How’s your future looking?

How’s your future looking?

Have you started planning for 2021? How’s your confidence now New Zealand’s election is done — and what’s worrying you about business right now?

Our Spring Pulse Check has arrived and we want to know how you’re doing as we head into summer.

You can take the Pulse Check here and tell us how you are, how you’re managing and how you feel about the future. What is building your confidence and what’s causing you concern? Have you been affected by the high demand for shipping space or are you struggling to keep up with sales? And, if you had three wishes to ask of the new government, what would they be?

Let us know and, as a thank you, when you’ve finished the survey — which takes just a few minutes — you can enter the draw for some complimentary support.

Findings from recent Pulse Checks have shown small to medium size businesses in New Zealand have been holding steady and are ready to move forward despite the uncertainty that has occurred in 2020.

Your answers help us to keep you, the business owner, on track and your insights ensure we continue to have the right resources to help you.

Take the Spring Pulse Check here

How the Important but Not Urgent can catch you out.

How the Important but Not Urgent can catch you out.

As business owners we all undertake activities every day that loosely sit under one of four categories-:

  1. Important and Urgent
  2. Important and Not Urgent
  3. Not Important but Urgent
  4. Not important and Not Urgent

At one of our recent meetings of The Alternative Board in Christchurch, we undertook an exercise to establish how our business owners planned their activities during a normal day. The results were not only relatively consistent but also quite alarming!

Everyone was able to put a particular activity they had undertaken in the previous day into one of the above categories and the following themes emanated from the ensuing conversations.

  • For obvious reasons everyone placed priority on the Important and Urgent activities above everything else
  • A significant part of some people’s day was taken up with activities relating to the Not Important but Urgent category. Further discussion reveals that a lot of this activity came from staff and other enquiries. In some cases, this reflected a lack of training or specific operating processes and procedures within the organisation. This then necessitated the business owner getting involved in urgent issues that could have been handled elsewhere had better training or processes and procedures been put in place.
  • A surprising amount of time was spent on the Not Important and Not Urgent category. This including following social media, looking at emails of little relevance to the business owner and reading the media.
  • The biggest concern that came out of this assessment was the lack of time and effort put into the Important but Not Urgent activities. This category included such activities as-:
  • Proactive communication with key clients with a view to building key strategic alliances
  • Development of Databases/CRM systems to allow proactive communication with clients and prospects
  • Further development of websites, particularly around providing online sales capability
  • Strategic Marketing
  • Development of written processes and procedures
  • Staff development

“Why is this the case?” was the question asked. And “What was required?” to ensure that more emphasis was placed on this important category of daily activities in every business owner’s life.

The general answer to these questions was that in some cases the activity needed to move into the Important and Urgent category to prompt more proactive activity.  A common comment was “No one will die if I do not do this activity.”

But guess what? Covid-19 came along and what was previously deemed Important but Not Urgent suddenly became Important and Urgent. This new sense of urgency was created through;

  • Business owners unable to communicate with clients about their status under Covid levels because they had not put the time into developing their Database/CRM system. This had a direct impact on revenue streams.
  • Business owners unable to automatically ramp up online sales due to a lack of investment of time in putting the  process in place.

So, what’s the message here?

If you leave something that you have deemed as important for too long, at some stage it will go from being not urgent to urgent. This will not only cause unnecessary stress but may lead to wrong decision making because of the urgency now created.

It’s critical that business owners have-:

  • clearly identified what the activities in this IMPORTANT and NOT URGENT category are
  • ensure that they understand the risks should that activity become IMPORTANT and URGENT at short notice
  • understand what those risks mean to the underlying stability of the business and
  • make sure there is enough time going into this activity to reflect the ongoing risk.

These Important but Not Urgent activities form part of the monthly reporting from members of our Peer Group Advisory Boards. Fellow members continue to remind each other of the importance of ongoing regular work being done on these particular objectives to avoid some of the practical pitfalls that Covid has shown us can occur, as a result of failing to do so.

A great look inside a meeting of The Alternative Board Hawkes Bay

A great look inside a meeting of The Alternative Board Hawkes Bay

Damon Harvey editor and publisher of The Profit took some time out recently to discover what really goes on inside a board meeting of The Alternative Board.

TAB was first featured in The Profit in 2018, when it was launched in Hawke’s Bay by Wayne Baird and Russell Jaggard. Back then, Wayne and Russell were just starting to establish TAB, seeing the opportunity to offer the model that was benefiting small businesses across New Zealand and the world.

