15 Responses to “Innovation has nothing to do with downturns. Just ask Eric Schmidt.”

1. Christine Kaine - Business Angels Pty Ltd Says:
   October 30th, 2008 at 11:36 am

   I addressed this issue in News on my website this week -

   The question on everyone’s lips is, “Are angels investing?” Yes, this is an excellent time to invest in growing businesses. Who would invest in the stock market? Furthermore, has investment in the stock market out-performed investment in innovative companies anyway we might ask? It is interesting to contemplate how investing in an Australian company is perceived to be riskier than investing in the stock market.

   The current financial climate provides an excellent platform for smart companies to attract the right investor. When things are not so frantic (and automatic) everyone has more space to evaluate each other and make sure that they have the right partnership. There is great value in meeting together rather than picking over lists.

   It is also an excellent time for angel investors to re-evaluate how they want to put their resources to use. Perhaps more Australians will consider supporting our clever innovators. Then we could be a better showcase to the world, which sadly we are not.

   It could be time for everyone, those with money, and those needing money, to re-evaluate their goals. There can be no greater satisfaction than working with a team of dedicated entrepreneurs who are able to respond to a need in the market. For those without business ideas angel investing is the other way to participate.

   The current climate can also be a time for reassessing our values. Do we place a higher value on what we contribute or on what we can receive? Angel deals fall over because self interest outweighs the vision of what both parties can do together as a team. There is no question that we all need a greater vision about our economy to avoid, to put it simply, the habitual overvaluations and devaluations.

