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QUARTER 2 2017

AML – are you ready?

Jack Ma, today’s entrepreneur The most powerful person in music Turning your SME into a disruptor Coping with explosive growth Surviving a seasonal slump Simple strategies to help you keep your startup afloat

When expertise counts Not all business finance needs can be solved with vanilla solutions. When an expert sounding-board is needed, Fifo Capital can help: • One-on-one consultancy (complimentary) with a business finance specialist • Fast response and approval of finance (24 hours) to meet changing business needs • Consultancy in partnership with your financial advisers and with banking facilities • Solution-solvers for short term needs, and long term sustainability.

When your business finance needs demand expert thinking and purpose-fit solutions, call Fifo Capital on 0800 863 436


The Covisory Group solve people’s problems. We are specialists in International and Domestic Tax Services, Trust Management, Succession Planning, Structuring, Strategic and Business Planning, Accounting Services and Business Valuations. Now in its 10th year, Covisory’s services reflect our core values of: trust, accessibility, transparency, accountability and responsiveness. We build strong relationships with our clients and we aim to own the cracks. Our solutions are tailored to each client, drawing on our up-to-date specialist knowledge and our years of experience providing one-onone expert advice. Covisory clients are owners of family businesses, operating both in New Zealand and globally. Our specialists work either one-on-one or alongside our clients’ team of professional advisers to develop appropriate short and long term solutions.

Welcome The world is changing. When you receive this Covisory Connect magazine, the year will be one third over. It has certainly been a busy start to the year with plenty of good activity by clients across the board.

While the Auckland property market may be cooling, there is still plenty of property activity out there and businesses on the whole are continuing to do well in a good economic environment. One of the main questions we are getting is how we can plan for growth and better handle the stresses that growth places on businesses. Just as many businesses fail in times of economic up turn as they do in time of economic down turn, just for different reasons. Growth is a good thing but needs to be handled well. The changing world is also a theme in our magazine this month. We look at the new anti-money laundering rules and what these are going to mean to you in practice. Covisory Trust has been a reporting entity for anti-money laundering from when it was set up because it is neither a law firm nor an accounting firm. A requirement to obtain full client identification and conduct anti-money laundering searches on all clients that we provide services to will become standard over the next few years for accountants, lawyers and other professional service providers. To be honest, it is a bit of a sledge hammer to crack a nut, as it is only aimed to pick up the few percent of people that are not legitimate in what they are doing. Sadly however, everybody will be affected. It as only a few years ago that people could use tax havens and

hide wealth and the ownership of assets from creditors, spouses, revenue organisations and others who may want to take part of it. With the significant advances made by particularly the OECD in antimoney laundering, we now see the tax havens rapidly falling into line to share their information on accounts and structures that they manage for foreign owners. The New Zealand IRD has been front and centre in quickly signing up to these to enable it to obtain information about New Zealand tax residents who may have offshore structures or bank accounts. Australia has taken it a step further with their Austrack system where they actually scan money coming in and out of the country or the use of foreign credit cards in Australia. In an increasingly connected and transparent world, these changes are welcome as they will shut down avenues for people to avoid and evade the taxes they should actually be paying in their home country. What has been interesting is the rate at which this change has come about. With an election looming in September, we expect the economy to slow down a little bit through the latter part of the second quarter and into the third quarter. People will become a little bit nervous and wait to see the outcome of the election before spending money. However, the outlook remains strong and as always if there is anything we can do to assist you to achieve your objectives, we are only a phone call away. Let us make 2017 a prosperous year for all of you.  igel Smith N Covisory Partners Limited

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Are you ready?


Jack Ma, today’s entrepreneur


The most powerful person in music


Turning your SME into a disruptor


Should you patent your disruptive invention?


Cultivate great connections to be a referable business


How you can avoid late payments


Coping with explosive growth


Surviving a seasonal slump


Simple strategies to help you keep your startup afloat


Published by Fifo Capital International Ltd. Headway magazine is published four times a year. Copyright Š 2016 by Fifo Capital International Ltd. Email Visit All rights reserved.




Are you ready? In 2013, the laissez-faire world of New Zealand business as we knew it came to an end with New Zealand playing catch up with the rest of the world. Phase 1 of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (“the Act”) introduced new laws to tackle money laundering and terrorist financing. The Ministry of Justice estimates $1.3 billion of proceeds from illegal activities are laundered through New Zealand businesses each year. The new rules have added in an extra level of regulation that has taken some people in New Zealand by surprise. However, many countries around the world have already adopted these rules and New Zealand was late to the party. On a positive note the rules New Zealand adopted are more robust than many other countries. As you will know by now under the new laws Banks, Casinos and a range of Financial Service Providers had “practical measures” imposed on them to protect New Zealand businesses and reduce the ability of criminals to benefit from illegal activity. It has taken awhile for these organisations to come to grips with the amount of information (read mountains of paperwork) required to comply with these measures. In short, every customer’s identity needs to be verified and their source of wealth determined to ensure there is no criminal activity involved. Phase 2 will see the Bill, when it is passed mid-2017, extend this requirement to real estate agents and conveyancers, many lawyers and accountants, businesses that deal in expensive goods and betting on sports and racing. The law will come into effect in stages between July 2018 and

July 2019 allowing these businesses to prepare for the changes. One result of the introduction of these new rules is that when applying for an Inland Revenue Department (“IRD”) number for a non-resident/off-shore individual is that you either need to supply a New Zealand bank account number or have completed customer due diligence on the applicant. In our experience, New Zealand banks are not interested in opening bank accounts for non-residents if it does not result in ongoing income for them, which is the case for most nonresident applicants. This only leaves one option and that is to have a reporting entity as defined by the Act, carry out full know your client (“KYC”) checks on the applicant. The process of opening a bank account also takes a considerable amount of time and paperwork compared to previously.

