Window of Opportunity Transition to Retirement Strategy (“TTR”) for people 55 and over

LEGISLATIVE RISK – Will the ATO close the TTR window of opportunity?
There has been some talk of restricting the TTR strategy as it can provide a significant benefit and is reducing the Governments tax take. Therefore, if you are 55 or over, it would be wise to consider the TTR strategy as soon as possible to see if it could benefit you personally. Once your TTR is commenced it would be unlikely that any ATO changes would be retrospective.

CONCESSIONAL CONTRIBUTIONS REDUCED TO $25,000
From the 1st July 2012 the maximum concessional contribution into Superannuation has been reduced from $50,000 down to $25,000 for people aged 50 and over.  The TTR strategy is most effective when combined with maximizing concessional superannuation contributions.

With the limit now $25,000 is TTR still viable? - Definitely

• From our analysis the TTR strategy is still a great idea as it helps reduce tax on salary sacrifice contributions up to a maximum of $25,000 (including employer contributions).

• In addition the tax rate on superannuation accumulation account is 15% (on income and realized capital gains) and for a TTR pension account the tax rate is reduced to zero.

• Paying no tax on the returns generated by your super pension account could be a significant benefit. This will effectively mean higher net returns in the pension account when compared with the same investments in a superannuation accumulation account.

Who can benefit from the TTR Strategy?
• People 55 and over can commence a TTR pension.

• People with higher superannuation account balances can generally benefit more as once their accumulation account is converted to pension account the tax rate is reduced from 15% on the account earnings down to zero percent.

• People who may be selling assets owned in Superannuation and may pay capital gains tax in accumulation account – would pay no tax in pension account.

• People considering working part time on a reduced salary can top up their income with tax effective superannuation pension payments and tax free from aged 60.

Are Trusts still relevant for the Medical Professional?

Trust Law has been around for many hundreds of years and dates as far back as the early 1500’s when Knights going off to battle would entrust estates with Trustees for the benefit of beneficiaries in the Court of Chancery, England.

It was Henry VIII who passed legislation known as the Statute of Uses in 1535 that attempted to abolish trusts due to the fact that lawyers where using them as a means to evade tax.  Ironically, after all these years it would seem that not much has changed today, although it is getting harder.

Historically, having a trust that earns income and holds assets has proven to be an extremely popular vehicle for a business or investment portfolio due to their asset protection properties and ability to stream or allocate income to different types of beneficiaries.  From the perspective of a medical professional, trusts have been a very attractive proposition, particularly in the areas of protecting hard earned assets from ‘would be’ suitors and creditors in our ever growing litigious society.  They have also provided opportunities to channel or direct income to lower income tax beneficiaries, while at the same time providing for schooling, university and other associated family costs.

But is this all still the case?

In more recent times there have been quite a number of changes in the area of Trusts and Trust Law, from government legislative changes to decision outcomes tested in the courts that have drastically altered the way trusts are now administered.  This has resulted in the need to review the structure regularly to ensure it is complying with the new laws.

Some major changes include:

Minor Beneficiaries

Previously beneficiaries under the age of 18 could be distributed up to $3,333 each from a discretionary trust without any penalty tax implications.  For a family with four children this could be quite a tax saving! However, it was announced in the 2011 Federal Budget that the maximum distribution was to be reduced to $416 per Minor Beneficiary, leaving a big question-mark for the trustees of such a trust.

Bamford’s Case

A much talked about High Court case known as “Bamford's Case” tested the way in which a trustee of a trust could distribute income to its beneficiaries and how this income was to be determined.  This decision means that every care should be taken when determining and distributing income to beneficiaries of trusts to ensure the income of the trust ultimately ends up where it is intended.

Richstar’s Case

In 2006 the Federal Court case of Richstar went against conventional asset protection and trust law.  It effectively ignored the trust that was in place, and looked at the Trustee and the beneficiary as one and the same.

Legislative Change

Until recently, a trust distribution could be made whilst completing your annual trust tax return.  Now, the ATO has introduced laws that require all trust distributions to be made prior to 30 June each year, ie. for a trust distribution to be valid in your current trust tax return (year ended 30 June 2012) the distribution would have needed to be made before June 30 2012. The ATO are even issuing request letters to Trustees asking them to forward copies of resolutions to prove their validity.

In addition, the ATO has introduced new ‘Beneficiary Tax File Number Reporting Rules’ that, if not adhered to, will result in penalties of $2,200 to trustees who fail to comply… more red tap, and many professionals are not aware of this.

So the question is, with all this complexity and constant change, does there remain any benefit for the medical professional in either establishing or maintaining a family trust?

The short answer is, "Yes!"  There are still many valid and effective reasons for establishing a trust as part of your portfolio.  It is not, however, a one size fits all approach and depends very much on the family structure and the type of assets & property in the trust… and getting it wrong can be likened to using a band aid for a broken leg… it can hurt for a very long time.

If you have a trust structure already in place it is our strong recommendation that you have it reviewed by a professional to ensure you fully understand and are meeting your obligations with the workings of the trust.

