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QUARTER 4 I 2017

Do you actually know what you are doing with GST?  ow Jeff Bezos H is taking the world into the future  rowing businesses G need to think ahead to keep operations reliable Brian Chesky: building a culture of disruptive sharing  ranchisors need F to invest in their franchisees

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 86 34 36

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 the latest cloud based technology together with our up-to-date specialist knowledge and years of experience providing one-on-one 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.


The Covisory Group solve people’s

Welcome The past three months has taken New Zealand on a political roller coaster with the result being a new government with a new policy and social agenda for the next three years.

Change is coming and what is going to be interesting is what does this change mean for you as typically a business owner in the context of the post-election New Zealand. We have written about the expected changes over in our blog and the possible impacts but overall, there is much for business and our clients to be happy with and excited by in terms of what Labour and New Zealand First have promising. It creates opportunities in itself and you need to quickly focus on these to understand where they will be in order for you to take full advantage of them. If we couple this with the trust law reform, which will still come into effect next year even under a Labour government, it is going to be a busy year or two as we all get used to significant change in our existing environment. We will be taking the opportunity in 2018 to not only

review all existing trust deeds in light of the new law, but to assess the benefits of trusts for our clients. In some cases, particularly where children who are beneficiaries are living overseas, returning assets to individuals names may significantly reduce what could otherwise be hefty foreign tax burdens on them. As always, the Covisory team is happy to talk to you about your needs, now and going forward. If there is anything we can do to help, please call us. Best regards, Nigel Smith Covisory Partners Limited

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 D o you actually know what you are doing with GST?


 How Jeff Bezos is taking the world into the future


 C ulture shock is serious business for international SMEs


 Online marketplaces – empowering small business globally


 Growing businesses need to think ahead to keep operations reliable


 Brian Chesky: building a culture of disruptive sharing


Invoice factoring is a big deal for startups


 Franchisors need to invest in their franchisees


Learn how to fail like a disruptor


 O verreliance on contractors might be slowing your growth


 B e proactive online to protect your reputation


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.



Do you actually know what you are doing with GST? Are you avoiding issues with Property Transactions – What happens around GST? Whether there is GST or not on property transactions gives rise to a lot of confusion. The implications if you do get it wrong can cause serious ramifications for both parties to the agreement - think 15% of the purchase price. We are talking hundreds of thousands if not millions of dollars. The standard ADLS/REINZ Sale and Purchase Agreement for Real Estate in New Zealand (currently ninth edition 2012 (7)) has highlighted the need to ask questions around GST. The agreement does make things slightly easier as long as the form is filled in correctly. We have put together this basic overview as a starting point. Let’s set out the basics firstly from the Vendors Point of View. To be able to register for GST the vendor is not using the land for their principal place of residence and instead is using the land for making “taxable supplies”.


Examples could be: Taxable Supply for GST purposes

Long Term residential letting


Short term letting where you receive a rate per night. For example - Airbnb


Commercial Lease of a building


Farming (but there are exceptions)


Its not as straight forward as it looks – if you get it wrong think 15% of the purchase price.

If the vendor does make a taxable supply and has registered for GST, then they need to show this on the Sale and Purchase Agreement by: Respond YES to the question This question is located asking whether the Vendor at the top of Page 1 of the is registered under the Agreement GST Act in respect of the transaction evidenced by the agreement and or will be so registered at settlement The purchase price must be shown as “plus GST (if any)”

Located on Page 1 of the Agreement. This averts the possible problem if the purchaser nominates a non-GST registered entity after signing. Meaning the vendor would still need to account for 15% of the purchase price to the Inland Revenue, and ends up getting 15% less of the sale as a result of the Purchaser’s actions.

The Vendors GST registration number is to be entered in under Schedule 2 of the agreement.

If the vendor is not registered for GST, then they respond NO to the question asking whether the Vendor is registered under the GST Act in respect of the transaction evidenced by the agreement and or will be so registered at settlement and they do not have to fill out Schedule 2. Secondly if the purchaser is GST registered then they need to state this in Schedule 2 answering all questions 3 to 11. If they are not registered, then they would answer questions 3 and 4of schedule 2 as NO. Let’s look at some possible scenarios: Vendor GST Registered

Purchaser GST Registered



1. No GST on the sale 2. the Vendor must answer NO on the front page to confirm they are not GST registered. 3. The price can be shown as either Plus GST (if any) or inclusive of GST (if any) or if neither is crossed out it automatically defaults to Inclusive of GST (if any). In reality it makes no difference.

Vendor GST Registered

Purchaser GST Registered



1. The vendor must answer Yes on the front page to confirm they are GST registered. 2. The price must be shown as Inclusive of GST (if any). This way the vendor can only be better off if the Purchaser Registers. 3. Questions 1 and 2 must be answered on Schedule 2



1. the Vendor must answer NO on the front page to confirm they are not GST registered. 2. The price to be shown as inclusive of GST (if any) 3. The purchaser can claim the GST in their GST return as they pay for the property (irrespective of their actual GST registration basis).



1. Where both parties are GST registered AND the purchaser declares on Schedule 2 that they intend to use the property for making taxable supplies AND the purchaser does not intend at the time of settlement to use the property as a principal place of residence then under Clause 15 it will become compulsory for the transaction to be zero rated for GST purposes.

Yet, let’s consider what happens when the GST status of one of the parties to the transaction changes prior to the settlement date. If the purchasers GST status changes they are required under clause 14 to provide the vendor with no later than 2 days prior to settlement for the correct position to be recorded on the settlement statement. The relevant date for GST status is taken from the status of the parties at the date of settlement. In the next edition of Covisory Connect we will address GST issues around partial use and change in use. As always, we would advise that you seek specialist legal and tax advice when faced with GST.