Covisory Trust Services is a reporting entity for the purposes of the Act and governed by the Department of Internal Affairs. In our capacity as a reporting entity we regularly carry out independent KYC checks for nonresident applicants for IRD numbers and provide the appropriate sign-off for the IRD to allow the application to proceed without having to open a New Zealand bank account. Assuming the KYC checks do not throw up any untoward results they can be completed relatively quickly. This is a bonus when the IRD application is urgent. If you are interested in using this service or just want to talk about anti-money laundering and its possible impact on your business please contact either Marcus Diprose or Nigel Smith (

KYC – Know Your Client The AML Act imposes obligations to ensure NZ businesses, NZ Banks and financial services are not helping facilitate criminal activity. Instead of taking people at face value we now need to know our clients. Are they who they say they are and where did their wealth come from? 1. All parties to the transaction need to be correctly identified. a.  This includes verifying identification documents such as a passport, drivers licence or other government issued identification document. b.  Other documents that provide proof of the address of the applicant must also be verified. 2. Identify the source of wealth of the funds being used in the transaction.

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Jacktoday’s Maentrepreneur , Jack Ma is the founder of China’s largest Internet company and ecommerce marketplace: Alibaba. His personal history and his unique leadership style have garnered him respect all over the world, and made him a global celebrity as well as a highly successful businessman. Unlike many of his contemporaries, Ma was not born into privilege. Instead, his uniquely innovative, enterprising, and persistent attitude were the key to his monumental success. Today, he’s the second wealthiest person in China, with a net worth estimated at $22.7 Billion USD.

The persistence of Jack Ma In the numerous interviews and talks given by Ma, his most regular recurring theme is an emphasis on persistence, and the impact it has had on his own life. To him, success did not come easily. He failed his college entrance exam twice before securing a spot at university, after which he had enormous difficulty in finding work. As a young college graduate, Ma was famously turned down for over 30 different jobs, including one at KFC. Eventually, he secured a position as an English teacher, earning just $12 USD per month. On a visit to the US in 1995, Ma learned about the Internet, and was surprised to find that China was virtually unrepresented. Not only was there no noticeable Chinese


presence on the web, there wasn’t even any significant amount of content about China, or its products. Seeing an opportunity, he launched one of the very first Chinese business websites, which was effectively a directory of Chinese businesses and products. While he was met with some success, it wasn’t his big break, and he eventually left and secured a government job. In 1999 he was ready to try again, and founded Alibaba with the financial support of 17 of his personal friends. Initially seeking investment in Silicon Valley, Ma was again frustrated by rejection and heavily criticised for his proposed business model. Eventually, however, he succeeded in securing a $5 million dollar investment from Goldman Sachs, and $20 million dollars from Softbank. With that, Jack Ma and Alibaba were ready to begin taking on the world.

Building Alibaba Originally, Alibaba was focused on helping Chinese SMEs get involved in international trade, but Ma is not one to pursue only a single idea at a time. When his new business still hadn’t turned a profit in 2003, he launched, with the ambitious goal of challenging Ebay in China. Unlike its competitors, Taobao operated as a commission-free marketplace, which put Alibaba

under considerable financial strain. It relied on peripheral services to generate revenue, which made it very competitive, but also far less reliably profitable. This calculated risk, however, paid off in a big way. Taobao grew rapidly, and pushed Ebay out of China entirely just 5 years later, after refusing to be bought out by the auction giant, and garnering a $1 billion dollar investment from Yahoo. Seeing and taking advantage of opportunities like this has defined Jack Ma’s success. Besides Taobao, he also founded a variety of other ventures under the Alibaba umbrella, including Alipay, Aliexpress, Tmall, and others. By identifying and pursuing business opportunities related to his original goal of facilitating the global success of Chinese SMEs, he built a massive multifaceted enterprise. Today, Alibaba is estimated to be worth over $200 billion dollars.

Ma’s big picture approach Unlike many of the world’s wealthiest and most successful people, Jack Ma isn’t laser-focused on achieving business success and building wealth for its own sake. He talks extensively about balancing life and work, and is acutely aware of the enormous weight of responsibility that highly successful business owners bear.


Ma once famously stated that he was happier as a low-wage teacher in Hangzhou, than as one of the most powerful businesspeople on earth. His humble, yet highly energetic approach to leadership have defined his career, and marked him as a unique figure among the world’s multi-billionaires.

determination to succeed in the face of adversity, along with his ability to bring out the best in his team, are what gave him the potential to dominate commerce on China’s Internet. His unique approach serves as a singular example to business owners all over the world.

Unlike extremely hands-on leaders like Elon Musk and Steve Jobs, Ma encourages business owners to make themselves replaceable, and to avoid making their operations dependent on them. This helps businesses to prevent complications due to bottlenecking, and gives individuals along the chain of command more freedom to make use of their particular skills and knowledge.