If you are thinking of establishing a trust or wonder whether a trust would be beneficial to your particular circumstance, please seek appropriate advice from a specialist firm who understand the medical profession to avoid future headaches.

2012 Federal Budget Summary

The Federal Budget for the 2012-13 year was handed down on 8 May and while a surplus has been forecast by the Treasurer, the budget provides little to no confidence or optimism for business and the enterprising sectors of the economy that ironically derive the tax revenues that boost the economy, provide monetary reserves for our economy and reduce our borrowings.

In short, this budget strangles the goose that lays the golden eggs and provides a short term cash stimulus at the expense of long term economic sustainability and economic health.

The Treasurer has forecast that they will be taking the current $44.4 billion deficit to a $1.5 billion dollar surplus (this represents a $45.5 Billion dollar turn around in government profitability) while at the same time increasing the countrys' borrowings from $250 billion to $300 billion, costing Australians $12 billion in interest this year alone.

It’s the equivalent of a small business making a massive loss in one year, then turning it around to a profit in 12 months while spending more on the company credit card and taking on debt to pay its way. This is a one hit, unsustainable strategy that will leave a debt legacy for many, many years to come.

The following is a summary of the major changes announced on Tuesday night.

Individual Tax Payers

The individual Tax Rates will change form 1 July 2012 to the following rates.

Increased Medicare levy low income thresholds from 1 July 2011
The Government will increase the Medicare Levy low income threshold to $19,404 for individuals and $32,743 for families for 2011-12. The additional amount of threshold for each dependent child or student will also increase to $3,007.

The Medicare levy threshold for single pensioners below age pension age will also increase to $30,451.

Net Medical Expenses now to be means tested
From 1 July 2012 the government will begin means testing eligibility to the Medical Tax Offset. This means that for people with adjusted taxable income above the Medicare levy surcharge (MLS) thresholds ($84,000 for singles and $168,000 for couples or families in 2012-13), the threshold above which a taxpayer may claim an offset will be increased to $5,000 (indexed annually thereafter) and the rate of reimbursement will be reduced to 10% for eligible out of pocket expenses incurred. Taxpayers with income below the MLS thresholds will be unaffected.

The School Kids Bonus
From 1 January 2013, the Government will replace the current Education Tax Refund with the School Kids Bonus. Qualifying families will receive $410 each year for primary school children and $820 for high school children, with payments made at the start of term 1 and term 3 each year.

The payment will be available to those families that currently qualify for the Education Tax Refund (families that receive the Part A tax benefit) as well as those families that receive income support such as Youth Allowance or Veterans Assistance.

In addition, as the Education Tax Refund is to be replaced, the Government will pay to families that qualify for the Education Tax Refund their full 2012 entitlement to the refund. This payment will be made in June 2012, with families not being required to lodge their claim through their income tax returns - the payment will be made automatically.

Consolidation of Current Dependent Tax Offsets
The Government will move to consolidate eight dependent non-refundable tax offsets for taxpayers who maintain a dependent that is genuinely unable to work due to a carer obligation of disability from 1 July 2012.

This will see an amalgamation of the current invalid spouse, carer spouse, housekeeper, housekeeper (with child), child-housekeeper, child-housekeeper (with child), invalid relative and parent/parent-in-law tax offsets.

50% General Tax Discount to Be Removed For Non-Residents
Non-Residents acquiring property in Australia will be no longer entitled to the 50% General Discount For Capital Gains from 8 May 2012.

What is Not Proceeding?
The 50% discount for Interest Income previously announced by the government for interest amounts up to $1000 has been scrapped.

The $1000 automatic standard tax deduction for individuals lodging tax returns has been scrapped. This means that people will still need to incur taxation compliance costs to complete their taxation affairs each year.

The Mature Age Tax Offset that provides a $500 offset for people remaining in the work force past 55 years of age has been removed and will be phased out from 1 July 2012.

Companies and Business

Carry back of company losses
This is a new measure that has been announced that will start from 1 July 2012. Effectively companies will be able to carry back up to $1million in losses from up to 2 previous financial years where they had tax payable.

This means that if a company has a loss in the tax year of 2013-14 then they can claim this back if they were tax payable in any of the 2 preceding years. This is subject to certain restrictions, ie the Company has franking credits in their franking account.

Bad Debt Deductions
Bad Debt deductions will no longer be available where the debtor and creditor are related parties.  This will commence from 8 May 2012.

Small Business Instant Write Offs
From 1 July 2012 small business will be able to have an immediate asset write off for assets costing less than $6,500 for normal plant & equipment and $5,000 for motor vehicles.

More ATO Audits on the way
The government is pouring another $195 million dollars in to the Taxation Office to increase the level of GST Audit activity on small business.

What’s Not Proceeding for Companies & Small Business?
The government will not be proceeding with the 1% company tax rate and will not be proceeding.

Superannuation

Increased Contributions Tax
People who earn more than $300,000 income per year (including their concessional super contributions) will pay 30% contributions tax on amounts over this threshold up from 15%.

If your contributions push you over the $300,000 threshold it will only be the amount that has gone over the threshold that will be subject to the increased 30% amount.