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Arguably the greatest of these visionary superentrepreneurs is Jeff Bezos, the founder of Amazon, and briefly the richest man in the world early in 2017 when his net worth broke $90 billion US dollars.

How Jeff Bezos is taking the world into the future While most entrepreneurs are limited to disrupting and advancing a single industry in marginal steps by their resources or interests, others are determined to push humanity forward as a whole. Some, like Elon Musk, aim to do this by simultaneously transforming multiple industries, while others, such as Boyan Slat and others with fewer resources, pursue more targeted projects with the aim of triggering global change. Arguably the greatest of these visionary super-entrepreneurs is Jeff Bezos, the founder of Amazon, and briefly the richest man in the world early in 2017 when his net worth broke $90 billion US dollars. Through Amazon, Bezos disrupted the retail industry and transformed how hundreds of millions of people buy products online, but that was only the beginning. He also launched


Blue Origin, a secretive competitor to Elon Musk’s SpaceX and Richard Branson’s Virgin Galactic, all while proving himself as a driving force behind other unrelated disruptive businesses.

Bezos’ big picture vision As the valedictorian of his class in 1982, an 18 year-old Bezos gave an interview to the Miami Herald that must have sounded more like an expression of naive optimism, rather than the ambitions of what would become one of the most powerful people on earth. In it, Bezos talked not about becoming a wealthy, successful CEO, but about the future of humanity. He dreamed of evacuating humans from the Earth entirely, turning the planet into a sort of nature preserve, while humanity expanded into space. While the Jeff Bezos of today is certainly more focused on the

business of doing business, he’s still a big believer in thinking big. His broader goals and long-term vision have been instrumental in the success of Amazon as well as his other ventures. He believes that great businesses should focus on goals that reach beyond themselves. After all, the simple pursuit of shortterm profit isn’t nearly as inspiring or conducive to disruptive innovation as the goal of reinventing the world for your customers.

Driving disruption Amazon opened its doors in Jeff Bezos’ garage in 1994. It began as an online bookstore, but expanded to provide products of all kinds after experiencing rapid growth in its first few years. Since that time, Amazon has disrupted brick-andmortar shopping, transformed how we find and acquire the products we need, and changed how and

how quickly goods are delivered all over the world. Even now, Amazon is testing even faster drone-delivery systems. If Amazon were content to simply continue to dominate online shopping, many of these globally disruptive advancements would never have been made. That drive to always push forward into the future was the root of Amazon’s success, and it’s this force that will keep Amazon at the forefront for the foreseeable future.

Thinking even bigger with Blue Origin While it’s unlikely that Bezos will ever try to fulfill his childhood dream of seeing the planet as a park, he has proven to be completely serious about bringing the space age to the general public. With the founding of Blue Origin in 2000, he has begun to pursue his dreams of commercialising space, and bringing about “an era when millions of people would be living and working

in space.” 17 years later, Blue Origin only just landed its first paying customer earlier this year. Despite this, the company has made steady developmental progress and enjoyed stable funding out of Bezos’ own pocket. He views his project as a powerful long-term investment that will allow for the commercial usage of space for resource acquisition, energy production, and manufacturing. This is in contrast to SpaceX’s greater mission, which is primarily centered around transportation and colonisation, and places Bezos in a unique position to expand the global economy beyond the globe itself.

Giving a leg up to progress While most entrepreneurs might feel more than occupied by their own ventures, Bezos continuously works to advance other disruptive businesses besides his own. Many of these have become household

names, and some have become integral presences in the lives of everyday consumers. In 1998, Bezos became the fourth angel investor to help launch Google with an investment of $250,000. Later, he would also invest in Airbnb, Twitter, and Uber, among many others. Over the course of his career, Jeff Bezos has directly and indirectly affected many aspects of the lives of consumers, from how we commute and travel, to how we buy our products, to how we communicate with both friends and strangers online. Along the way, he has amassed an incredible net worth of over $83 billion US dollars, and has positioned himself as one of the world’s most influential figures in the global economy. His example serves to show entrepreneurs that mundane business goals are often best achieved in the pursuit of larger ambitions.

He dreamed of evacuating humans from the Earth entirely, turning the planet into a sort of nature preserve, while humanity expanded into space.

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Culture shock is serious business for international SMEs As an SME, then, it’s critical to know what kind of culture shock to expect, and to have a plan for how to deal with it when you decide to start building your business overseas.


As the world economy globalises, shipping gets cheaper, and intangible goods and money become ever easier to transfer across borders, SMEs increasingly can’t afford to operate only domestically. Competing means reaching out to international markets both for suppliers and for customers. Unlike larger businesses, SMEs are likely to enter the world of international business without a lot of prior experience or knowledge about what they’re getting themselves into. Additionally, they don’t generally have the notoriety or the resources to help them ease the process of building new relationships. As a result,

What to watch out for Putting chopsticks into a bowl incorrectly, arriving to a meeting late, giving an odd gift, or accepting one when you were supposed to refuse, are issues that are commonly brought up in regard to culture shock. While those kinds of incidents make for great stories, they aren’t very likely to destroy a business relationship on the spot. These actions often don’t really miscommunicate, because it’s usually evident that the offender isn’t aware of the message they’re sending. Faux pas that can easily be interpreted as a deliberate power play, challenge, or insult are far more dangerous. These tend to be cultural habits that people assume are universal, but that don’t actually translate well.

