ACCESS Family Business - December 2019

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SMEs: business’s forgoten people

n JONATHAN ATTIA n JOHN MUNNELLY N he business communi y, we hear abou s ar -ups disrup ing en ire indus ries and large corpora es making high-s akes plays. Where are he s ories abou he orgoten people o he business world; he small and medium enerprises (SMEs)?

Tere is really no hing small or medium abou SMEs. Tey employ seven million Aus ralians, con ribu e over 50 per cen o Aus ralia’s GDP and are in egral o bo h global supply chains and he local communi y. Ye hey eel hey do no have he same oppor uni ies as o her businesses when i comes o he abili y o access nancing and business managemen echnology. Tese are major pain poin s or he sec or.

Why? SMEs have o en been in business or many years, and are pro able. Some are very pro able. Tey are growing bu are no par o he grow h-orien a ed ech ecosys em ha bene s rom ven ure capi al.

Tey exis all over he economy, in re ail,

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manu ac uring, dis ribu ion, pro essional services and no - or-pro sec ors. Tey aren’ seen as ‘sexy’ – even hough hey are crucial o he crea ion o ‘sexy’ produc s and services.

So how do we go abou removing hese pain poin s? ake accessing nance. SMEs don’ usually have deep pocke s. SMEs owners ell me hey eel he only way hey can ob ain inves men capi al is by o ering up heir amily home as securi y, which makes mos resilien person hesi an .

In oday’s low-in eres ra e environmen , deb is cheap bu can be hard o access. I we are o urn around he slowdown in he domes ic economy we have o make i easier or SMEs o access lines o credi or bo h inves men and cash ow managemen purposes.

A recen s udy sugges s ha 53 percen o SMEs’ invoices are paid la e, depriving he secor o AUD7 billion in capi al each year.

Al hough n echs and peer o peer lending rms or business loans have cropped up o service his demand in he marke , heir loan ra es are o en higher han he marke average.

From a regula ory perspec ive, APR could

assis SMEs by con inuing o encourage he enrance o n echs and neobanks in o he banking ecosys em under heir new ADI licencing ramework whils providing clear rameworks or unsecured loan origina ion echnology wi h an algori hmic approval process.

Enhanced compe i ion in he loan marke wi h a s reamlined approval process would go a long way in resolving he nancial issues o SMEs. SMEs also express rus ra ion a heir inabili y o s reamline heir back-o ce unc ions.

Tey lack he size and money o ou source hese opera ions, bu o en nd ha hey’ve reached he limi o so ware designed o assis SMEs in his area.

Common complain s include an inabili y o in egra e di eren unc ions o he business (such as inven ory managemen and invoicing), a endency or he so ware o be wedded o legacy sys ems and di cul ies dealing wi h a grow h in loca ions, inven ory size or ransacion quan i y. Te end resul o hese needless complexi ies is a loss o ime ha would o herwise be spen by owners and employees o run and grow he business.

A key s ep o solving hese problems is migra ing o a cloud-based sys em. Te cloud allows owners and employees o access and upda e da a in real ime rom anywhere in he world. o no use i is o place yoursel a a compe i ive disadvan age.

Many cloud-based sys ems o er he seamless in egra ion and reconcilia ion o da a – like beween your bank and accoun ing so ware – providing huge ime and cos savings. Tis da a can also be u ilised o crea e relevan benchmarks on how heir business is per orming agains o hers in he indus ry. radi ionally SMEs have had litle abili y o crea e benchmarks, le alone bene rom he insigh s hey provide.

Te u ure o our economy will be underpinned by our abili y o libera e SMEs rom hese concerns. All large s akeholders in he economy – banks, governmen s, s ar -ups and large corpora es – should work o help he grea and glorious middle. I will be o he bene o us all.

First published by Jonathan Attia, Managing Director Wiise and John Munnelly, Partner, KPMG on KPMG Newsroom.

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Embracing TECHNOLOGY o fu ure-proof family business Don’ be scared, be prepared N he la e 1990s, ew people could have guessed wha he business landscape would look like in 2019.