The more conventional advisory structure for a business is to have a governance board, made up of experienced business people across a range of business competencies such as financial, legal, human resources and marketing and sales.

This type of structure is usually for medium-to-large businesses and is particularly common in the corporate sector as well as the not-for-profit sector.

TAB was launched in 1990 by US entrepreneur Allen Fishman as a way for small businesses to get the benefits of a board structure. In 2012, Aucklander Stephen James introduced TAB to New Zealand and it’s now in nine cities and towns across the country.

Wayne Baird is the franchisee for Hawke’s Bay, Gisborne, Taupo and Wairarapa, with Russell being joined by experienced business leader and start- up extraordinaire Ailne Bradley as board facilitators.

Having been a board director and chair myself for the past 14 years, it was a pleasant surprise to turn up for a TAB meeting and be asked to go to the white board and rate out of 10 how I was feeling about my own business and also how I was feeling personally.

New Zealand had just moved from COVID-19 Alert Level 3 to Level 2 and so the four of the five members of the TAB I was joining were all happy to see each other in person, instead of via a Zoom video conference call, therefore they were in relatively high spirits, with the lowest rating being 7.5 (and this was me!).

Wayne hosted of the TAB meeting that was attended by local business owners Carol Reid of Soulpreneurs, Kay Castles of Admin Plus, Alieta Uelese of Learning Innovations and newcomer Joanna Monteith of Consult Ltd. Absent was Dr Sundar Jagadeesan of new dental practice Dentiq, who had only just reopened his practice and had a backlog of patients to treat.

The agenda for the meeting followed the TAB’s well-honed formula that affords everyone around the table equal opportunity to provide updates on their business, and then report on progress from actions they agreed at the previous meeting before presenting a new challenge or opportunity their business is facing.

Following the biggest disruption to businesses and the economy and the world strike on March 24, you would have expected the mood of the table to be sombre, but in fact it was largely the opposite.

The forced physical closure of their businesses and lockdown spent at home had given these business owners the time to not only keep business going and staff motivated but also to adjust their businesses to the new normal.  When it came time to put forward a recent challenge or opportunity, the true benefit of the TAB board format came into its own.

As each member addressed their fellow board members, they were scrutinised first, responding to a range of questions, some expected but many unexpected.

The appeal of the process was that the room wasn’t full of ‘yes’ or ‘no’ people, nor those who had a vested interest due to being a staff member, director/ governor or an investor/shareholder.

The questions were tough and the advice even tougher. And that’s the gold of TAB. There are no hidden agendas, you get what you give, as your time to put something forward soon comes.

For small business owners it can be a lonely place leading from the front but with TAB, there is genuine support as well as accountability.

As the facilitator, Wayne gave everyone an opportunity to firstly ask questions rather than risk going straight to the possible solutions.

This was an easy trap for me to fall into and I quickly realised that I couldn’t shoot straight to what I thought was a solution. Instead, by asking questions you get to fully understand the situation each business owner is experiencing before putting forward any suggestions, ideas or advice.

I like to think of myself as an ‘ideas person’, so this was particularly challenging, but the approach works. Not only does it draw out the full picture but it enables the business posing the issue or opportunity to get a broader and more external perspective.

Everything is confidential; there’s no risk of ideas being leaked. As an observer I signed a confidentiality agreement, so I’m not going into any detail on what was raised.

However, two members had challenges they wanted to moot about how to evolve their businesses, while the other two members were looking at solutions to get the best out of their teams.

My summation was that the challenges and opportunities weren’t anything I hadn’t heard before but it was the process – the listening, line of questions, advice and agreement for action – that was unique.

There’s accountability and it’s not to those within your business that perhaps you can make excuses for not actioning as promised.

To close the meeting, Wayne asked each member what they intended to action before the next meeting and it was recorded. After the formal meeting, Wayne contacts and works with each member on their actions.

Kay Castle sees many benefits in becoming a member of a TAB board, saying that she always gets something valuable to further develop her administration support business.

“We all share ideas and our experiences and there’s a high level of confidence and trust in each other. We’re also very fortunate to have Wayne and the opportunity to tap into his wealth of knowledge.”

Like the board meeting format, the final word must go to Wayne (not me …).
He says his personal vision is to work alongside as many SMEs as possible to help them reach their own goals and visions for what they want their business to be.