Body language We don’t tend to spend a lot of time learning about different rules for body language and closeness in other parts of the world. For example, smiling and eye contact that one person might consider to be normal friendly and polite behaviour could easily be interpreted as a sexual advance by another. Touching someone, even on the hand or arm, could be considered extremely inappropriate in some places, while in others simply making no physical contact could be seen as standoffish.

Adherence to hierarchy it’s simply a lot more difficult for SMEs to build those relationships. That creates both a challenge, and an opportunity to compete. As an SME, then, it’s critical to know what kind of culture shock to expect, and to have a plan for how to deal with it when you decide to start building your business overseas. That’s true whether you’re visiting a foreign partner, or just trying to communicate effectively in a teleconference.

In the Western business world, business hierarchies have been gradually levelling for decades. Employees communicate fairly freely with other employees in and outside their department, they call managers and leaders by their first names, and generally feel more comfortable accessing and exchanging ideas with people higher up on the totem pole than them. This can become a problem when working with partners who maintain stricter order in their own organisation. For example, if you were to seek some expert feedback from an employee in a partner organisation, it might not be appropriate to communicate with them directly (instead of

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their manager), even if you’re working with that employee in another capacity. Conversely, they might consider it disrespectful if you were to refer them to a lower level employee instead of handling the issue yourself when roles are reversed.

What “business relationship” means As extreme examples, it’s well known that building a business relationship goes hand in hand with building a social relationship in Mexico, and that pleasantries are considered mostly a waste of time when working with Germans. Every culture has a slightly different approach to what a business relationship really is, and to what extent business should overlap with personal. Even small missteps here can lead to serious miscommunication, and make it very difficult to come to an arrangement.

Managing culture shock While the best solution is, of course, exhaustive familiarity of the culture of your partners, that isn’t always an option in the short term. In many cases, we only work with the information we can find on the Internet, and that is rarely complete or appropriate for every demographic and industry we might interact with. To succeed despite this, it’s important to be ready for unexpected issues, and to have a plan for how to approach any awkwardness and miscommunication.

Briefly... Conducting business across different cultures is increasingly a reality for SMEs. How do you navigate your way through cultural differences and come out on top? Straightforward communication is your most vital tool, particularly if you had little opportunity to do your research. As culture shock is a twoway street, be aware and tolerant. Last but definitely not the least, do show interest.

Communicate straightforwardly People aren’t out to get offended, and a bit of preventive honesty can go a long way. If you can make your business’ situation, goals, motivations, and intentions toward your new business partner clear up front, they’ll have the context they need to interpret your actions. Similarly, eliciting this information from them explicitly can eliminate a lot of guesswork later on.

Be tolerant Culture shock goes two ways. It’s important to understand that behaviour that you might consider unprofessional or rude could be completely normal for your business partner. There’s no reason to be offended, or to make judgments in regard to things that won’t get in the way of the relationship’s business success.

Show interest If you’re visiting a new place, and the business you’re working with has assigned you someone to show you around or help you, it might be an appropriate time to get some insider knowledge. Showing interest in new cultures is a great way to gain the cultural familiarity you’re missing while also signalling your current lack of that familiarity.


Understanding that culture shock can be a serious issue when doing business internationally is, in itself, already an important step. If you additionally take the time to educate yourself, be tolerant, and learn to communicate effectively while operating in an unfamiliar context, you’ll gain a significant edge on many small business competitors that are dipping their toes into international markets for the first time.

Online marketplaces

are empowering small business globally

Amazon’s move to open their first distribution centre in Australia is creating a lot of buzz, but how are online marketplaces really affecting businesses and everyday consumers? Global e-commerce retailers like Amazon only make up a small part of the total picture. Small businesses, governments, artisans, freelancers, and individual consumers all take advantage of different kinds of digital platforms to connect businesses to their customers, and to help make business more efficient and more competitive. Online marketplaces have been disrupting industries and transforming how we do business for years. They’ve made the global economy more efficient overall, but the benefit to startups and small businesses is especially significant. To understand why that is, however, we need to look at more than just retail giants like Amazon.

Types of online marketplaces While we tend to focus on just one or two major examples, Internet marketplaces have been adapted to function in a huge variety of capacities to transform how we sell goods and services in almost every industry.

Retail marketplaces Online retail giants like Amazon, Alibaba, and Ebay have made by far the biggest splash. However, they’re only one very specific kind

of marketplace. Others exist to cater to the needs of different types of businesses, specific industries, or groups of consumers.

Service marketplaces Consumers can compare options and buy everything from insurance, to mental health services, to language lessons via Internet based marketplaces. More importantly, unlike physical goods, they can often also receive and manage these services electronically. Catch-all platforms like Gumtree, general service platforms like Upwork, or smaller industry specific options allow businesses to reach and provide services to customers that they otherwise would never be able to connect with. These are, in many ways, the driving force behind the much-hyped “gig economy”.

How online marketplaces are helping small businesses evolve These new kinds of marketplaces are having a profound effect on small businesses and startups. Specifically, it makes it much easier and cheaper for them to break into markets and to compete with larger and more established businesses.

Getting products and services in front of customers

limited amount of space, and need to stock their shelves with exactly those products that consumers are likely to buy. Online, on the other hand, space isn’t really at a premium. Anyone can create a merchant account on Amazon (or any of a wide variety of online retail marketplaces) and offer their products alongside those of well established competitors under the same, or similar, keywords.