2. Heather Smith Says:
   October 30th, 2008 at 11:38 am

   My two cents worth :-

   I attended the Small Business Summit on the Global Financial Crisis hosted by the Council of Small Business and the Chamber of Commerce. Businesses from my local community were well represented; marketing consultants, graphic designers, research specialists, website designers to name a few.
   Prime Minister Rudd told us that there are 2 million small businesses in Australia and they employ 4 million people. My mathematics tells me that the average number of people working in a small business is 2. This was discussed at the forum, and we were told that a business of that size, even though it very clearly was an average small business size, was in fact a micro business. Let me repeat that - the average sized small business – was not referred to as a small business at all – instead it was referred to as a MICRO business.
   Interesting when you think about that, the average size woman is considered large when she buys clothes, yet businesses are labelled just the opposite.
   The small business arena has changed and evolved and there are many very successful home based and small businesses who I sometimes feel fall under the radar of the “Small Business Leaders”
   It is interesting to note, that on the application form to join the Council of Small Business Organisations of Australia Chamber of Commerce they tell us they are proudly supported by Phillip Morris, who are surely one of the largest business organisations in the world.
   Back to the summit, COSBOA told us they were committed to developing and implementing policies to assist small business. Prime Minister Kevin Rudd said that his government was committed to paying invoices up to $1M within 30 days, and after that you are welcome to charge interest on them. He went on to tell us they would standardise the procurement documents. This is good news. As someone who has actually sat down and read the government procurement policies for small business from cover to cover, they left feeling completely bewildered. I get a similar sense of bewilderment reading a John Le Carre novel. To the governments credit when I contacted them about this, they directed me to their tendering websites https://www.tenders.gov.au and for Queensland businesses https://tenders.nsw.gov.au/queensland/. Neither of them has provided my business with an opportunity that I have capacity to serve, but I read them with interest, and they provide focus and direction for my growing my business.
   Prime Minister Kevin Rudd went on to tell us about a $4M cash injection into existing Business Enterprise Centres. Well I am subscribed to umpteen newsletters, and pore over all small business articles I can lay my hands on, and I have never heard of a ‘Business Enterprise Centres’. I asked the other small micro business owners at the table had they heard of a ‘Business Enterprise Centres’? None of them had. So now I am mad that $4M of my taxes is going to something that I have never heard of – more taxes for me to pay. I got home and googled ‘Business Enterprise Centres’ http://www.beca.org.au/ and I found a very unattractive website – that does not jump out and say we are a government initiative, instead it looks like slimy networking organisation trying to suck money out of me. I flicked through the website and it appears that there is no centre in Brisbane, and there is no newsletter to subscribe to, so I do not feel that I or any of the other small micro business representatives at my table will benefit from that cash injection.
   The summit went on to talk about banks, and some of the bank managers gave us a polished speech, and small business owners grumbled about customer service and communication. Personally from my perspective, I am with ANZ and have always been extremely happy with them. My bank manager at the Carindale branch is an exceptional lady, whose dedicated service makes me feel like I am the only customer whom she has. Note to self I do need to make an appointment with an ANZ dedicated Small Business Specialist and see what else they have to offer. As far as credit goes, for my small business, other than a credit card with a very low limit that I use for convenience, and to assist when I do my reconciliations I have no need to loan money from the banks, and I see no need to over the foreseeable future.
   Many of my clients who are defined as micro business are in a similar situation as I; they have very restricted credit and no plans to take loans out. Yes some of the larger businesses do have loans, but they have not yet grumbled to me about that.
   Prime Minister Kevin Rudd did make one comment that I have to disagree with. He suggested and I am not quoting him ~ that the micro businesses of today are the small businesses of tomorrow and the large business of our future. I disagree with this. Yes of course some entrepreneurs have dreams of global domination, yachts and leer jets. But I also think many solo businesses are extremely happy in the niche they have carved for themselves, as demonstrated by the many followers of the FLYING SOLO community. Lack of growth should not be seen as a failure. Solo or Micro businesses does not translate to small profits, it translates to less hassles, less politics, more flexibility, more work/life balance and while I am on my soap box the very very small businesses tend to be greener, using less fuel, less infrastructure and utilising virtual services.
   The question and answers session provided for some interesting comments. Someone complained about fines on late payment for GST. Minister Craig Emerson told the audience about BAS Easy, a policy that I as a Chartered Accountant am completely opposed too. I liken a small business owner’s attraction to BAS Easy, equivalent to Homer Simpson’s attraction to doughnuts. Of course a hot sugary cinnamon flavoured doughnut is easy to like, but it provides you with no nutritional benefit, and we all know where too many doughnuts will lead. Relying on BAS Easy will send your financial reports and your ability to financially manage your business spiralling out of control.
   Using suitable accounting software (as a MYOB Certified Consultant I have to plug MYOB here!) and skilled staff, preparation of the BAS should literally take 2 minutes. Every other task that you undertake, that you may label as BAS preparation, you should and you need to be doing on a regular basis. If you are not doing them, you can not rely on your financial reports and you can not use your financial information to manage and drive your business.
   My comment to the small business owner complaining about GST late fees is the GST was never yours in the first place. With the introduction of GST, your business took on the role as tax collector for the government, you collect tax and you pay tax in the form of GST, and the difference you reimburse or collect from the government. If you are paying your GST late it suggests that you may be using the cash flow from GST to finance your business. This is not a good habit to get into.
   The comments from the audience went on; some were simply too micro level to be brought to a summit of this nature. At one stage Prime Minister Rudd threw his arms out to the audience embracing us and explaining that he was here to help on a macro level. He should not really have needed to tell us this, to define his role, but it was good, in fact it was one of the highlights’ of the summit for me. You could feel a hush fall over the audience as some of the members digested this information.
   In my opinion a really valid comment from the audience came from Goldstein’s Bakery - a bakery and pie shop from the Gold Coast. They have been at Pacific Fair as long as I remember, and from reviewing their website it seems they have been busy, 17 stores on the Gold Coast. Mr Goldstein (I am not sure if that is his real name) explained that the superannuation funds owned the shopping centres, and that they would only provide the shop owners with short term leases, and that the rent would always go up about 2% above CPI. He asked for transparencies in the area of Retail Tenancy. One wonders if a rental fixing system like they have in New York should be explored here in Australia.
   So as a micro business owner what am I concerned about with this global credit crisis? I am worried that people will take longer to pay outstanding invoices and that they may result in bad debts. As a small business investing in a debt collection service is expensive, and we are simply vulnerable. Though I do see opportunities coming out of this crisis; I like many at the table I sat with are finding it very difficult to find suitably qualified staff. Increased retrenchments may release high calibre staff into the workforce that the small businesses can absorb. As a business owner who provides on-site MYOB training, I am marketing the cost effectiveness of job specific training to retain staff and grow your business.

   What would I like to see the government do? Disseminate information through one source, take the small business forum online, provide a web-based forum for small business owners, to easily find information, and connect with businesses, without having to work our way through all the filters. Secondly, improve the search and navigation features on the Australian Taxation website.

3. Angie Hammond - Garnish Marketing Says:
   October 30th, 2008 at 11:45 am

   I totally agree, in fact we are ramping UP our marketing campaign as we speak and we are adding new and improved services to our menu, purley because as a Marketing company, we believe that NOW is the time to stay aggressive.

   The one thing business owners should NOT be doing now is thinking about culling their marketing budgets. Its no wonder that Eric Schmidt is not concerned, methods like Google ad words are some of the cheapest and easiest ways to promote your business.