Ma approaches leadership from an inspirational angle, focusing on defining general goals and a greater unifying vision for his employees. Uniting his team under that vision, and enabling them to do the work of realising it as efficiently as possible are what he sees as his primary function. His personal drive and

1. Get used to rejection 2. Keep your dream alive 3. Focus on culture 4. Ignore the little man (who don’t understand your idea) 5. Get inspired 6. Stay focused 7. Have a good name 8. Customers are number one 9. Don’t complain 10. Look for opportunities and lastly ... Have passion.

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most powerful person in music Daniel Ek founded his first company at the age of 14, and hasn’t slowed down since. After launching several businesses, retiring, and coming back out of retirement before the age of 25, he decided to get serious. Together with Martin Lorentzon Ek hammered out a plan to create a product that would provide free seamless access to all the world’s music while rebuilding the ailing record industry. A decade later, the industry is finally showing its first real signs of growth since the turn of the century, in large part because of Ek and his company’s work. Today, Spotify is worth over £8 billion, and Ek has been named the most powerful person in the music industry by Billboard’s “Power 100”.


The music industry’s dilemma In 1999 and 2000, peer-to-peer file sharing platforms, most notably Napster, permanently transformed the music industry. While online file sharing predates these platforms, Napster, Kazaa, and other similar platforms brought music piracy to the masses. For the first time, the record industry lost control of their product, and sales plummeted. But why did people suddenly engage in mass theft? The ability to copy and distribute music far predates

the internet, but people didn’t feel compelled to do so in previous decades. Why then?

Users didn’t feel they were doing anything wrong At the time, attitudes regarding the legality of downloading copyrighted materials weren’t entirely clear. People had been creating mixtapes and burning CDs for each other for decades without raising

any eyebrows, because it didn’t significantly slow record sales. To regular internet users, these new tools seemed no different than borrowing a burned CD from a friend. If anything, people were even less comfortable with the idea of spending money on an intangible download than with paying for a physical object like a CD.

It was far more convenient Getting access to your favourite songs in the past meant physically going to a store and buying what was available. Not only did this require time and money, it also meant purchasing entire albums, which often contained songs that customers didn’t particularly like or want. File sharing, on the other hand, allowed people to get access to exactly the music that they wanted at no cost and virtually no effort.

What made Ek’s approach different? iTunes tried to solve the problem by offering a way for users to simply buy and download the songs they liked directly. While this partially addressed some issues and did recover some revenue for the music industry, it still turned out to be more complicated than simply downloading music for free. Further, it didn’t do anything to address the fact that many users simply weren’t willing to pay for music anymore. Ek had a far more complete and elegant solution. Rather than trying to fight consumer preferences, he would harness them to create a new way to pay for music. While traditionally minded users could simply pay for their music using a subscription option, they wouldn’t necessarily be required to spend any money if they didn’t want to.

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Free and safe on-demand access Spotify has an exhaustive music library that can be accessed and streamed from for free, on-demand, at any time. Unlike some competitors, it allows users to choose exactly what they want to listen to, to create and share playlists, and to generally treat it like their own personal bottomless music library. Unlike the first generation of file sharing options, it was also far less likely to serve as a vector for malware.

Monetising listeners Ek realised that it wasn’t necessary to force listeners to purchase the songs that they wanted to listen to. There was no reason that a website couldn’t operate on the same basic business model as a radio channel. Instead of selling music to listeners, he could attract an audience, and then sell their attention to advertisers. Allowing an ad to run requires no effort on the part of the listener, while effectively paying for the song on their behalf. This allowed users to continue to access music as conveniently as before, while also generating the revenue that the music industry needs to survive.

Social integration While Spotify’s original model engendered its initial success, its growing dominance is the result of another one of Ek’s strokes of genius: Social media integration. Spotify was designed from the ground up to make music sharing on Facebook, Twitter, and other networks easy. Today, Spotify is integrated into thousands of popular apps and websites, making it the obvious default source for music on the web.

While other businesses fought to preserve an obsolete business model, Daniel Ek embraced change and used it to disrupt and dominate the entire music industry. His innovative approach transformed how we listen to, share, and pay for music all over the world.


We’re here to help. Business finance when you need it. Working capital to support and grow your business We know that the working capital your business needs to support and grow can easily exceed what other financiers can approve. And that’s where we can help, with flexible financial options from $10,000 to $1 million. We understand, because we’re business owners like you When you talk to us, you’re talking to a business owner like you. We’re a privately held finance company, which means we can be innovative in our approach and work closely with our customers.

Contact Fifo Capital today for more information.

0800 863 436

We’re all about keeping things simple – from a single point-of-contact who’s also the decision maker, to a 24-hours turnaround time… all with minimal paperwork. We don’t require long term contracts or property security – and it’s up to you when you choose to use our services and when to stop. All with no impact on your existing lending arrangements In fact, banks often recommend us as preferred short-term funding option. And because we work as a complementary service, there’s no need to refinance your current funding facilities.