The $50,000 Concessional cap for those over 50 has been deferred to 1 July 2014. This means that everybody from 1 July 2012 will be subject the $25,000 concessional contributions cap until 1 July 2014.

It is envisaged that from 1 July 2014 the caps will be as follows

Self-Managed Super Fund Levies To Increase
The self-managed super fund levy currently $180 per year will be increased. The amount of the increase is yet to be advised by the government.

This is the fee that all self-managed funds pay on an annual basis.

Catching up on some reading this morning I couldn't have said this better myself . Love it Joe

“Everything changes when you stop focusing on you and your business and start considering the one, all important question: how can I bring more value to this relationship? Whether it's with customers, employees, vendors, lenders, friends or family, if you always begin by understanding the value you bring to the equation, you create goodwill, profits, excellence and an amazing life!”

— Joe Wollenweber
Senior Coach, E-Myth

How One Client Found Profit & Cashflow Improvement in the Current Economy

There is no question clients are finding business increasingly tough in the current economy at present and for very good reason – It Is!

The good news is it doesn’t have to be a constant struggle.  Let me explain.

Many businesses are very good at what they do, but are not so good at understanding their business fundamentals.  Whilst they understand the technical side of their business, they don’t understand the management side and this often leads to disaster when the business environment is as tough as it currently is.

As an example, we saw a client recently who had a very good business and was desperately out successfully chasing more sales to assist in growing his bottom line.  The trouble was, his Working Capital % was higher than his Gross Profit Margin %.  This meant that for every new dollar of business he obtained, he required more working capital to fund it than margin he was making on it, and he couldn’t understand why he wasn’t seeing results.

By proactively working on his pricing and volume strategies we were able turn this equation around so that more profitable sales where achieved, so it became a question of what he was selling and at what price, not what quantity.  This improved his cash flow tremendously.

It’s not enough in this environment for clients to be going to their accountant once a year to have a tax return or BAS done – they need strong financial advice and guidance.

When things are going well in business anyone can open a business and make money.  However its times like these when the economic tide runs out on the beach that you can see who’s been swimming with no swimmers.

Skinner Hamilton works extensively with our valued clients to ensure that they fully understand their business fundamentals and are kept accountable to achieve, no matter what the economy.

If you would like the gift of success and being different from the others, please feel free to contact me directly to arrange an obligation-free consultation.

Jason Skinner
Director/CEO

Phone 07 5594 3434
http://www.skinnerhamilton.com.au/

How am I treated for tax purposes as a VMO at a public hospital?

Visiting Medical Officers (VMO) are not employees of the public health system, however are classified as independent contractors for taxation purposes.

As an independent contractor you must have an Australian Business Number (ABN) in your own name and if your business turnover is over $75,000 a year, also be registered for the GST.

Most VMO’s already have their own specialty practice set up and trade as sole traders for taxation purposes. The ABN and GST registration set up for these practices may then also be used for this purpose. The VMO payments are then included in the Business Activity Statement with other business income.

Most of the State health authorities have a specific ‘timesheet’ format that must be completed by the VMO and is then submitted by the VMO to the health authority within 14 days of the end of month for payment. However, some of the State Health authorities require the VMO to provide a ‘Tax Invoice’ (if registered for GST) or an Invoice (if not registered for GST).

We recently found an error with a VMO’s payments made by a one of the State’s health authorities. For 6 months of a financial year our VMO client received payments with no GST included (so was paid Nett of GST), then for the remaining 6 months received the GST (so received his payments plus GST). On enquiry with the State health authority, it was found that their system had not adjusted itself for the VMO’s GST registration and as a result, the VMO was backpaid just over $5,000 in unpaid GST. Had this error not been found, the client could have been $5,000 out of pocket.

A Tale of Two Eateries

Imagine the scene – local restaurant district on a busy Sunday lunch time, people bustling on the footpaths, the diverse aromas distinctive as we pass each restaurant but gradually mingling into one delicious lunch time smell. Noisy chatter, clinking glasses, patrons busting out the seams of each eatery. And then we arrive at our restaurant of choice to fulfill our booking.

Not a single person seated. The Maître D and wait staff jump at the opportunity to seat us and attend to our every whim. Although we feel uncomfortable at the fact that we’re the only people in the restaurant and have to fight the urge to make a run for it, I find myself more and more delighted that we don’t – the prices are very reasonable, the food is delicious and the service is exemplary.

So what’s the problem? Why can you hear a pin drop in this particular bistro when all around it you’d have to wait for a seat? What sets it apart? I believe it’s that one thing that many businesses that are excellent in every other way often come up short on – marketing. Sure, you’ve got plump, succulent prawns, but how would I know that? Yes, your prices are wildly competitive, but I’m not going to find out if you don’t draw me in enough to even look at the menu.

Sometimes, even doing everything right just isn’t enough, especially for a start up business. If it’s a name that everyone knows and loves, chances are you might not have the same issues. And if you are a start up business who does everything right, you’re likely to win fans by people like me telling all of my friends how fantastic you are. But can you hold on long enough until the word gets out there without helping it along? Chances are, you can’t.