Greater growth potential Besides making businesses more visible to their target markets, online marketplaces are fundamentally not geographically limited in the same way that small businesses usually are. By using an online marketplace, businesses can reach the entire market targeted by that platform. Best of all, a startup can immediately get access to the marketplace’s users without being forced to spend months or years on digital marketing to establish themselves sufficiently to attract significant web traffic to their own site. As a result, these businesses have the opportunity to grow much faster than would otherwise be possible. Online marketplaces help to level the playing field for businesses, and offer consumers more choice. That gives innovative startups with disruptive new ideas a better chance to be noticed and to gain traction.

Brick and mortar stores have a

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Growing businesses need to think ahead to keep operations reliable There are a million things that can go wrong in a business at any one time. During a growth spurt, many of those issues become much more dangerous. • Investing in growth places additional strain on a business’ budget, which leaves very little room for error. • A lost investor, a late client payment, or simple budgeting problems can disrupt a business’ cash flow to the point where operations are interrupted. This can quickly evolve into a dangerous downward spiral. • Cash flow problems mean payment delays for suppliers and employees. Depending on the situation this might just result in a temporary morale or a product quality issue, or it could mean losing suppliers or valuable workers. Those disruptions can then negatively affect client relationships, causing even more problems and eventually destabilising your business. Even in relatively minor cases, business owners often find themselves scrambling to put out fires, only to find the next disruption waiting the moment they finish mitigating the damage from the first. This makes it difficult to focus on developing and implementing an effective growth strategy, and ultimately results in stagnation. To maintain control as they grow, businesses need to ensure that operations can continue uninterrupted regardless of everyday issues.

Budget properly for growth While there are a number of ways to manage cash flow problems, there’s no sense in making the task any harder than it has to be. That means taking reasonable steps to avoid running into those issues in the first place. Budgeting can become extremely complex in some organisations, but it’s essentially just a prediction of your business’ cash flows over a set period. By analysing your cash flows and taking the time to budget comprehensively, you can get a very good idea of what kind of financial risks your business will face at a future point in time. Your budget should realistically describe your business’ needs, both in terms of current operations, and your growth plan. When that’s done, you’ll need to ensure that the funds


you need will be available when you need them. That means tracking incoming revenue and investment income, and pre-emptively making up for any foreseeable gaps with the financing options that are available to you.

Keep cash flow steady Once you’ve set a solid budget, you can make future financial decisions with far more confidence. You’ll be better able to predict when problems will arise and how serious they’ll be. When those interruptions strike, you’ll be able to respond quickly and proportionally to prevent any long-term effects. Most often, that means using short term financing to cover for a cash flow issue.

Invoice financing Invoice financing allows you to exchange an unpaid invoice for most of its value at your financial institution. When the invoice is due, they’ll collect the payment from your client themselves, and deliver the rest of the payment (minus a fee) to you at that time. This allows you to give your business a quick advance, and is especially useful for dealing with an issue where your business is generating plenty of revenues, but those revenues can’t be collected in time to cover costs.

Small business loans Alternate finance institutions can offer much smaller loans than are generally available from your primary bank. More importantly, businesses can get access to their funds extremely fast, usually in less than 48 hours. That allows business owners to finance shortages practically overnight instead of waiting for a response to a loan application for weeks or months.

Stock loans If you find yourself in a situation where you don’t have assets against which you can secure a loan, you can make your resources stretch with a stock loan. This type of loan finances supplier purchases, and is secured against the stock you buy with the loan. It’s an especially great option for businesses who are experiencing unexpectedly rapid growth, and don’t have the funds available to fill their orders. Of course, cash flow solutions aren’t always enough to insulate your business against all disruptions. A critical supplier going under, key employees moving on, or a piece of difficult-to-procure equipment breaking down can still interfere with growth. Not every risk can be perfectly accounted for, but careful cash flow management is a powerful stabilising force. By taking the time to do it well, you can help to mitigate those other risks. After all, suppliers and workers who know they can rely on you are more likely to succeed and stick around, and it’s much easier to keep equipment properly maintained when your organisation is properly funded.

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Brian Chesky: building a culture of sharing


When Brian Chesky agreed to rent out a few air mattresses in his apartment in 2007 to help make ends meet, he and his roommate, Joe Gebbia, figured they might be onto something. Not even in their wildest dreams, though, did they expect to be launching a $30 billion dollar enterprise. Now worth over $3.8 billion dollars, it’s difficult to picture the CEO of Airbnb as a young industrial designer looking for side-hustles to come up with rent money.


Ultimately, however, it was exactly that situation that inspired the idea behind Airbnb, and that continues to drive the success of the business today. Chesky’s vision, his inspiring business philosophy, and his focus on strong and vibrant communities and company culture have enabled his and his business’ success. Further, his experiences offer other entrepreneurs insights into what makes some innovative and disruptive ideas succeed while others fail.

Bringing back trust In an extended interview, Chesky discusses how he views his business’ success and its purpose. His business is about more than just providing accommodations for travellers. He doesn’t look at Airbnb as a brand new, ultra-progressive idea, but rather as a way to enrich cities, and to restore a lost sense of community and “village”, that went missing in the 20th century. Until relatively recently, in historical terms, people stayed in boarding houses and homes when they travelled. Hotels, by contrast, owe their dominance to a loss of trust in other people, replaced by a lesser faith in institutions and brands. Chesky aims to bring back that trust to facilitate healthier and more community oriented cities, to enable micro-entrepreneurship, and to encourage the shared use of spaces and resources. Covisory Connect


He doesn’t look at Airbnb as a brand new, ultraprogressive idea, but rather as a way to enrich cities, and to restore a lost sense of community and “village”, that went missing in the 20th century.

While Chesky himself doesn’t strongly embrace the term “sharing economies” himself, his philosophy and his business are clear and commonly-cited examples of the disruptive potential that this type of peer-to-peer approach has.

