2015 is almost over and we have a new government that is full of promise. Australia seems to be keen to put the days of negativity in politics behind us and get on with an agile innovative theme for 2016.
Interest rates are low and likely to go slightly lower before we see any strong change, making this the time for good businesses that have survived to invest in growth.
Business has been tough for the past years in Australia with margins being squeezed in every industry. Service businesses have been forced to provide better quality of service to remain competitive and producers from primary to manufacturing have been forced to increase volumes at reduced prices. Many like my IT company have found better productivity solutions and remained healthy, while others have simply reduced profits or gone backwards.
We are now working with the businesses that are seeing growth, or at least the potential for it,as well as those taking advantage of good cash flows and reserves to buy out competitors and build their business.
These people understand that now is a great time to access loans to build positive returns through systems that drive efficiency. With property markets near a peak and equities markets offering subdued returns, the opportunity to invest in one’s own business is now.
Acquisitions and productivity improvers are likely to give you the best ROI around. Last week I spoke with a company that does injection moulding and they had a row of 16 head machines that were running OK but they upgraded them to 24 head machines and now produce 50% more units in the same amount of time with the same amount of labour. This simple upgrade made them competitive in their market place again. The cost of the cash borrowed was trivial compared to the labour costs they would have faced to increase production through labour alone.
Of course, if your business is not profitable in the current climate it is hard to see how loans help. The key is to seek the areas in your business that are able to be improved through LEAN methodologies or the like. Improving processes, improving workflow methods and using faster technology.
Another example is that we are seeing relatively small city-based businesses benefiting from much higher internet speeds through excellent fibre deals that are often better priced than previous DSL services. If you are not reviewing your technology you may already be spending the money without getting the benefit.
Your workforce is expensive and if they lack access to the right tools it will impact morale and motivation, team culture and productivity. Often your staff already know what is needed but don’t feel empowered to tell you.
So a great start can be to ask your team. As David Thodey did at Telstra, he simply asked his staff to identify frustrating processes and then worked to simplify them or remove them. This can be done in team meetings or over internal social media with tools such as Microsoft Yammer. It is just a conversation that needs to be started.
IT systems may not be the right place for your investment but if your business is to grow to any scale you need to be sure it has the systems to support it such as:
• Finance package that has the right modules, possibly even an ERP solution or point of sale system if you do any kind of retail
• Email and calendaring tools along with basic office applications
• Graphic design capabilities from sketch tools to CAD tools as your industry dictates
• CRM system for tracking client interactions or service requirements
• Intranet for storing company information, policies, processes, workflows, IP, and so much more.
• HR package that tracks compliance, policies, training, certificates held and more
• Team management tool for setting and tracking company objectives
• Document management system
• Website
• Email Marketing platform (integrated with CRM if you can)
• An App to put in clients hands
• Data base, data warehouse and analytics or dashboards for tracking
• Internal social platform
• Video telephony with application sharing, possibly conferencing or webcasting capability
The list of applications and technology tools is endless and with it goes all the platforms required to be secure, stable, recoverable and so forth.
No one should ever invest in any of these technologies, platforms, devices, gadgets, apps and so forth unless it offers a return on investment. You need to be already earning or spending money to get a return on investment. The investment must either earn you more money or mean you spend less than you would have for the same or greater return.
If you have no surplus left to spend look at where you are already spending it and how you could spend the same money differently for a better return. A great example is moving technology to the cloud to replace out of date server infrastructure and reducing the head count in the server support team. Long-term the benefit may be better results from the cloud for less total cost with no capital outlay and no downside.
The point is if you are not continuously investigating some aspect of technology and investing you will fall behind. If you are still running 16 head machines to your competitor’s 24 head machines it may be the difference between you making money out of your next sale or going backwards that bit more.
Don’t wait until the last straw to explore investment ideas. Take action now to make 2016 a great year.
David Markus is the founder of Combo – the IT services company that is known for business IT that makes sense. How can we help?
David Markus is the founder of Combo — the IT services company that is known for business IT that makes sense. How can we help?
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