Turning your SME into a


In a competitive global marketplace, real success hinges on much more than just getting the job done. To outcompete larger, better funded, and better connected businesses and to establish yourself as an industry leader, you’ll need to change the game. You’ll need to become a disruptor. Doing this isn’t necessarily about how big your research and development team is. Instead, it’s about how your business operates and evolves on a fundamental level. Unlike their larger competitors, SMEs tend to be flexible and tolerant to change. Th research and development is gives them an edge that they can use to spearhead rapid change, despite their relative disadvantage in terms of resources. Emphasising this strength, and finding ways to capitalise on it, is key.

Find and address big business blind spots Bigger businesses have massive bureaucracies designed to keep


everyone organised and working together with minimal waste. This makes businesses less agile, because research and development needs to be planned well in advance, and needs to improve products and services in a predictable way. Furthermore, they have a strong incentive to make progress backward-compatible in terms of the production process. For example, a battery manufacturer might look for a way to improve their product’s efficiency, but, instead of starting from scratch, they’d prefer options that allowed them to use their existing factory and equipment instead over those that required them to invest in all new custom equipment. This leaves a massive opening for smaller businesses that don’t have these enormous sunk costs to contend with. As a smaller business that hasn’t scaled its operations up yet, you can experiment with and solve problems that much larger companies can’t even consider addressing in a practical or cost-effective way.

Go out of your way find these blind spots, and you can effect major change in a relatively lowcompetition arena.

Build a flexible and innovative company culture Disruptive innovation doesn’t have to come from management, or from a dedicated research team. Research and development departments are great, but they’re also difficult for smaller businesses to afford. To deal with this, smaller businesses can compensate by working to develop a general culture of innovation that allows them to pool the specialised knowledge of their entire company instead of relying on a dedicated team of developers. Encourage employees at every level to educate themselves about your industry, and to acquire the specialised knowledge they need to effectively identify problems and innovate solutions. Incentivise learning, and recognise and reward solutions-oriented thinking. Further, your employees need to feel

If you make a point of examining the innovations of your competitors and considering their potential in context with your own ideas, you may be able to put together something entirely new and better than the sum of its parts.

your disposal is invaluable, but it’s not the best way to take competitors by surprise. If you’re looking for a game changer, you’ll need people who haven’t been taught to look at the issues you’re working to resolve the same way that everyone else in the industry has.

motivated and empowered enough to share their ideas. To facilitate that, it’s a good idea to create a formal process by which anyone can submit problems that they think should be addressed, or solutions to a known issue.

Bring in experts from other industries Don’t restrict yourself to working with people from within your own industry. Every industry typically comes with its own school of thought regarding how it should progress, and what the next great breakthroughs should look like. Having these industry experts at

Of course, that doesn’t mean hiring a landscaper to develop accounting software. Instead focus on acquiring people in the right field who have different industry backgrounds and who might bring something interesting to the table. A former game developer, for example, might bring some strange and interesting new ideas to a brainstorming meeting about accounting software development.

Watch your competitors You don’t necessarily have to reinvent the wheel to make a big splash. Often, you’ll find that a competitor has already started on a great idea, and simply failed to see and properly exploit its potential. All that needs to be done is for someone

to step in and perfect it. The classic example of this approach is Steve Jobs and Apple, who applied a variety of older technologies and ideas to create some of their most iconic products. New ideas often aren’t exploited to their full potential, or don’t work well because they haven’t been paired with other complementary innovations. If you make a point of examining the innovations of your competitors and considering their potential in context with your own ideas, you may be able to put together something entirely new and better than the sum of its parts. Becoming successful as an industry leader and pushing boundaries in a meaningful way in a globalised economy requires transformative innovation and radical change. Given the right innovative environment, a flexible attitude toward change, and outside-the-box thinking, any business can spearhead a disruptive transformation in an industry. There’s no good reason it can’t be your business!

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Should you patent your disruptive invention? Disruption is built on innovation and invention. By patenting a particular new process or invention, businesses can protect their exclusive access to it. However, to do that, they must disclose exactly what their innovation is, and how it works.

This trade-off allows people and businesses to protect their competitive advantage against others seeking to take advantage of their intellectual property. The public, on the other hand, gets access to potentially valuable information, which could help drive technological progress in any number of other areas.

The benefits of holding patents Holding patents for your inventions comes with a few very important benefits. Every country’s patent laws work a bit differently, but most will grant you exclusive rights to commercialise or manufacture your invention for up to 20 years.


That means you can prevent other businesses from manufacturing, using, or selling your invention without your consent. This is particularly important if your innovation can be easily reverse engineered, or if competitors are likely to make similar innovations on their own in the near future. If a competitor might have caught up within a few months or years, you’ll still be able to preserve any competitive edge that your invention grants for up to two decades. The security offered by this arrangement has made patents an enormously popular way to protect proprietary knowledge, but it does come with a few downsides that shouldn’t be ignored.

Patents require disclosure In order to file for a patent, you’ll obviously need to describe exactly what it is and how it works to prove that you’ve invented something that qualifies for a patent in the first place. Patent applications and patents are public record, meaning that anyone can access and read them. This is a big deal, because it means that competitors can easily access and analyse your work. While they obviously won’t be able to use your patent, they might learn other information that they can use that isn’t eligible to be patented. For example, Australia doesn’t grant patents for mathematical models, plans, schemes, or other “mental processes”. A patent that relies on such a process that was previously undisclosed can protect an invention, but may have to incidentally disclose this previously unknown unpatentable process. A competitor could feasibly then borrow and apply that process for their own efforts.