Disruptive sharing Disruptive innovations often seem obvious in retrospect, and few more so than sharing-based businesses like Airbnb. Sharing economy based businesses make sense, because they allow regular people to apply their existing resources and skills to compete in an industry that wasn’t previously accessible to laypeople. It’s not surprising that, given the opportunity, people would want to rent out a spare room, a guest house, or an empty apartment to make some extra money on the side. Airbnb started as a side hustle, and its fundamental purpose today is to enable others to do the same. The hotel industry didn’t see this coming as a possible disruption they needed to prepare for, because they never considered that the threat


to ensure that those changes are complementary to their vision for their company. When it came time to hire Airbnb’s first employee, Chesky personally interviewed hundreds of applicants before settling on Nick Grandy. Taking his time with that choice, and the ones that followed, may have been slower in the short term, but it allowed him to better shape the values and core identity of Airbnb. Brian Chesky started as an industrial designer looking for a way to make rent. That initial perspective has informed his entrepreneurial approach ever since. His passion for enabling micro entrepreneurs and enriching cities, together with his

was real. After all, how could an enterprising homeowner possibly market themselves more effectively than a hotel? How could they guarantee quality service? In founding Airbnb, Chesky and his cofounders elegantly solved this issue. The platform connects micro-entrepreneurs to their customers, and includes a rating system designed to keep users honest. This allows these non or semi-professional individuals to collectively saturate markets, and to compete against established enterprises in the industry.

Building strong company cultures While he had something going for him with a great idea and the ambition to create a more efficient, better connected, and more egalitarian world, the secret to Chesky’s success ultimately lies in the way he pursued that passion. Even a great product won’t endure, he says, if it isn’t supported by a similarly great company. This latter challenge is, according to Chesky,

all about creating a strong and vibrant company culture. Brian Chesky doesn’t believe in “good” or “bad” company cultures, so much as strong and weak ones. A weak company culture doesn’t unify its employees, or help a business connect with its customers, resulting in a weak brand. By contrast, a strong company culture helps to define an environment and experience for both employees and customers. Every strong company culture is different, and better suited to different kinds of people with different values.

Strong cultures require careful hiring Cultures are defined by the people that operate within them. For a business, that means hiring the right people is about much more than acquiring labour resources. According to Chesky, bringing in new employees is like introducing new DNA to an organism. That DNA will cause changes in the long term, and it’s up to entrepreneurs

Even a great product won’t endure, he says, if it isn’t supported by a similarly great company. This latter challenge is, according to Chesky, all about creating a strong and vibrant company culture.

insight in building a strong company culture to represent his core values has made him one of the world’s youngest billionaires, and most important entrepreneurs of the 21st century. By emulating his approach of empowering innovative ideas with strong supporting company cultures, you and your business will also be better able realise your own vision.

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Invoice factoring is a

big deal for startups New business owners are often shocked by the amount of time and effort they’re forced to spend on managing their finances. Billing clients, chasing down payments, covering expenses, tracking all of these transactions, and planning for the future is not an easy task. Worse, many entrepreneurs are forced to spend their time not only handling this but also overseeing employees, developing growth and marketing strategies, and often lending a hand in production as well. This can make it incredibly difficult to keep cash flow stable,


and to stay on top of payment collection from late clients. Invoice factoring is an ideal solution to this issue. Not only does it give business owners the tools they need to stabilize their revenues, it also simplifies payment collection to help free up much-needed time for other responsibilities. Moreover, it helps businesses avoid friction over payment issues with clients.

Dealing with inevitable cash flow interruptions Small businesses in Australia alone are owed approximately $26

billion in late payments at any one time. Cash flow interruptions are practically unavoidable for any small businesses that don’t require upfront payment, which simply isn’t an accepted option in many industries. That means entrepreneurs have to be prepared to deal with unreliable revenues. A failure to address this issue can make a business far less competitive, and even drive it into default before it ever has had a chance to establish itself. To bridge these funding gaps, businesses need fast access to funds, and that means short term financing.

traditional debt, while also freeing business owners from the burden of collecting payments themselves. When you factor your invoices with a financial institution like Fifo Capital, you trade your customers’ debt in the form of unpaid invoices for most of its value up front, with the remainder paid out when the client pays. By doing this, you can be absolutely certain when you’ll be paid, allowing you to plan your finances far more reliably. The secondary benefits, though, might be even more valuable.

Protecting your business relationships

Invoice factoring isn’t the only option for this, but it’s an excellent frontline solution for many businesses. Sometimes you may need more funds than your outstanding invoices can provide, and in those cases traditional loans and other financing options certainly have their place.

How invoice factoring works Traditional short term financing is a great way to get access to muchneeded funds on short notice, but in many cases it means just another layer of financial complexity. A short term loan or a line of credit costs interest, and leaves business owners with the responsibility to come up with the funds for repayment themselves. They’ll need to pursue late-paying clients with even greater urgency to make sure they can control the debt they have. Invoice factoring, on the other hand, is designed to provide short-term access to funds without the issue of

