exPert Advice
Plan for the good times as well as
the bad
Economic times continually change and it
may be a surprise to hear that business failure
rates in strong economic times are almost as
high as those in tough times. In good times
business owners can make decisions that
restrict the business as conditions deteriorate.
Lease costs that are too high, excessive reliance
of a small number of customers, commitment
of cash flow to non-business related purposes
are some examples. Keeping a close eye on
business results and not being afraid to react
quickly can reduce any negative impacts. For
example, the reason for a drop in turnover
needs to be quickly understood and the
business expenses adjusted accordingly. Staff
hours may need to be reduced, labour mix
changed or the business owner may need to
spend additional time working in the business.
seasonality and other issues
impacting cash flow
It is rare to see a business which is not
impacted by some level of seasonality or other
distortions which impact a steady cash flow.
Taxes (GST, Income, PAYG etc.) need to
be paid, equipment replaced, stock ordered
and paid for. All of these factors need to be
considered in the businesses cash flow cycle.
The slower the cash cycle, the higher the
working capital requirement.
Fall-back position
Expect the unexpected! What if the local
council decided to upgrade a road or
temporarily restrict street access? What about
weather events, long term power outages etc.?
It is always prudent to have some financial
resources in reserve.
This reserve should be in addition to the
normal working capital allowances. A recent
example of an unexpected event was a business
owner who on day of settlement had their roof
cave-in due to excessive rain. The business
was closed for over a fortnight and while there
was some insurance coverage in place, it took
several months for the owner to get paid.
Meanwhile, they had to meet their overhead
costs, wages and loan repayments.
These stories are not isolated and have a
significant and immediate impact to business
cash flowdon’t be afraid to ask for help
Business owners who find themselves with
cash flow problems should ask for help early.
The earlier any issues are detected, the greater
the options that will be available. Engaging
with the franchisor and establishing a time
bound and measurable action plan is a starting
point. This plan will examine and monitor
outcomes closely adjusting actions as required.
Involving advisors such as accountants,
lawyers and bankers will ensure all understand
what the business needs to do to get back on
track.
This action may include the business owner
selling personal assets to return capital to the
business. Owners are best advised to take
charge of the situation and make the hard
decisions early.“Business owners must take time to have a detailed look at
their financial reports. learning how to analyse profit and loss
statements and balance sheets is time well spent.”it’s not all doom and gloom
Taking the above into account, being a
business owner can be one of the most
rewarding things people will ever do. This is
reflected in the large number of Australians
that continue to aspire to become business
owners.
Additional free information is available at
Westpac’s Davidson Institute, visit http://www.
davidsoninstitute.edu.au.Steve Seddon is Westpac’s, Senior Business
development Manager – Franchising,
Western Australia, Queensland and South
Australia. He is a CPA and a member of the
Franchise Council of Australia’s Western
Australian committee.
Westpac continues a long-term
commitment to the franchise sector in
Australia. The bank has a national network
of franchise specialist business bankers
who are able to deal with the specific needs
of the franchise sector.
Contact Steve at:
0407 401 892
[email protected]
http://www.westpac.com.au/business-banking/
industries/franchising/The information contained in this article is intended as a guide only
and is not intended as an exhaustive list of matters to be considered.
Persons entering into franchise agreements should seek their own
independent legal, accounting and other advice.clarkrubber.com.au
BUILD YOUR FUTURE
WITH A RETAIL ICON
As one of Australia’s iconic retail brands, with
a proud history over the past 70 years, we now
have 65 stores nationally. Our award winning
franchise model commenced in 1995 and offers
a vibrant product range providing you a great
platform to start your own successful business
in the pool and spa industry.Our business development and support
teams will assist you in building your successful
business. We have three exciting franchise
models where we are looking for new, motivated
and business orientated franchisees for:- Clark Rubber Retail Stores
Starting from $420,000 plus - Clark Pool & Spa Shops
Starting from $147,500 plus - Clark Rubber Pool Care Service Territories
Starting from $49,500 plus
Our industry knowledge will help you
build a strong business, becoming the local
pool specialist in your territory and helping
you work in a lifestyle environment.
Our franchisees benefit from:- Unparalleled national and local support
- Proven marketing and business strategies
- Group buying power
- No franchise renewal fees
- Turnkey development and set up
- Retail brand celebrating 70 years
- Multi Award winning franchise system
- Unsurpassed initial training and
ongoing support
If you would like to hear more about franchise opportunities in your area, please contact Dirk Heinert for a
confidential discussion on (03) 8727 9999 office or mobile 0400 922 493 or [email protected]