Patents don’t apply everywhere

it. Instead, the information would essentially become public.

Since patents are inherently legal restrictions, they can only provide protection where the relevant legal system has power. A patent issued in one country isn’t valid in another. There are a variety of treaties that allow you to apply for patents in multiple countries simultaneously, though that certainly still won’t cover all possible competitors.

In conclusion: think before your patent

Businesses that have to compete in the global marketplace might not be able to secure patent protection for some of their most important markets. This could leave them vulnerable to competitors who can appropriate and use the business’ own inventions to potentially challenge and drive them out of that local market.

Not everything can be patented Beside the aforementioned mental processes, a variety of other innovations can’t be patented. Most importantly, a new invention needs to be considered sufficiently novel to merit a patent. If the patent doesn’t contain a real “inventive step”, it won’t qualify. Further, patents are meant for economic use, and need to have a verifiable practical application. This is to ensure that businesses and individuals can’t simply try to patent every possible idea or process in hopes that it’ll become relevant to some industry at some point in the future. Naturally, you also can’t patent any invention that you aren’t the inventor of, even if it has not been patented in your country. While a patent issued in Albania won’t be valid in Australia, the Australian government won’t grant a patent for the same invention to anyone else who tries to apply for

Patents are an extremely valuable tool for protecting your intellectual property in a competitive marketplace. However, it’s also important to think about whether the information released by your patent application is more valuable than the patent itself. Innovations and processes that might not be covered under the patent, or that aren’t eligible to be patented in the first place, can still prove valuable to competitors. In some cases, then, you might be better served by attempting to protect intellectual property through other means, such as by treating it as a trade secret and taking steps to prevent the public disclosure. By not applying for a patent, you can maintain your competitive edge for as long as you can maintain secrecy, potentially much longer than 20 years.

So, what’s the right choice for you and your business? There’s no one right answer. Every innovation is unique, and you’ll need to make a determination based on your own industry environment and the particulars of your invention.

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great connections to be


a referable business


Actively generating new leads using a classic marketing funnel can require an enormous amount of effort and resources. While typical marketing strategies are a valuable way to generate leads, the most efficient way to drive growth is to turn your existing business connections into a referral network. Existing and former customers and other industry professionals that you have an existing relationship with can provide quality leads that you may not be able to reach with your traditional marketing efforts. Of course, getting referrals means first being the kind of business that others feel secure referring to their own contacts. The key to building a great referral network in this way, more than just your business’ operational excellence, is developing real, human connections.

Connect with related businesses A simple way to boost the number of referrals you receive is to work on cultivating relationships with complementary businesses in your industry. For example, a small solar energy products installation company would stand to get far more referrals by networking with established roofing and construction companies than other types of businesses. Determining which businesses and people might be particularly valuable to you in your industry, and going out of your way to focus on them, can make all the difference. Similarly, you’ll represent a more valuable connection to those types of businesses as well. Having reliable partners to whom they can refer existing clients helps them to develop

their own reputation as a wellconnected and established business.

Leverage your own contractors and freelancers Referrals don’t just flow from bigger, more established companies, but from smaller contractors too. It’s important not to neglect networking with much smaller businesses or freelancers that you may already be working with. This often work with a variety of larger companies, and can provide valuable referrals as well. For example, a screen-printing and embroidery shop might work with an independent graphic designer to provide occasional design services. This designer likely works on a variety of contracts with a host of other small or medium sized businesses, many of whom are likely to be in the market for branded clothing or other branded promotional items. By working to leverage these smaller partners, you can build mutually beneficial relationships that can grow both businesses while providing better and more complete services to clients.

Do favours for people Making strong connections often means making a business relationship less transactional and more interpersonal. A simple way to do that, is to go out of your way to be a friend and do someone a favour. In the case of a customer, that might mean providing helpful feedback or taking the time to do something extra for free. This shows that you like them, and want them to be successful beyond just whatever product or service you’re providing for them. Similarly, you might refer potential clients that you encounter to

people in your network in hopes that they’ll return the favour in the future. Giving a referral is almost as valuable as receiving one, because it communicates that you trust the business that you’re referring someone to with your own reputation. Doing this indicates that you’re invested in the relationship, and that it’s worth it to cultivate closer ties with you.

Giving good gifts Another, different way to stand out is gift giving. While gift giving is discouraged in some countries, it’s absolutely vital in other parts of the world. Always do your research. In recent years, as corporate cultures globalise and evolve, gift giving has become more popular in the West. Giving an acceptable gift isn’t necessarily difficult, but giving a good one requires some work. While the right choice is very different depending on the person and culture that you’re working with, a great gift will have a few specifically important qualities: • It’s non-perishable: Perishable gifts like wine or flowers aren’t ideal because the recipient won’t keep them for a long time. Ideally a gift will remain with the recipient, and help them to keep you in mind • It means something: The best gifts aren’t just appropriate, they specifically help to characterise your relationship and show your appreciation for the recipient • They are NOT branded: Branded items could easily give the impression that you’re self centered, and are not a great way to make a good impression.

Building a strong referral network requires a lot of work, but it can produce incredible results, even without the benefit of a team of inbound marketers. Personal connections are a powerful way to reach new clients and quickly build a level of trust that traditional marketing simply can’t compete with.