So what’s the solution then? Get serious about your marketing strategy. If you’re not sure where to start, take a look at what your competitors are doing. Get on board with technology and social media. Think about initiating a loyalty program. Introduce special offers, shake up your product offering, use traditional marketing methods if they work in your industry, get your website up and running finally… there is much that can be done.

In product related industries like retail and hospitality, social media can be a godsend. If referred, it gives you a warm introduction from existing friends and puts you in direct contact with the very people you are trying to sell to. Special offers are quick, easy and free to announce to people who already love what you do. Your audience has a chance to get to know you and importantly, for you to listen to what it is they want to buy, and then deliver on it. Yes, it takes time. Yes, it needs to be updated regularly and consistently. But the rewards can be great if used properly. You know you’re onto a good thing, you just need to let everyone else know.

A Letter to Your (younger) Self

A friend recently told me about a book called “Dear Me” which features a series of letters written by famous people, to their 16 year old selves. What a great concept!

Do you remember what 16 feels like? The uncertainty about where you’re going and how you’re going to get there? The excitement about what the future holds? The frustration brought on by the constraints of being 16? And of course, looking back now, you realize how uncomplicated things really were.

Think about it for a minute – what would a letter to YOUR 16 year old self look like? What lessons that you’ve learnt along the way would you deem important enough to share? Make a list, start a letter… you’ll possibly find that even now, you’re still not taking your own advice. Let go of toxic people, remember that nothing stays the same, do what you love, nurture yourself, wear sunscreen…

If you’re in business, apply the same exercise. Do you remember how you felt when you first started out in business? The excitement, the nervous anticipation, the dreams and goals you had? Life, and business, can be tough. It’s important to take a step back from time to time to regroup and remember why we’re doing what we’re doing, and not get lost in the daily grind. Remember the passion that you had at the start of your great idea?  Do what you need to, to get that back.

As for me, I think it’s high time I revisited “Ferris Bueller’s Day Off” – surely a few life lessons in there! Or just a nice trip down memory lane. Long live stonewashed jeans.


http://www.dearme.org

What does the new PPS reform mean to you?

What does the new Personal Property Securities (PPS) reform mean to you? It’s good news for businesses who lease or supply goods, because by registering your security interests in the goods you supply or lease, you help ensure that you get paid even if a debtor defaults or goes bankrupt.

The new PPS Register took effect on the 30th January 2012 and replaces various Commonwealth, State and Territory registers in one central, online register, available in real time 24 hours per day, 7 days per week.

Personal property is any form of property other than land or buildings and fixtures which form part of that land. It can include tangibles such cars, boats, machinery, crops; as well as intangibles such as shares, intellectual property and contract rights.

Buyers purchasing a car from an individual you will be able to conduct a search on the register to ensure you are receiving clear unencumbered title to the car. This will replace the current REVS system.

Under the new laws Retention of title terms currently used by businesses will no longer exist and new security interests will need to be registered on the PPS register to be effective protection.

For more information on the new PPS and how it will affect you, contact us on 07 5594 3434 or go to http://www.ppsr.gov.au/.

The Power of Planning

Ever feel like you, or your business, are drifting along on a current, just reacting to whatever is thrown at you? You feel like you’re continuously working hard at something, yet still you somehow seem to get nowhere day after day, year after year.

We all know the saying, “Fail to plan, plan to fail”, but how many of us actually take the time to take stock of our current situation, set some goals and formulate a plan to make them happen?

The beginning of the year is the perfect time to do that, and before we’re all bemoaning how we can’t believe it’s already February, take the time to set some changes in motion. Don’t let another year, in fact another day go by, drifting on that current. I guarantee, you’ll feel better for it!

1. Start off by thinking about the “big picture” – what do you want your life / business to look like? Personally, think about aspects such as Relationships, Family, Health, Finances, Career, Personal Development, Spiritual Wellbeing. In business the issues might be Cashflow, IT, Staff, Customer Service, Marketing.

2. Next, break your big picture ideas down into bite-sized pieces. For instance, your “Health” goals might be to lose weight and get fit. Now, if you’re overweight, this in itself could seem like an insurmountable task, and the more you think about it, the more overwhelmed you’re likely to get and ultimately end up in a packet of Tim-Tams. But break each step down into more manageable, achievable tasks, and the achievement you feel from ticking each task off the list will spur you on to the next one.

3. Dissected, your actions for “losing weight and getting fit” might include 1) walk for 30 minutes every day, 2) pack lunch instead of hitting the drive-through, 3) get out in nature at least one day on the week-end (rather than sleighing yet another zombie). Take it a step further by creating a daily to-do list – go grocery shopping, create an exercise playlist for my iPod, pump bicycle tyres. The forward momentum you create from small accomplishments will propel you towards your goal.

4. Be realistic. There are going to be times when life gets in the way and the no amount of planning could have foreseen your biggest client walking out on you, or your file server crashing. Accept that things may not always go according to plan, and be flexible enough to roll with the punches. A sense of humour is always handy.