“When you ask questions, you gain clarity. I often see business owners who leave the meeting with a completely different viewpoint. That’s the beauty of the collective wisdom around the table and one of the aspects that makes The Alternative Board different.”

As we all move out of COVID-19 and look to keep adapting our businesses, it’s worth contacting Wayne at [email protected] thealternativeboard.co.nz to discuss how TAB can assist.

How do we treat our employees?

How do we treat our employees?

Have you ever considered that the way we treat our employees has similarities to how we bring up our children?

If we don’t guide our children, establish boundaries, praise when appropriate and clearly communicate consequences, then we are probably doing them a disservice. 

A child turns into a teenager and if that teenager goes off the rails and becomes a recidivist youth offender as a result of a dysfunctional family and a lack of strong core values, who is responsible for this teenager’s anti-social and criminal behaviour?  The answer is probably both the teenager and the family. But think about the influence the parents could have had on this outcome if the teenager had been brought up in a different environment, one of

  • love,
  • empathy,
  • strong values,
  • accountability, and
  • discipline.  

If this were the case, I am sure we would be talking about a different teenager!

In this example it is easy to lay the blame of this anti-social behaviour with the teenager; some people will even say ‘lock him up and throw away the key’, as if the problem will just go away.  But we do need to ask ourselves; “Where does the real problem lie?”.

A similar philosophy applies in business.  We diligently recruit staff to give us the best chance of finding the right person, with the required skillset and strong core values to ensure they have the right attitude and attributes to fit with our organisation.   This is the first step, but once employed, similar to bringing up children, we need to provide them an environment where they can develop and flourish. 

A poor performing employee may be managed out a business or even fired, but does that performance issue rest with the employee or the employer?  The answer again is probably both, but if this employee was working for an employer that had a;

  • clear vision for the business,
  • strong values,
  • effective communication,
  • an engaged and positive culture,
  • clear goals and expectations for all staff,
  • consistency, empathy and inspirational leadership

I am sure we could well be talking about a different outcome for this employee.

Often our first instinct is to blame, in this case ‘let’s fire the troublesome employee’, but shouldn’t we first look inwards to see if we have contributed to this outcome and ask ourselves whether we have done everything we possibly can to give this employee the best chance of succeeding? 

If we can answer ‘yes’ to this question then we can move forward with conviction and certainty. Staff will still need to be praised, disciplined and some poor performers may still lose their jobs, but we can act with confidence in the knowledge that we have done everything we can to positively influence the outcome.   

Small businesses look beyond COVID-19 with confidence

Small businesses look beyond COVID-19 with confidence

For the third month in a row, small-to-medium size businesses outside the hard-hit sectors of retail, tourism and hospitality are proving confident, optimistic and actively planning for their future beyond COVID-19.

Our September Pulse Check shows exceptional levels of confidence and optimism with business levels booming or the same as last year, relatively unchanged levels of employment and sustained sales.

More than 80% of you are confident you’ll make it through, more than half report sustained or improved business levels, nearly two-thirds are optimistic about the next twelve months and 65% are already working on future strategies and getting business plans in place.

On the downside, 2020 has taken a toll with business owners feeling exhausted and that’s a real concern. Government support and business advisors have helped get through the difficult days of 2020 but despite weathering exhaustion, lockdowns, alert level changes and varying levels of uncertainty, you’re not giving up and have your head down, planning your way to the future.

For some, the forthcoming election, mainstream media stories and government policy are reducing confidence, while for others, their own resilience drawn from past experience, government policy, and the thought of open borders is a confidence booster.

Stephen James observed: “Our members are, for the most part, outside the sectors acutely affected, such as retail, tourism and hospitality. It may seem that member confidence levels and optimism are at odds with other commentary but our small business owners are efficient and resilient because they have to be. Small business owners regard their employees as family, do their utmost to retain them and are able to adapt and evolve business practices swiftly with the right support, even among those hardest hit.

“It’s heartening – and speaks volumes for business owners – that so many have got through with relatively unchanged levels of employment, due in part to the government support people have  turned to and a willingness to change where necessary.

“One of our priorities will be to help business owners cope with the high levels of exhaustion they’ve reported. We see this as a danger area as, no matter how resilient they may be, working through an ongoing crisis is hard and it is draining. Supporting our business owners helps them to help their business, so developing strategies and solutions to what we know will be an ongoing challenge is an area we will be working on with our boards and through our coaching sessions”.