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How you can avoid

late payments

Of cash flow interruptions that SMEs don’t have direct control over, late payments from customers are one that every business has to wrestle with. A single late payment might just be an inconvenience, but over time these incidents can seriously undermine the long-term viability of your business. Even minor cash flow interruptions can interfere with your ability to pursue growth opportunities, pay employees on time, pay your own suppliers, and cover your own fixed operating costs. As we discussed in a previous article, 70% of small business owners surveyed have reported that late payments have negatively impacted their profitability and cash flow, and that more large clients are paying late than ever before.

deadline, you can mitigate your losses by stopping work instead of finding yourself in a non-payment situation after completing the entire project.

Learn about your customers

Remarkably, many SMEs don’t have clear and legally binding written agreements regarding non-payment with their clients. Always ensure that your contract clearly spells out exactly what will happen in the event of non-payment. That means delineating how late a payment can be before work is halted, and establishing agreements regarding late fees and accrued interest on unpaid invoices.

Few businesses go to the trouble of checking a client’s credit history, and that can turn into an expensive mistake. Businesses need to convert leads to sustain and grow their operations, but that doesn’t mean you should necessarily agree to do business with anyone who comes through the door. Untrustworthy clients can quickly become very expensive. If you run a check on potential or current clients, and find that they have a history of late or missed payments, you’ll be able to take measures to protect yourself and to minimise risk to your business.

Invoice early and often Don’t rely on single large invoices when projects are completed. Instead, invoice clients regularly for partial amounts. More paperwork might sound like an unnecessary complication, but it can make a big difference. If a client misses a payment


Furthermore, smaller sums will be easier to accommodate for a client at any given time, which means you’re more likely to be paid in a timely manner even if a client is trying to deal with their own cash flow problems.

Write thorough and binding contracts

Ideally, you should ensure that it’ll be more expensive to pay late than it would be to borrow money from their financial institution to pay you. By doing this, you can make it unattractive for clients to build up trade debt with your business, even if you choose not to terminate a late client’s project. To ensure that your contract is legally binding, it’s also a good idea to work with a legal professional when creating this document, especially if you’re working internationally.

Use payment plans In many cases, very large clients won’t be willing to sign contracts that don’t grant them very favourable terms, especially if they know that your business will rely heavily on their business. Fortunately, that doesn’t mean that they explicitly intend to be delinquent on payments. A great way to protect yourself when you have that minimal goodwill without a lot of leverage is to use a customer payment plan financed through your financial institution. You’ll be paid a lump sum right away, and your financial institution will collect payment from the client themselves, effectively removing you from the process. Not only will you be paid much more quickly, you’ll also be able to maintain a much smoother client relationship since any future payments will be completely out of your hands.

Set up contingency plans In some unfortunate cases, you’ll still be forced to deal with late payment issues no matter how well you’ve managed your clients. To make sure that you don’t suffer a cash flow interruption as a result, there are a few contingencies that you can preemptively set up.

Briefly... Invoice often, at each job completion if possible, and issue statements too.

Free standby finance facilities Standby finance facilities are loans that are negotiated in advance, allowing businesses to draw on them at a future time without having to go through the approval process. This can help you get fast access to a significant amount of capital in the event of a cash flow emergency.

Invoice financing Invoice financing or invoice factoring allows you to exchange an outstanding invoice at your financial institution for most of its value up front. Your financial institution will then pursue payment from your client on their own. As late payments become a growing problem around the world, SMEs need to take preventive steps to protect their cash flow and ensure their ability to operate smoothly.

By thinking ahead and actively managing these risks, you can not only survive, but also support your business’ growth by giving your business an advantage over poorly prepared competitors.

Introduce terms of trade contracts, insert them on the reverse side of invoices, and stick to them.

Finance, secure a standby invoice finance facility to fall back on when needed.

Coping with

explosive growth


Rapid growth is something most business owners dream of, but managing the challenges that come with this kind of expansion comes with some major hurdles. Making sure that your business can deliver on its commitments while maintaining quality standards during such a growth phase can feel like an impossibility.

Not only do you need to acquire new equipment and workers to increase capacity, you also need to find a way to pay for all that while training those new workers and trying to assimilate them into your team. To make sure that your business really benefits in the long term, you’ll need to manage a few important issues.

Address cash flow issues up front Growth is expensive. The cost of new equipment, hiring and training new employees, and renting or buying additional floorspace adds up fast. Even if new clients were to pay up front, most businesses wouldn’t be able to recover their investment immediately. Because of this, accommodating new growth needs to start with determining what your financial needs will be going forward, and finding solutions for any cash flow issues. After collecting any overdue debts, it’s a good idea to sit down with your financial representative and discuss your financing options. For a short-term boost, you can give your business a quick advance by using invoice financing. Larger and longer-term financing needs can be addressed using a more traditional business loan or business line of credit. Every situation is unique, and it can be tricky to decide on the best option for your situation on your own.

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Manage client expectations

Take care of your staff

Change has a way of disrupting order and leading to mistakes. While your business is growing rapidly it’ll be particularly vulnerable to client retention issues, especially if you went into debt to finance the expansion. If this disruption leads to mistakes and you lose too many clients, you may be unable to recover your investment as quickly as you need.