Smar phones, au oma ion and ar i cial in elligence, cashless paymen s and coworking spaces are jus he ip o he iceberg – he world o work and he world in general have changed a lo in wo decades, massively impac ing business mindse s and cus omer purchasing behaviours along he way.

Bu while no one can say or cer ain wha disrup ive developmen s are in s ore or he nex 20 years, maximising he bene s o echnology can help amily businesses mee and overcome u ure challenges, while sharpening heir compe i ive edge here and now.

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Get closer to your customers According o responden s o he 2018 KPMG En erprise and Family Business Ausralia survey, changing consumer pre erences and purchasing behaviours were one o he op hrea s o u ure grow h.

One major bene o echnology is ha , hrough business in elligence ools and da adriven insigh s, en erprises are now beter equipped o iden i y shi ing rends in cus omer paterns, behaviours, li es yle choices and so on, resul ing in beter-in ormed decisionmaking around produc ion, orecas ing and planning.

I may even inspire wha David Chris ie, Join CEO o Bakers Deligh Holdings, calls a ‘produc renova ion’ – such as when he iconic bakery chain added ex ra bre o heir whi e loa in response o a more heal h-conscious movemen among consumers. Wi hin a ew shor years, he high- bre whi e was heir new bes -seller.

“I don’ hink anyone can hones ly say hey’ve go he ull pic ure o wha ’s ahead,” Chris ie says, “bu i you’ve go he righ skillse , capabili y and drive o always be an icipa -

ing wha your cus omers wan , and i you’re prepared o ry new hings – and po en ially o ail i hey don’ work – hen I hink ha pu s you in a prety good posi ion.”

Start now Tere are a couple o reasons ha Brad Miller, Par ner and Na ional Leader – Advisory a KPMG En erprise, says here’s no ime like he presen when i comes o he adop ion o new echnologies.

Te rs is ha echnological solu ions or

core sys ems such as nance, H , and even cus omer managemen are becoming more a ordable, giving amily businesses beter da a, beter insigh s, and, as a resul , beter compe iive advan age.

“I you are aking advan age o his, and we see a lo o he smaller companies doing i , you ge beter a making decisions, because you run your business in more o a real- ime ashion,” Miller says.

“You can respond o issues and oppor uni ies as er, and you ge a beter handle on hings such as basic pro abili y, wha your cus omers are doing, wha your compe iion is doing, and wha your employees are doing – i.e. how produc ive are you really as a business?”

Te o her argumen or embracing new echnologies sooner ra her han la er, is ha i will make i easier o adap o disrup ions down he rack.

“In simplis ic erms, you need o inves now,” Miller says, “because i i ’s no he absolu e righ piece o echnology or a par icular issue or i evolves, he experience will pu you in good s ead.”

Sign up o he KPMG En erprise Business o Family Mas er Class series a kpmg. com/au/businesso amily o build he skills o balance he needs o your amily and your business.

Article first published on SmartCompany – https:// www.smartcompany.com.au/partner-content/articles/family-business-embrace-technology-to-futureprrof-your-business/

In the restaurant business; adapt to survive and thrive n MORGAN KELLY HEN he Ho el S eyne in Manly sold or he eye-wa ering sum o $60M earlier his year, heads urned in he hospi ali y indus ry.

I wasn’ jus because o he high s icker price – venue sale prices have increased across he board over he las decade.

Wha is unusual is ha a record sale occurred a a ime when mos hospi ali y venues are doing i ough. Wi hin a ew mon hs o he sale o he S eyne, renowned Sydney ea eries Acme, Paper Bird and Billy Kwong closed heir doors ci ing rising xed cos s and middling sales due o a slowing economy and he increased populari y o ood delivery services.

Te con uence o rising asse prices, declining sales and atening yields reminds many, mysel included, o he s a e o he indus ry prior o 2006-2007. Increasing asse prices necessi a ed higher deb levels and resul ed in highly leveraged opera ors going bus when he economy s ar ed o slow in 2007.