5. And finally, track your progress. Set some time aside to go through your daily, weekly, monthly, annual goals and to-do lists to make sure you’re on track. If you want something badly enough, it’s worth the time investment it’ll take to make it happen. If it isn’t you may need to start from scratch and rethink your goals – perhaps that uni degree or toned stomach isn’t really as important to you as you first though it was? Was it really what you wanted, or just what you thought would make your Dad proud?

It’s your money. It’s your health. It’s your business. It’s your life. The difference between a dream and a goal is a plan. You know what you need to do – go to it!

Lessons from Qantas

The decisions and actions of Alan Joyce and the Qantas board will no doubt be studied in text books for many years to come...was grounding an entire airline at a moments notice as a form of reprimand the correct management decision that could be made? I'm not sure, and it's not for me to say as I am sure there are many, many facts and circumstances that Mr Joyce, the board and senior management of Qantas are dealing with daily that we will never be privy to. Maybe under the circumstances it was the only course of action.  The purpose of this article is not to validate or criticise the managements decisions but to look at what lessons that can be learnt from this monumental event.

Every person in business can learn from this. We all have people we need to satisfy in our business's on a day to day basis. Maybe we have employees, we definitly have customers or clients. The Qantas case involves both employees and customers.

The other big discussion point in this exercise is brand damage and whether or not the actions taken on the day have damaged the brand and image of Qantas.  If we go back to the very ingredients of any business whether you are a small sole trader or multi-national public company, the following points are critical to remember:

1) Customers/Clients are critical to your business. Without them you have no business or revenue. They need to be serviced and looked after so they become an advocate of your brand and keep coming back and buying from you.  People need goods and services everyday but where are they going to get them?

2) If we have customers/clients that need servicing in a particular way as discussed at point 1, we need people and systems to do this efficently . It is vital to the ongoing success of the business that the people we have doing this are equally motivated and engaged in providing the level of service and skills that are required. Is it better to have 1,000 customers serviced exceptionally well and thus positive advocates of your product or 1,000,000 customers receiving mediocre service by disgruntled staff, thus negative advocates? Yes, revenue might be higher initially but obviously not for long.

3) This is where the brand comes in - through constant delivery of exceptional service and supply of product  the business brand grows customers/clients associate and assimilate with the brand in their lives. The brand can have different meanings and feelings to different people but the more consistantly you hit that chord the stronger the brand grows. This is the same for the employees of the company. The strength of the brand grows as their emotional and motivational perception of the brand increases. Attracting people to work in your business becomes easier with the strengthening of your brand.

If we apply the basic ingredients above to the Qantas scenario you will see that there are some very delicate relationships that need to be mended by the management and board of Qantas.

For Example
If we simply legislate through Fair Work that there can be no industrial action and all employees need to just get back to work, will point 2 above be satisfied? Will employees feel engaged and motivated to deliver exceptional customer service and building a brand? Or will the extra touches of customer service go undone and over looked?

Equally if the employees hold the company to ransom through strike action, does that help the company to remain viable and assist in better working conditions?

Does awarding the CEO a $2 million dollar payrise at a time of such cultural turbulence help engage your employees in the debate? Does it make it hard for Mr Joyce to go to the bargaining table now and say we can't afford to meet your requests?

If we just throw millions of dollars in free flights to our customers as an apology will this help everybody to move on if we still have disgruntled employees? Or will it make matters worse as we encourage more people to take a trip on our disgruntled air service?

At the end of the day as I said, there are no doubt many facets in this debate that have not surfaced or we are not aware of, however from an outsiders perspective and looking for the lessons to be learnt on what we do know...

It doesn't matter how right you think you are, how unreasonable you think someone is being or how wrong the opposing opinion is. If they are critical to the success of your business, which they clearly are, you have to be prepared to give and take to find common ground.

If you are the CEO of an organisation and you are arguing with your employees that our productivity needs to improve and we need to put restraints on wage growth you will have an impossible time selling this argument and thus finding common ground and maintaining respect by awarding yourself a large pay rise and blowing millions of dollars fixing a problem you didn't need to have in the first place.

As Dale Carnegie quoted in his book How to Win Friends and Influence People published in 1937, "If you want to gather honey don't kick over the honey pot." 

People have pride. Alan Joyce is a proud man, the employees of Qantas are proud people, the unions that guide them are also proud.  To say any of them are wrong for what they believe to be right will not repair Qantas. It is only respected leadership that can pioneer common ground and a strong win/win for all parties that will ensure a business's longevity and profitability.

There is a lesson in this for us all in business and in life...

"Do you want to be happy or do you want to be right?"

Adapt To Build A Better Business

Look around you. Kids today have mobile phones, iPods, Facebook, Twitter, Google, iPads are even compulsory in some schools...the list is endless. Kids are multi-tasking, multi-educated and multi-stimulated and its all happening fast.  They are networking and socialising like never before, discussing their likes and dislikes with the world. They are consuming and purchasing products and material online for large portions of their day and most importantly, they are your future customers/clients.