Non-payment and late payments can quickly sour a previously healthy business relationship. In B2B relationships, client businesses often need to juggle a variety of payment obligations. If they run into cash flow interruptions themselves, they may attempt to informally renegotiate, delay, or even avoid payments to those partners who might be unable or unwilling to resist. The lack of respect displayed by the client in that moment endangers your client relationship, and it’s extremely difficult to maintain a healthy partnership going forward once that occurs. Brand new business in particular tend to be insecure when trying to pursue a late payment while still hoping to hold on to a client. This can lead to miscommunication that makes it even more difficult to resolve the problem in a productive manner in the future. Factoring invoices with an institution like Fifo Capital removes this threat entirely. When you use this service, your financial institution becomes a powerful ally, while also making it impossible for a late client to leverage your continued business relationship to ensure your cooperation. Since the financial institution holds the debt at the point

that the invoice comes due, it will collect payment from your customer itself. A financial institution calling about an unpaid bill is far more likely to inspire a professional response and rapid resolution than a followup call by a supplier. In this way, you can completely circumvent an enormous amount of interpersonal drama that doesn’t belong in your business relationships in the first place. Startups, and the entrepreneurs who run them, have far too much going on to deal with avoidable cash flow interruptions and unnecessary client management and retention issues. By using tools like invoice factoring, you can stabilize your revenues while also freeing up more time that you can spend on driving growth and becoming more competitive. If you’d like to learn more, our representatives at Fifo Capital are always happy to advise you.

When you factor your invoices with a financial institution like Fifo Capital, you trade your customers’ debt in the form of unpaid invoices for most of its value up front, with the remainder paid out when the client pays. By doing this, you can be absolutely certain when you’ll be paid, allowing you to plan your finances far more reliably.

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need to invest in their franchisees

The capacity for growth that a business has is traditionally limited by the amount of investment it can apply to that purpose. Franchising is a great way to get around this issue quickly by harnessing the capital and labour of franchisees on behalf of your brand. The franchisee invests the capital for the new franchise, while also accepting most of the risk associated with that investment. Financially, this makes growth a significantly lowerrisk endeavour for the franchisor than it might otherwise be. Despite that, however, businesses can’t afford to let their franchises fail. The benefits of a successful franchise are obviously mainly financial. The cost of failure, though, is further reaching than the loss of that profit, and isn’t as immediate. When a franchise underperforms and goes under, it can damage the reputation of the brand as a whole, and repeated failures will inevitably discourage other potential investors. This will make it more difficult to attract new franchisees to support future growth. Because of this, franchisors need to invest their own time and effort into ensuring the success of their franchising program, even if they’re taking on relatively little direct risk.

Offering the right kind of help Franchisees need support from their franchisor in order to succeed, but micromanaging a franchisee too much defeats much of the purpose of having a franchising program in the first place. Rather than looking over their franchisees’ shoulders,


businesses need to make sure that they offer the right training and the necessary tools that they’ll need in order to succeed. Many franchise investors are firsttime entrepreneurs, and often don’t even have any significant background in their new industry. Facilitating their success, then, means providing industry knowledge, management training, and the tools they’ll need to operate and be competitive.

Building a training program There isn’t exactly one right training program for all franchisees. That said, franchisors absolutely need to offer an in-depth training phase for their franchise investors. Running a franchise is a serious job, and it requires a lot of knowledge and a variety of skills. Not only do they need a thorough understanding of your business’ standards and business practices, they’ll also need training on how to effectively manage their new business’ finances, their employees, and their customers. Initial training should provide a general foundation in all the skills that your franchisee will need to run their franchise. After this phase, it’s not enough to simply turn them loose and hope for the best. Network new franchisees with more experienced mentors, and encourage them to seek advice and feedback

regularly. This will allow them to address specific issues and gain additional insights as they go while ensuring that they’re not left without support when they’re trying to make their new business succeed in the real world.

Providing the right tools for the job Skills training is critical, but having the right tools at your disposal can also make all the difference. Knowing what options exist, and how to use them to make your life as an entrepreneur easier, is just as important as developing the skills you need to manage a business. As a franchisor, passing that knowledge on to less experienced franchisees is critical.

Cash flow management tools Even a business that’s highly successful in terms of making sales and providing quality goods and services can fail due to financial issues. Usually, this is the result of cash flow management issues. Late payments can lead to solvency and service issues. Worse, chasing down those payments requires a mind-boggling amount of time. Nearly a third of small businesses in Australia spend 8 or more hours per week pursuing late payments. When a small business owner spends a fifth of their total work time trying

to gather revenue they should already have, other responsibilities inevitably get neglected. For a rookie entrepreneur, this can seem like an insurmountable challenge. Fortunately, there are tools that franchisees can use to sidestep this entirely. Invoice factoring or financed customer payment plans can effectively allow businesses to collect their revenue in a predictable manner, while outsourcing payment collection to their financial institution.

Marketing tools Individual franchises often don’t have the resources to hire a

marketer, or the time to try to effectively market themselves in their local area. As a result, they often rely heavily on the franchisor’s existing reputation and ongoing global marketing efforts to generate leads on their behalf. To maximise their potential, however, individual franchises need to be able to generate leads on their own while tackling their other responsibilities. By training their franchisees in the use of a few time-saving online marketing tools, franchisors can make this feasible. An email management platform, combined with social media content

management tools allows business owners to reach out to their target markets and to better connect with their existing clientele. This makes it easier to generate leads, and to gather and respond to customer feedback in a timely manner. By taking the time to properly equip franchisees with the tools and training they need, brands can greatly improve their own long-term growth potential. You won’t just maximise profits from your existing franchisees, you’ll also develop a reputation that attracts new investors, allowing you to accelerate your growth even more.

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Learn how to fail like a disruptor Innovation is a long process, and it can take a long time to progress from an innovative idea to a marketable product. Exactly because of all the time and resources that business owners invest, it can be incredibly disappointing and paralysing when a major project fails. What an entrepreneur does then is often the key factor in determining their ultimate success. Innovation and disruption is a long and bumpy process, and responding to failure well is ultimately what separates successful serial disruptors from the thousands of failed startups with great ideas who ultimately don’t deliver.