The September Pulse Check surveyed 266 of our members and associates between September 18 – 27 with a confidence level of 90% and a 5% margin of error. You can download a copy of the results in full here.

The Alternative Board conducted the September Pulse Check survey of 266 of its members and associates between September 18 – 27 with a confidence level of 90% and a 5% margin of error.

Changes to the Business Finance Guarantee Scheme

Changes to the Business Finance Guarantee Scheme

Gordon Stuart takes a look at the recent changes made to the government’s Business Finance Guarantee Scheme.

The eligibility criteria for a Business Finance Guarantee Scheme (BFGS) loan have been loosened from the initial terms detailed back in April. The maximum amount of the loan is now up to $5m. Note the first version announced by the Government in April provided $6.25b but was largely unsuccessful with only $150m taken up by 780 customers.

The BFGS loan use criteria have been widened, so your business (which can be a company, sole trader, partnership or trust) can use credit for (a) working capital (b) funding capital assets and/or (c) projects related to responding to, or recovering from, the impacts of COVID-19. Previously it was for working capital only.

I expect take up will be better this time towards the end of the year, as forecasting hopefully becomes easier.

Recessions since 1987 have generally reduced business revenues and cash available for debt servicing. This has resulted in longer debt payback thereby creating term debt needs.

To be eligible to apply for a BFGS loan your business must:

  • Be a New Zealand based business
  • Have annual revenue of $200 million or less in its most recently completed financial year
  • Not be on your bank’s credit watchlist as at 31 January 2020 (for retail customers) or 30 September 2019 (for non-retail customers)
  • Not be a residential or commercial property developer or investor, or a local authority or council-controlled organisation

The Participating banks ANZ, ASB, BNZ, Heartland Bank, Kiwibank, SBS Bank, TSB, Bank of China and Westpac are under pressure from the Reserve Bank to lend to their capped amount. However, their requirements for financial forecasts will still be tough. The better the quality of information you submit, the higher the likely success rate and the quicker the loans can be processed.

Here are some key points worth noting:

  • Under the scheme, the government will guarantee 80% of the risk associated with eligible loans.
  • The interest rate charged is lower, reflecting the Government’s 80% share of risk and should be (c.2.5% – 3%), up to 5 years and up to $5m. For Regulatory Capital Purposes the Government is zero risk weighted. The benefit borrowers receive is a lower interest rate.
  • If your business defaults, your bank will follow its normal process to recover the debt. If the debt can’t be recovered, the bank can claim 80% of any shortfall from the Crown. Note that the Government guarantee does not limit your business’s liability for the debt
  • For borrowers that have fixed rate lending already in place, consider break costs if you refinance existing fixed rate debt via a BFGS loan early.
  • The BFGS loan needs to be repaid over 5 years but can be repaid earlier at no break cost.
  • This scheme is also available to clients who are already on COVID-19 relief packages provided by the banks or have received the wage subsidy
  • The Scheme is open for applications until 31 December 2020.

Exclusions:

  • Cannot be on the bank’s credit watch-list at 30 September 2019 and 31 January 2020.
  • Cannot be a residential or commercial property developer or investor or a local authority or council-controlled organisation.
  • Cannot be used to fund dividends – note:- there is a guaranteeing group exclusion that you should discuss with your Bank.
  • Cannot be on lent outside the business.
  • Cannot re-finance or repay more than 20% of the business’s existing term debt (term debt only). Note – there appears to be an exclusion if debt facilities mature before 31 December 2020. Discuss with your bank.

Note:- Businesses do not have to draw down all existing facilities before applying for a BFGS loan as previously required in April.

As part of your bank’s approval process for a loan under the scheme, your bank decides:

  • The loan amount (up to $5 million under one or more loans), term (up to five years) and the interest rate
  • What businesses should provide to demonstrate ability to repay the debt, such as a cashflow forecast, business plan and details of assets
  • Whether it will rely on existing or require new security and guarantees to support the debt (this is not a Government requirement)
  • Whether it will approve or decline a loan under the scheme.

Finally to reiterate two common misunderstandings.

  1. Is the Government guaranteeing the loan?
    No. You will need to provide security for the loan as you would normally. The Government and participating banks have agreed to share the risk in case of default only.
  2. What kind of security do I need to provide for the loan?
    While banks remain in control of their own lending decisions there is no Government expectation or requirement that lending requires a general security agreement or personal guarantee. Note – Banks will require security! Their job is to take minimal or no risk for maximum return.
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