But to make things worse, now they are educating and encouraging their parents (your existing customers and clients) in these new technologies which is driving the rapid change in the way business is being done today, not just tomorrow.

 

Only three months ago my own mum refused to send an email. Said it was the reason for the breakdown in communication today and that computers were a waste of time.  Then my dad got an iPad and now mum is sending emails regularly and shopping on line. Having finally accepted the efficiency and benefits, her usage of online technology is growing daily.

This is going on everywhere! Ten years ago online sales accounted for 1% of retail sales (excluding travel & events). Today they are at an estimated 4% or $8 billion and this is expected to treble in the next 4 years. Source AFR 4 June 2011).

 

As a business owner you need to be looking at your business now!

• How is technology currently impacting your business?
• Is the growth of technology going to impact your sustainability?
• Are you tracking how your customers, clients are finding you?
• Are you giving them with every opportunity to find you in order to buy your products?

People are no longer limited by location. They can shop all over the world 24/7. There is a good and bad side to this.  Firstly your customer base has expanded world wide, and on the flip side so has your competition.  You need to adapt to this new economy and the opportunities it brings to the table for your business. It is not going away and those that don't embrace it will become extinct as your customer base move to demand it.

When was the last time you went to a record store? Traditional book shops are rapidly falling along with DVD hire shops.  Change for some can be daunting and thus is avoided, others don't know where to start.  With the new financial year approaching now is the time to review and plan your business strategy for the years ahead. Start the new financial year with a strategy that embraces the new road ahead. The time to act is now.

I am always available for assistance on this or any other business matter you may be needing help with.
Contact me by email or by phone on 07 5594 3434.

A smile can make a major difference to your business.

It costs nothing, yet it has such a major impact!


With strains on marketing budgets and business cash flows you would think they would be free flowing. But something so cost effective and easy to implement is a rarity these days.

I'm talking about a smile...


When you walk into a business and a person smiles at you, you feel instantly welcomed and important.  Unfortunately it's usually the opposite that we are greeted with.

So why then do we not instill in our team members that it is compulsory to smile when greeting and communicating with clients and customers?  I understand this may be hard for those in the funeral business for example, but they can in the very least display an open, empathetic face that shows care and understanding.

Customers are going to have a far better experience, be more inclined to communicate and discuss their needs with a friendly smiling attendant, rather than a grumpy non smiling person that treats the customer like an inconvenience.

My personal experience
I was at the car wash yesterday and as I watched the cars going through the system I couldn't help but notice the lethargic non-enthused, unhappy approach that each attendant adopted to undertaking their task in the production line.

These people were in full view of the customers sitting watching their pride and joy being washed while trying to enjoy a coffee.

As a paying customer, should I be made to feel that I am inconveniencing the staff?  Couldn't my experience have been a lot nicer with a simple smile on the faces of the attendants. It costs nothing and is only a matter of management instilling and explaining the importance as a part of the company culture.

If your staff don't enjoy what they're doing and can't smile, tell them to go and do something else that does make them smile, then hire someone who not only has a better attitude, but is going to contribute to the overall success of your business.

I am a firm believer that simple, FREE things like this can make a profound difference to your business and most importantly your customers experience in your business.

At a time when customers have unlimited choice available on the internet and when every dollar they spend counts, you have the power to make sure your customers and clients want to use only you...because you make them feel like they belong to you and nowhere else.

I have witnessed companies spending thousands of dollars to attract new business, only to have a non smiling, inconvenienced attendant go up apathetically try and 'help' them, when a happy, smiling, energetic, caring attendant could have not only satisfied the customer but welded them to your business, and even better, referring new business, because you show you care.

Try it... smile tomorrow it may even change the way you approach your own day.

Condolence & Thoughts For Pike River Families

Our warmest thoughts and condolences go out to the families and victims of New Zealand's Pike River mine tragedy. Such a terrible thing for anybody to ever have to experience. It certainly puts things in perspective.

Gerry Harvey - Is the Economy all to blame?

In recent days Gerry Harvey has voiced his concerns over the bleak and severe battering ahead for Christmas retail trade in the media, sighting interest rate rises, drops in consumer sentiment, heavy discounting, a stronger Australian Dollar and an increase in online store trading as some of the major factors in this gloomy retail picture.  Mr Harvey is not a happy man with the current state of things.

While I dont necassarily diasagree with Mr Harveys claims, it does raise some very valid thoughts to ponder.
Lets start with 'Online Trading': As the technological generations mature to become a larger percentage of the consuming economy, coupled with increased internet trust and security by existing consumers, the move to online purchasing and retail trading is inevitable. You can buy your groceries online safely and efficiently now. You can even buy homes, boats, cars and yes TV's all from the comfort and security of your home. I have even heard rumours of full shopping centres currently being developed...a virtual centre you can go online and buy all your favourite brands.

Can I raise the point though, that if there is no perceived difference between buying in person and buying on the internet, the internet will inevitably win. By this I'm not talking about price, I'm talking about personalised friendly service that is designed to assist and build a relationship with the customer. The internet is impersonal, you are offerred no assistance as a customer, it is very much point, click, hand over your credit card and the goods arrive. If the experience I receive when I walk into a retail store to purchase a TV is very much the same impersonal and transactional experience, then why would I not save the time, fuel and energy and buy online?

