty of approximately $145,000, which was an impost the owner could not afford to incur.

Accordingly, the owner was caught between the existing structure where the ability to reduce debt was significantly reduced and the transferring of the business to a more favourable structure while incurring significant transaction costs.

What this case study highlights is the need to consider long-term outcomes sought versus the short term benefits of a structure when deciding on the optimal business structure.

Often there is a trade-off between a lower tax payable on trading profits versus the potentially lower capital gain tax payable on the exit of the business which means there is often no perfect solution.

When deciding on the optimal structure, questions to consider include:

  • what is the marginal tax rate of potential beneficiaries?
  • what is the level of trading profits?
  • is the intention to reduce debt used to finance the business?
  • are there any asset protection considerations?
  • are you likely to bring in business partners, investors and/or key employees into the business?
  • what are the options to restructure to a company or trust at a later date?
  • what is your exit time frame i.e. 3-5 years or keep it forever?
  • what are the exit scenarios i.e. can you sell shares to a prospective purchaser versus sell the business?
  • will you qualify for the small business capital gains tax concessions based on projected growth in the value of the business and the exit time frame?

The pending election and a possible change in the government and the tax laws could be another important consideration in determining the optimal business structure for many businesses.

Businesses often fail to address the above questions and related issues and as a result, choose an expedient structure to conduct their operations, which often creates problems in the future.

Determining the optimal structure requires business owners to answer all of the above questions and to focus on the long-term business strategy, while keeping the short term considerations in mind.

If you have any questions on the above, please do not hesitate to contact us.

 

Xero Road show 2019
Image source: Xero

Unlock Greater Value with Xero

By Jenana Atkinson

How to utilise the digital offerings in Xero and its ecosystem to optimise your business operations.

In February, along with 1000 other attendees, our team representatives, Jenana, Janice, Evan and Kylie, attended the annual Xero Roadshow.  What they have discovered is that 2019 is set to see the biggest changes ever implemented in Xero.

The theme for the Xero Roadshow 2019 was “view digital less as a thing and more as a way of doing things.”  Through various expert group discussions and presentations, we got a thorough insight into how we as advisors can utilise the digital offerings in Xero and its ecosystem to unlock greater value for our clients and find new and better ways of doing things.

One of the biggest ‘take-aways’ from this year’s Roadshow is that Single Touch Payroll will be compulsory for all employers from 1 July 2019.  Xero is Australia’s largest payroll product currently in use.  In conjunction with add on ‘Apps’ such as Xero Me and the online Xero employee portal,  employees can access their payroll account on their smartphones to check on leave balances and submit leave forms.  Other great features that make payroll easy are Xero Expenses, an App that enables the user to make digital expense claims ‘on the go’ and through the new mileage feature also allows employees to easily add mileage claims.

Many of our clients are already using Xero for their bookkeeping and accounting, lowering costs related to managing these crucial business areas.  For those who are not using Xero as yet, we recommend investigating options for the system’s implementation in your businesses.  The flexibility of Xero means that you can start by using just a few selected features and gradually add others, which means that Xero is tailored to your individual business needs.

Should you want to find more information on how Brentnalls WA can help you implement and make the most of Xero, email me or call 08 6212 7220.

If you have any questions on the above, please do not hesitate to contact us.