Unsurprisingly, explosive growth puts enormous strain on your team at every level. Workers might be forced to handle larger workloads while also training new employees, even as managers try to maintain client communication at the same time. To manage this kind of overloaded schedule worker morale needs to be kept high. That means checking in with individual employees about how they’re coping with ongoing changes, and working to ensure that they have the information and tools they need to be successful.

To deal with this, you’ll need to maintain excellent communication with new and existing customers. They need to understand that your business is undergoing significant changes, and that this could temporarily impact their service despite your staff’s best efforts. Encourage them to bring up any issues that they run into so that you can address them without losing their business. This extra bit of outreach can make all the difference between a client leaving in a huff, or simply calling to let you know there’s been an issue.

Most importantly, work on empowering employees to communicate with each other to make minor decisions and to prioritise effectively on their own. Provided that they’re trained well, this can lower stress levels in general and also take a significant amount of pressure off the management team, who is likely to be distracted with outward-facing tasks.

Control the hiring rate It can be tempting to hire as many people as you need as quickly as possible to take advantage of every new


growth opportunity. Unfortunately, hiring and training too many new people at once can interfere with your team’s ability to do their usual jobs as they’re trying to also bring new hires up to speed. If those same employees are also taking on oversized workloads, it could lead to serious mistakes and morale problems that could undermine your success in the long run. The other big issue with this type of reckless uncontrolled hiring is maintaining a stable company culture. The success of your business is ultimately contingent on the people that make up your organisation, and how well they work together. A business that’s trying to cope with rapid growth is obviously doing something right, and you’ll need to take steps to preserve the team dynamic that facilitated that success in the first place. That means that new employees need to be added to the team slowly enough that they’ll assimilate into the existing company culture and get properly incorporated into the team. Onboarding too many new employees too quickly could significantly change the existing team dynamic and lead to problems.

Of course, explosive growth is still a best-case scenario in many ways. Many famous unicorn startups, such as Google, Uber, Airbnb, and others experienced this type of growth and managed to harness it with great success. If handled well, these kinds of growth spurts can represent golden opportunities for your business as well.

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It’s natural for most businesses to go through seasonal slumps in sales. That might be because of the weather, cultural factors like holidays, government related issues, or any other reason. The cash flow disruptions that these slumps often cause can put enormous pressure on businesses, and can be especially difficult for startups and SMEs since they’re less likely to be able to absorb the cost. Making it through a slow season requires good planning, and a pragmatic approach. Let’s take a closer look at how you can help your business survive when budgets get tight.

Recognising seasonality Not every slump in sales is going to be a seasonal issue. If you’ve been in business for some time you’ll become familiar with regular seasonal cycles, but if you’re just starting out it can be difficult to determine exactly what the problem is. The simplest way to know for sure is to get input from more experienced people in your industry, so that you can react appropriately right from the outset. It can be difficult to get helpful information from someone who may be in competition with you, but you can and should use connections with experienced people who aren’t. Those, for example, might be suppliers or contractors that you already work with, and who would have direct experience with these kinds of cycles.

Understand the bigger financial picture When entering a down season, you’ll need to work out exactly what your business’ financial needs will be, and what your financing options are. That means determining what level of revenue you’ll need to sustain to keep employees paid, lights on, and operations running.

To deal with any shortfalls, you’ll need to speak with your financial representative about what your best options might be in any given scenario, whether that’s a business loan, invoice financing, a stock loan, or something else. From that solid theoretical footing, you’ll be able to work out a strategy to help you keep your operations safely in order in the first place.

Don’t try to market your way out Many less experienced entrepreneurs try to deal with seasonal slumps by ramping up spending on marketing and sales. Unless you’ve found a new way to specifically make your product relevant during a slow season, this is like trying to sell dry crackers in a desert. If you’re already dealing with cash flow issues, it could very well make the problem worse. Marketing campaigns can take months to generate any leads at all, and longer to really start producing profitable results. Trying to resolve a relatively short-term seasonal problem in this way isn’t likely to be effective, even if the campaign is well executed. Worse, launching a marketing campaign while revenues are slumping is dangerous, because you may well be unable to fund it properly. That, in turn, will further interfere with its effectiveness.

Nurture your existing business One critical thing you can do to keep revenues up is to focus your efforts on your existing customers. Encourage customer loyalty and client retention by connecting with them, launching loyalty programs, and generally ensuring that they’re well taken care of. This extra attention will not only make it easier keep revenues as stable as possible, it’ll also give you the opportunity to

collect data from customers and to make improvements to your products and services. With business slowing, your employees will have more time to devote to individual customers, which is something you can take advantage of. Work on getting clients to engage with your brand, and to help you advocate for your business with their peers. While regular marketing might fail, encouraging loyal customers to refer new clients is much less expensive and far more likely to result in success during a slump.

Cutting costs The most obvious way to keep budgets under control is to cut spending. Cutting costs in a sustainable way that doesn’t impair your business’ ability to function and continue to provide top quality products and services certainly isn’t easy, however that shouldn’t stop you. Regular cuts are an important way to get rid of inefficiencies and redundancies that naturally develop in your organisation over time. When your business is growing, for example, you may need to hire additional staff, experiment with new types of subscription-based softwares, and acquire equipment that won’t have any real purpose a few months or years later. It’s not practical to continuously audit your entire organisation to keep these issues from developing, but it can be particularly harmful to ignore them when money is tight. A seasonal slowdown is the perfect opportunity to go in and make these types of adjustments. Don’t view your seasonal slump as a threat so much as a natural phenomenon that marks an opportunity as much as a challenge. You and your business will become stronger and more competitive for it in the long run.