Retailers need to look at the internet as an opportunity to improve their traditional sales, marketing and operational models. You can not rely on people just walking through the door and handing over their limited hard-earned cash. You need to build a relationship and trust. Every person that walks in the door is a prescious resource to be nurtured now. It's the new economy! (although it should have been there in the first place).

If we look at Heavy Discounting: Discounting has been alive in retail for many, many years and always will be. Everybody likes a bargain! As a consumer, if you leave a store feeling you have had a win, you are happy. But discounting is a very tough way to make money. Let me explain... If you currently operate with a 30% Gross Profit Margin and you offer a discount of 10% to your customers, you need to increase the actual amount of goods you are selling by 50% to make the same profit. In tough economic times discounting is always the first point of call for many retailers.

Why not go the other way and offer value and package deals or bundles. There is nothing more frustrating when you have finished negotiating a "cash price" for an appliance then you get to the counter and the salesman starts to rattle off all the other cables you are going to need and keeps adding to the agreed price. Why not have a less discounted experience with an all-up price, so that the customer feels they have received value and all my needs are met?

Interest Rates are rising and will continue to in my view in the next twelve months. Consumer sentiment is dropping but I am a firm believer people will still be purchasing. They still have needs, they still have a thirst for consumption and technology. Go for a walk in an Apple store on any given weekend... they are packed to capacity! Even with interest rate rises, even with increased online sales, people are walking out the door with Apple bags. They are meeting the needs of the new economy. They have developed a marketing machine that brings people in. You can touch and experience their products. Their shops are bright and simplistic yet have a feeling of efficency and currentness about them and can I just say they are not just young tech-head customers they are attracting. Many, many of the customers are over their mid 30's. Yet Apple are nowhere near the cheapest technology and computing solution, they dont heavily discount their products, you never see big "On Sale Now" signs in their stores. They are meeting their customer needs. When you buy an Apple product you get a box and its all included and most importantly when you go to pay they don't slug you with extras or a 2% surcharge or EFTPOS fee penalising me for how I choose to pay for my experience in their store.  THAT is my biggst pet hate!

So, I agree with Mr Harvey, the factors he speaks of are out there and having a huge toll on traditional retail strategies. But I think there is a need for many retailers to take a good hard look at how they are treating their valuable customers and meeting the needs of the new economy.

Do you have a Customer or a Client Culture?

A customer by definition is "somebody who buys goods and services."  A client, on the other, hand by definition is "somebody who depends on the protection of another."

So many businesses we see have a customer culture of selling goods and services.  A one dimensional transaction to gain as much profit from the transaction as possible, and falsely believing we have satisfied the needs of the customer.  A transaction that may happen just the once.

Contrast this with a client culture, based on protecting the needs and requirements of the client.  The development of trust and a bond with your business that goes much deeper than a quick profit.  A relationship that will see the client return more than once, even bond them for life, but also have them singing about you to others.

How much more business do you think a client culture would attract?

There is an old story about the person walking into the hardware shop to buy a drill.  He asks the attendant,  "Do you have a 10mm drill?"  The attendant takes him over to the drill section and gives him a 10mm drill costing $10 to take to the register to pay.  This is a customer culture.

Another person goes into a different hardware store and asks for the same 10mm drill.  The attendant recognises that this person doesn't need a drill, they need a hole.  They begin to consult with the person, asking if the hole required is going into timber or masonry, as each will require a different type of drill bit. What is the hole to be used for?  Is it for fastening or hanging?  Do they have the appropriate fixtures? Is it to be temporary or permanent?

This person was not after a drill at all.  They were wanting to hang a picture for their wife and had been putting it off for months. Items sold included 1 x masonry drill $15, hanging hooks $10.  And the relationship established?  Invaluable. This a client culture.  Where do you think he'll shop next time?

Think about it the next time you buy something - what experience are you having?  What do you have in your business - a customer culture or a client culture?

Do something different, start referring to your customers as clients or guests.  Start training your team to think of people this way in your business.  It will make all the difference.

Run Your Own Race!

The Sydney city sky is turning from black to the lightest of pinks and blues as the sun wakes the city for the new day and the buildings that were just minutes ago towers of coloured neon are now solid towers of concrete and glass. Monday has arrived and I am sitting in my hotel room thinking about the race I have just taken part in the day before, The 2010 Sydney City to Surf.

80,000 people running through the city 14kms in search of the ocean, as if it would end the world if they didn't reach it by lunchtime. An endless snake of people funnelling through the city streets and tunnels in search of water and the ocean. There were people in Batman suits, Spiderman suits, dressed up as blue smurfs, Santa even made an appearance running along the road stopping to hand out presents to children spectating with their parents and of course there were the serious participants using every bit of their energy to get to the finish (I was in the later group as I had misplaced my smurf suit).