Our curren economic ou look is no exac ly rosy – opera ors have o be prepared o adap o survive and hrive. Tis is wha I would recommend:

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Do not over-leverage yourself.

Te price o deb is a his oric lows and is looking o s ay ha way or a while. Borrowing o und capi al inves men s or o expand can seem emp ing bu I would advise agains i .

Banks are cognisan o increasing asse prices and atening yields in he sec or and are igh ening lending requiremen s: a ew years ago hey were willing o lend a a loan o value ra io o 80 percen . Now, he ra io is under 55 percen . Addi ionally, no hing ea s away a margins like in eres paymen s.

Consider equi y injec ions. Wi h in eres ra es so low, here is a cloud o super und and priva e inves men money oa ing around,

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looking or a place o land and make re urns.

Wi h asse prices so high you could ge a decen injec ion o unds in exchange or equi y.

And while i may s ing o have o share pro s, he repaymen requiremen s are cer ainly less onerous han a bank loan – and i he money is inves ed care ully in your venue, here will be pro o go around.

Become aware of your customers and their changing preferences. oo o en I am called in o assis venues ha have los ouch wi h heir cus omer base and subsequen ly ail. Demographic change across he coun ry means ha a venue ha once did well serving up parmas and pin s is eeling a pinch.

Broadly speaking, Aus ralians are drinking less and ea ing heal hier. Beer consump ion has halved per person since he 1970s and alcohol consump ion na ionally is a i s lowes in 50 years – bu cra beers, non-alcoholic beers and high-end spiri s are growing in populari y.

Aus ralians are also more in eres ed in where heir ood and drink are coming rom.

Making he e or o cul iva e high-quali y ingredien s ha are environmen ally riendly or more e hical is an ac ivi y ha will be rewarded by cus omers. Provenance o ood i ems are now cen ral o consumer concerns.

Protect margins through efficiencies, not by compromising on quality.

An added bene o sourcing beter quali y ingredien s – and charging accordingly – is ha you will be able o resis par icipa ing on he basis o price o di eren ia e yoursel .

In an indus ry wi h growing xed cos s and a requiremen o please he cus omer, rying o aggressively cu prices by skimping on he quali y o your ingredien s is a race o he botom.

Tis is no o say ha you shouldn’ look or savings. A riend o mine works in avia ion logis ics and has always expressed his awe

The Steyne Hotel.

a he logis ic complexi y o a busy ki chen: Ensuring ha di eren produc s wi h di eren inpu s arrive a heir des ina ion in a imely manner is complica ed – bu i doesn’ mean i can’ be ra ionalised. Tere are many business managemen sys ems geared owards hospi ali y venues ha can help drive in ernal e ciencies, bringing he cos o doing business righ down.

Also realise ha prices in hospi ali y are s icky: People generally won’ spend more han $45 on a high-end s eak, or ins ance. Te curren high cos o bee may emp you o increase prices o main ain your margins – bu you may be beter o increasing he price o he wedges.

Personnel and Human Resources

he hospi ali y indus ry: he labour shor age.

Whe her you are a che or a bar ender, he chances are you learn how o do your job on he job.

Hospi ali y opera ors are cons an ly inves ing in up skilling heir people who o en go on o change careers – or move back overseas, as many workers are on emporary visas.

Te simple solu ions are o rea your employees well and o have a mind owards succession planning. Te success o a venue is 90 per cen dependen on he quali y o managemen – having good personnel who enjoy heir work is key, as is having a plan o replace hem when hey have o move on.

So as we rush owards he end o year celebra ions as 2019 comes o a close make sure you are prepared or a pro able 2020.

Earlier his year I happened o si nex o a celebri y che and hospi ali y group opera or on a igh o Melbourne. We quickly go o alking abou one o he bigges problems in

Article first published by Morgan Kelly, Partner, Restructuring Services, KPMG Australia on KPMG Newsroom.

WESTERN SYDNEY BUSINESS ACCESS DECEMBER 2019

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© 2019 KPMG, an Australian partnership.

All rights reserved. 400324266ENT.

WESTERN SYDNEY BUSINESS ACCESS DECEMBER 2019

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