Failures drive industries forward Surviving and learning from one or multiple major failures is a nearuniversal experience of successful disruptors, especially those who repeatedly succeed in changing their industries. SpaceX, for example, famously failed for years to bring its rockets into orbit, until, nearly out of funding, they made history with their 4th launch in 2008. Each failure came with enormous costs, but ultimately also led to their success. Since that time, they’ve achieved breakthroughs that have promised to revolutionise spaceflight on a


nearly annual basis. In many ways, those setbacks needed to happen before success could realistically be possible. Great entrepreneurs understand that a project failure can be a part of progress.

Be prepared for negative outcomes Some ideas just don’t work, others need to be developed further or applied differently, and still others just weren’t marketed correctly. Whatever the case, a business that wants to push the envelope and cause a real industry disruption needs to be prepared to do a lot of troubleshooting. Be mentally prepared Being mentally prepared doesn’t mean anyone should “plan to fail”. Pessimism is not a useful trait for a business. What it does mean is being open to the possibility of negative outcomes, and not being paralysed when something goes wrong in a minor or a major way. If disruptive innovation was straightforward, everyone would do it. That process is necessarily experimental, and experiments have value in the data they return as much as any tangible profit. Document everything Maintaining good oversight over

what’s going on in your business is always important, but it’s especially critical when you’re developing new products and services and trying to apply new ideas. When things don’t go as planned, relatively minor details can provide critical insights into what went wrong, and what you might be able to improve in the future.

Have a financial backup plan Serious innovation often requires big, high-risk investment. There’s nothing wrong with taking ambitious financial risks for the sake of progress, but entrepreneurs do need to ensure that their business can survive when things don’t work out. Businesses that can’t survive a setback, and get funding

for further work, won’t be able to take advantage of the knowledge and experience they gain from that situation to drive progress further. It’s important to sit down with a financial professional ahead of time to determine what your options are, and how you can best keep cash flow stable.

Responding to negative outcomes The idea of framing setbacks as “learning opportunities” is not just a feel-good morale booster. Every project offers an enormous amount of data that businesses can use to better understand their products, their market, and their own business. By gathering that information and analysing it, businesses can understand exactly what does and doesn’t work, and use that information to improve.

Analyse the data It’s not enough to know that a project failed because you lost investors, the product flopped, or you ran into technical issues. Business leaders need a thorough understanding of exactly what happened, and determine why things went wrong. To do that, you’ll need

to sit down with your team and review the project step-by-step. Decide what worked well, and what may have contributed to the project’s failure, and then focus on what might be done to improve in the future.

Develop actionable responses Once you’ve analysed the failed project and learned as much about it as you could, it’s time to return to the drawing board to apply that knowledge. The insights you’ve gained from this prior experience puts you in a better position to succeed on a second attempt, giving you an edge over less experienced competitors. By innovating to address the specific issues that contributed to a previous project failure, you may even stumble upon process improvements that turn out to be disruptive in their own right. Innovation is a continuous process of setting goals, brainstorming solutions, experimenting, analysing, and improving. While setbacks can be expensive, they often do far more in terms of bringing progress and disruption than lucrative successes, provided your business is prepared to take advantage of the lessons offered by those failures.

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Overreliance on

contractors might

be slowing your growth


Hiring employees is expensive and complicated. Among other things, there’s superannuation, insurances, and tax withholding to worry about, and entrepreneurs often feel that they have enough on their plate as it is. Fortunately, there’s an easy way to get access to the labour you need without most of those pesky additional responsibilities.

Increasingly, startups and small businesses are leaning on contractors and freelancers to provide the labour they need to grow. However, contract labour was never meant to replace traditional employment. While it looks like an attractive option, trying to use contractors as a replacement for regular employees could actually be getting in the way of your business’ success.

Why contract labour is so popular Before we can look at why businesses shouldn’t be too reliant on contractors, we need to examine why we do hire them, and what makes them such a great tool for businesses.

Flexibility Unlike regular employees, contractors’ jobs aren’t legally protected. They only have as much job security as is specifically stipulated in their contract. This makes them perfect for tackling temporary projects with a limited scope. Once the work is done, you can simply terminate the contract, or offer another project as is convenient.

Fast access to skilled labour New employees usually take weeks or months to train properly. Even experienced workers need to acclimate to how things are done in your business and to get comfortable with your clients and their responsibilities. Contractors don’t generally need to work this way. Unless they’re forced to integrate into your business, they can operate independently, immediately applying their own expertise and way of doing things to the task you’ve hired them for.

Uncomplicated relationships Your relationship with your contractors need only be as complicated as you would like them to be. At its simplest, you might simply set a task and a due date. On which days a contractor goes on vacation, is sick, or chooses to work doesn’t need to be of any concern, greatly reducing the need for active top-down management. Of course, most contract relationships are more integrated than this, but the key is that this relationship is freely defined by the business and the contractor.

How misusing contractors could harm your business As businesses grow and develop, they necessarily need to become more complex and procedural. To manage this growing bureaucracy, businesses need dedicated, invested, and well integrated workers who prioritise its interests. Contractors, by definition, are not well suited to these roles.

Lack of institutional knowledge Contractors often develop highly specialised skillsets, but they don’t tend to work for the same business for years on end. Even those who build long-term relationships generally won’t be integrated into the business to the same extent as a regular employee, and won’t have access to the same training and knowledge. As a result, they don’t develop the kind of institutional knowledge that employees do by operating in the same environment for years. This ultimately makes contractors and freelancers less versatile and less efficient in more generalised, ill-defined roles.