As I was running along I got to thinking (as you do!) "every one of these 80,000 people are here for their own reasons" - some for fun, some just to finish, some to win, some to beat their personal best. They were all "running their own race". It didn't matter that people were dressed up in clown suites or stopping along the way for a drink, or walking and talking... they were all running their own race.

It is one of the greatest gifts we have in life, the freedom to run our own race, and it is one of the greatest gifts we all have in business.You can decide today how you are going to operate your business. You  can decide how you are going to service your customers and clients and you can decide your success and future in doing so.

Get passionate, Set Goals, Set Strategy, Achieve and "Run Your Own Race". Don't be drowned by negative media, or people trying to pull you down. Rise above it.

My Goal was to beat my personal best time...and I did it.

Enjoy your journey.

Is Business Bad Or Are You Just Doing Bad Business?

I have the pleasure of seeing hundreds of different types of business's each year and as an adviser I love nothing more than to see them prosper and exceed in their own expectations.  It is a very large part of my role as an advisor and something I am very passionate about to this day.

On the flip side of helping and talking with business owners I also get the privilege of utilising the services of a lot of businesses both locally and nationally and it is to this end that I remain constantly astounded at the way in which people conduct their business's.

Let Me Explain!

A common complaint is that "business is bad" "nobody's buying" "the phones have stopped ringing" and so on... but is business really bad or are we just doing bad business?  Let me give you two very real and distinctly different stories -

We recently had the interesting experience of using a local business to undertake some reasonably large work that needed careful planning and attention. After providing them with a detailed scope of the project, a quotation was provided of which we accepted and it was 'happy days'...or so we thought.

In going through the process of this project I was continually amazed at the amount of times that things were promised, but not delivered. People who said they were going to show up on a date and time did not show up. In one instance, the business owner promised to come three days within the one week and on each occassion, never did. Not a phone call, a message, even an apology for not delivering on what they said they would. It then took weeks to have them eventually come and do the simple job.

Yet, they tell me "business is bad". "No body's buying". "The phone has stopped ringing".

If I contrast this with a recent experience I had with a well known company Dell Computers.

One of our very important file-servers crashed and died on Easter Monday, of all days. I rang DELL technical support on Easter Monday evening at 6.30pm to report the issue, as I had a full team of employees coming to work the next day.

A friendly technician called me at 7.30 pm that same evening and asked me if I would like him to travel immediately from Brisbane to the Gold Coast this evening to fix the problem? I couldn't make the poor man travel for an hour on the last night of a long weekend, so he promised he would have the parts on our doorstep first thing in the morning, along with a technician to fix the problem.

To their word the parts arrived on time, the technician arrived as promised, our server was fixed as promised and all rubbish and faulty parts where removed. By the time they had finished, you wouldn't have known they'd been there at all.

This is not a one off instance. On another occasion we ordered critical parts at 4pm in the afternoon. They promised they would be delivered that evening at 7pm as they where coming once again from Brisbane. At 6.45 they phoned me to say they had been held up in traffic and would be 15 minutes late. To their word they arrived at 7.15pm, problem solved.

Is it because Dell is such a multi-million dollar company that this kind of service is acheived? Definitely not! Michael Dell started this business from the boot of his car in a university car park.

My point is they are doing business well and that is why their phones are still ringing, They are still growing and people are still buying.

Do they make mistakes? I'm sure they do. We are all human but what is their normal service and business standard? What experience do they strive to provide their customer no matter how big or small?

What is your business standard?
What are your service values?

I suspect in a lot of circumstances business isn't THAT bad?

Negative Gearing A Tool Not An Investment

Negative gearing is a financial tool not an investment

Made popular in the times of high inflation and no capital gains tax back in the 70's, negative gearing was a way to borrow money to buy more of an investment that was increasing in value.

The aim being, by using one dollar of your money and one dollar of the banks money, as the investment increased in value you hopefully made four dollars when you sold the asset. This would leave you with a profit of two dollars after you pay back the bank instead of just one dollar, had you just used your own money.

Now days the tax and investment environment is a lot different. We have capital gains tax that can bite into profits and inflation is not as high. Care and proper advice should always be taken when considering using such a strategy as it is not a "one size fits all" solution.

Yes, there can be tax advantages and it is still an effective way to acqiure more of an investment in a rising market however, you must do your numbers to ensure you will be in front in the end.

Many people that come to see us see negative gearing as an investment ie They want to buy a negatively geared property instead of looking at it as a financial tool and asking: Whats the best way to buy a property for my own circumstances?

Your New Years Resolution - 1 Month Down

It's Saturday morning January 30 2010 and the coffee's fresh. The office that not more than 12 hours ago was a buzz of staff, phones ringing and the usual hustle and bustle of conversation and client appointments is now empty and the only sound is the soft, mellow hum of the air conditioning unit above my head.

The peace is music and as I take a deep breath to reflect on the week that was. I am suddenly alerted by the realisation that the month of January 2010 is over. The first month of 2010 is done.

One month since setting my goals for the year ahead has passed at the blink of an eye. What has been achieved to date? What steps have been taken to move closer to these goals?

Do you have a plan for your business? What steps have you taken to move closer to achieving this?