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Simple strategies to help you

keep your startup afloat Starting a business is expensive. Not only do you need to hire workers, buy equipment, and rent space, you also need to brand your business, market your products, and often build a website before you can start earning anything at all. This makes for a complicated situation for many young businesses. While these costs seem fixed and monolithic, there are a few things you can do to keep your spending under control, and to ensure that costs don’t mount uncontrollably over time to sink your business before it even has a chance. As with most things, it’s far more effective to think ahead from the start than to wait for potential problems to become impossible to ignore.

Start marketing early As an entrepreneur, it’s tempting to focus your efforts on your products and your operations. This is a good instinct, since a business needs to be able to deliver value if it means to survive. However, it’s equally critical to ensure that your business actually has an informed market to reach out to when it does start producing and looking for ways to grow.


Sit down with a professional and hash out a basic marketing strategy to run while your business is still in its initial stages. The investment doesn’t have to be large, and the marketing campaign doesn’t need to be comprehensive. Rather, it should aim to lay the groundwork for future marketing efforts by establishing your brand as a member of your industry on relevant industry websites or publications, building an email list, or developing a following on social media. Doing any of these things requires a relatively small amount of sustained effort over the course of months. It’s very common for marketing agencies to be forced to spend a long time laying this groundwork before they can generate real results. That can then translate to a lot of lost potential revenue while your business sits around waiting for leads. Getting these things done as soon as possible means you’ll be able to get rid of this lag time so that you’re ready to effectively generate leads with future marketing efforts much sooner, possibly as soon as your business is ready to accommodate them.

Don’t overestimate your growth Businesses grow in spurts, and not all of that growth is permanent. Over time, business owners get a feel for when those growth spurts are going to occur, and can prepare for them ahead of time. Unfortunately startups who haven’t gone through these cycles before often make the mistake of interpreting a growth spurt as a long-term growth trend, and overreact. They go and get financing to purchase more equipment, hire more employees, and sometimes even move into a larger office on the expectation that demand will catch up to fill their new capacity very soon. This is, of course, incredibly risky. If your business doesn’t actually experience the predicted growth, you could experience serious financial hardship that will impact your ability to operate and grow effectively in the future. It’s important not to arbitrarily grow your operational capacities beyond what your revenues can currently sustain. By doing this, you’ll keep your business running sustainably

without unnecessarily leveraging assets to finance wasteful spending. This not only saves money directly, it’ll also make it much easier to get the financing you need to expand your operations when a tangible growth opportunity does materialise.

Hire experienced workers Most startups can’t afford to hire industry leaders and experts with decades of experience. Unfortunately, many entrepreneurs give up on hiring experts entirely, and bring on the most inexpensive and under-qualified workers they can find, usually fresh college graduates. That can be a big mistake. While these workers certainly cost the least in terms of wages, they aren’t actually the most cost effective solution. Employees with just a few years of experience can bring far more to the table, while often still being available at fairly affordable rates. They don’t need to be taught the basics of their positions, they generally know how to stay on task, and they know how to interact with co-workers and clients to create a healthy and productive work environment. They’ll

also be far less likely to make simple mistakes that could undermine customer confidence in your business. This is a big deal for any startup, because it’ll impact the quality of your work, and your ability to retain clients in both the short and long term. Paying less for a worker isn’t worth the savings when you have to compensate for accelerated client turnover and potential damage to your startup’s reputation. Hiring additional marketing and sales staff and possibly a reputation management firm is going to be far more expensive than bringing on well qualified employees in the first place.

Most new businesses don’t make it through their first year, but if you plan ahead and think strategically, your business doesn’t have to become a statistic. If you’re looking for help and advice on how to help your business succeed financially, give us a call today to chat with one of our expert representatives.

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Give your business the boost it deserves Innovative short-term finance facilities designed to help businesses and start-ups get ahead. Speak with our business finance specialists about a unique way to get more cash into your bank account, without disrupting present banking arrangements. Set up a standby facility now, and only incur fees when you use it. It’s as simple as 1-2-3.




Tell us what you need.

We’ll present a nonobligation offer.

Set-up, grant access, and use.

If we can help, we’ll tell you how along with all applicable terms and charges. If we can not help, we’ll do our best to refer you to someone who can.

We’ll establish an ondemand standby finance facility for you to call on when you need it. If your circumstances change, we’ll change the facility to suit.

We will visit you, and you tell us about your business and what you need: your industry, your turnover, your customers and your finance need.

Our national Business Finance Specialists are available at all times, and are waiting for your call. Contact Fifo Capital today. 0800 863 436

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Covisory Connect - Qtr 2, 2017  

Covisory Groups eMagazine Connect – sharing insights and inspiration, relevant industry news and information to help you and your business.

Covisory Connect - Qtr 2, 2017  

Covisory Groups eMagazine Connect – sharing insights and inspiration, relevant industry news and information to help you and your business.

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