Flexibility goes both ways Stable employment isn’t just for the benefit of the employee. The legal protections and benefits that employees enjoy are also powerful motivators to keep workers in their jobs. A contractor might simply terminate your contract if another client comes along with a better offer, a payment is late, or they simply don’t like working with you. The nature of the relationship doesn’t encourage or reward loyalty. As a result, your growing business’ supply of labour isn’t as reliable as that of a competitor who relies more on regular employees.

Intellectual property Many jobs traditionally performed by freelancers are creative in nature, and this could lead to significant issues for your business. Inventions, content, or other creative work developed by employees typically belong to their employer. Contractors, on the other hand, retain their rights to any intellectual property they create unless they explicitly give it up. That means you can’t freely modify or reuse a contractor’s work in ways they didn’t intend, which can be very limiting. Further, it means that if a contractor comes up with a particularly clever innovation while working with you, you don’t automatically have the right to take advantage of it.

Contractors should be used responsibly Employee relationships require more investment from both employers and their workers, and that investment serves to create stable and strong businesses. Contractors, on the other hand, are an excellent supplementary tool that allows businesses to operate more flexibly and on a broader scope than they would be able to otherwise. The same things that make contractors so useful in this respect also make them less appropriate for roles that are traditionally filled by regular employees.

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Be proactive online to protect your reputation

The Internet has proved to be a driving force behind economic globalisation, and has quickly become an indispensable tool for businesses all over the world. Most notably, it’s given small businesses the ability to directly connect with target markets and to compete with much larger competitors by effectively democratising mass communication. Unfortunately, this unfiltered, fast-paced communication environment tends to amplify the most sensational and exciting bits of information, rather than the most relevant or truthful. Because of this, businesses need to get a head start on their reputation management if they want to control the narrative about themselves online. If you’re not careful, a single customer’s bad experience can cause serious long-term damage to your brand. No business is perfect, which means that, sooner or later, everyone will need to deal with an issue like this. To keep your business’ reputation intact, you’ll need to take steps to shape your brand’s image online.


Be accessible

Dissatisfied people don’t generally go through the trouble of voicing their grievances where no one relevant will hear about it. They want you to know if they had a bad experience, and they want your future customers to know as well. That’s a good thing, because it means you can influence where negative reviews and complaints will be posted. Become active on review sites like Yelp, and build and maintain social media accounts that are appropriate for your industry.


If you provide a clear platform on which they can engage with you and your market, an unhappy customer who wants to take their dissatisfaction to the web will likely use it. This means that you’ll likely be the first to become aware of the issue, giving you the opportunity to do something about it right away.


G  et involved in any conversation about you

It’s never a good idea to ignore a negative review or a complaint. If something shows up on your radar, you should get involved immediately. If you aren’t aware of the issue that’s being discussed, publicly acknowledge that you’re aware of their concerns, and that you’re investigating it for them. This makes it clear that you take customer experiences seriously, and protects your brand from being viewed as a monolithic, abstract, and faceless entity. Talking to customers directly, engaging publicly when appropriate, and generally just representing your business in a professional manner online is critical. Irrespective of exactly what you say, your presence and direct engagement alone humanises you to your audience, and puts the issue into a broader context. Additionally, it gives you the opportunity to show your audience how you deal with service issues,

and can possibly even be turned around to reflect positively on your brand.


Promote positive customer experiences

Satisfied customers are far less likely to talk about their experiences online than people who had a bad experience. In order to keep dialogue about your business representative of people’s real experiences, you’ll need go out of your way to encourage happy customers to engage. A good way to do this is by soliciting reviews from past customers, working to drive engagement through events and promotional activities on social media, and by simply being active and communicating with people about your business online.


Don’t neglect internal branding

Branding isn’t just about lead generation and driving sales. Your business’ public image also affects your ability to recruit quality employees and the morale of your current workforce. Establish a presence on employer review sites like Glassdoor, and use these to help gather feedback about your company culture and work environment from past and current employees.


Just as with customer reviews, it’s also important to respond and engage with negative voices from within your organisation, even those of toxic employees. This makes you a part of the conversation, and shows that you’re interested in making sure that your business is a good place to work. Most importantly, it’s an opportunity to give potential employees a clear view of exactly how you deal with situations like these. This is important, because, even if your industry isn’t dealing with a labour shortage, a reputation for a toxic work environment will deter the best employees: those with plenty of employment options.

Taking the time to get proactive about reputation management for your brand can make a big difference. By promoting productive discourse, addressing the concerns of people who’ve had negative experiences with your brand, and amplifying the voices of satisfied customers and fans, you can establish a solid and resilient reputation for your business on the web. Not only can this serve to protect your from negative attention, it also works to build your presence, and enhances your ability to generate leads and grow your business.

Take time to professionally represent your business online and you’ll reap rewards when it comes to your reputation. It is crucial not only to address any customers concerns immediately, but also to encourage and promote positive feedback and dialogue. Don’t forget about your internal branding – you want to show that your business is a good place to work.

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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.

0800 86 34 36

advising on better business Covisory Partners offers expert external reviews of business processes with the explicit aim of improving performance. We work with you to review your company’s operational systems to identify where change, enhancements, or smarter operations could positively affect the bottom line. We help you to work smarter.

NIGEL SMITH +64 9 307 1777

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Head Office PO Box 137215 Parnell Auckland 1151 New Zealand P + 64 9 307 1777

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Covisory q4 2017 Covisory Connect  

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

Covisory q4 2017 Covisory Connect  

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

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