   So instead of being frugal, I would say make sure you keep marketing your business, online, offline wherever, just don’t let the economic “crisis” affect your bottom line in six months time when things may have completely changed.

   There are a heap of low cost marketing methods you can use, if things have hit rock bottom. Try networking, send out cards (www.sendoutcards.com) or just writing letters to your loyal customer base - make sure they stay loyal to you during the tougher times.

   That’s all I really had to say

   Thanks

   Angie Hammond - Garnish Marketing

4. Roger Says:
   October 30th, 2008 at 11:47 am

   Went through the Asian Crisis whilst working in the Philippines for a dairy company. Our response was simple. Downsize packaging to get to another price point. It opened up a volume & distribution we hadn’t thought about before & lead to stronger sales than before & better cashflow. A simple thing, but without the crisis we may not have made that move. If you have a good product people will always aspire to buy what you offer even when there short of cash. The other thing we did was just look at cash. We came out the other end better than we went in & it was a good experience for all involved.

5. Mark Byers Says:
   October 30th, 2008 at 11:49 am

   Yes we are finding the downturn has focused the mind of a lot of poeple - both in terms of users of our business system, really looking closely at it and how it can improve how they can manage their business and also from the investor community in what myworkspace.com could be / represents as a piece of applied innovation.

   In the last 40 days we have encounted substantial growth and interest.

6. Wes Towers Says:
   October 30th, 2008 at 11:54 am

   I’m sure low cost, quick results marketing strategies such as Google Adwords would be exceling at the moment. if you only have a few hundred bucks to spend on marketing and need to see a return quickly, why not?

   As a graphic and web designer I’ve seen a significant increase in marketing dollars being spent this way where once they may have had the budget for big glossy magazine ads (sorry Anthill) they now may be more likely to spend on lo-cost marketing that has a measurable outcome.

   From that perspect Omnific Design is booming since we are lean and mean and have many clients who operate the same way. Over the last year I’ve sacked my largest client (and few small ones), my next biggest clients work dried up due to a merger yet business has never been better. Go the catalogues, brochures, flyers and websites! They can be a great way to make a quick buck in many businesses.

7. alan jones Says:
   October 30th, 2008 at 12:11 pm

   Yes, the sentiment really matters though - people will cycle between over-reaction and over-optimism again and again, each time creating havoc for those of us trying to understand the economic situation and get some stuff done. There was no need for most Australian fund investors to try and get their money out of their fund and into a bank account, yet so many of them did that funds were forced to freeze redemptions, which in turn created further panic.

   It’s not the actual situation we’re in that matters, it’s the public’s perception of the situation that matters. If consumers and businesses get hooked on feeling proud about doing without, being frugal and denying themselves necessary things, it could be bad. Very bad.

   Also, this Wordpress template looks really bad in Safari. Just saying. http://www.flickr.com/photos/bigyahu/2984986795/

8. Ben Moir Says:
   October 30th, 2008 at 12:12 pm

   We are also finding a lot of new opportunities and increased sales in the current enviorment. However we are not expecting this to continue. It is an opportunity to raise cash and prepare for what is to come. To survive it’s our opinion that small companies should have a minimum 12 months of cash reserves. Keep in mind we are only in the early stages of the current economic downturn. Its going to get a hell of a lot worse. Money is being destroyed so fast its hard to come to grips with the deflation that is occuring. Forget inflation, this is a full scale credit deflationary environment.

   I find it an insult to our intellegence to read that Google said “what ressession”. Their ad revenue is collapsing on multiple fronts and their entire business model is being tested to the limits. Ad sense payments to clients have been cut. Their proprietary models for calculating revenue hide the fact they are retaining much more of the revenue to protect their company. As they choke off end users revenue streams in an attempt to save Google, online advertising through google becomes less attractive. Its sink or swim time and the landscape in a few years will be unrecognisable to us pre-2008 recession thinkers.

   Here are some notes I found from a presentation by Sequoia Capital in response to current credit crisis. Lots of good points. Sequoia Capital focuses on software and services investments.

   · A “V” shaped recovery is unlikely
   · Cuts in spending will accelerate in Q4/Q1. Look at eBay—this is just the beginning.
   · This is a different animal and will take years to recover.
   · Getting another round if you’re not profitable will be rough.
   · Do everything possible to get to cash flow positive. Now.
   · Nail your Sales and Marketing message.
   · Pound your competitors shortcomings. They’re hurting and they will be quiet. Take the offensive.
   · In a downturn, aggressive PR and Communications strategy is key.
   · M&A will decrease dramatically and only lean companies, with proven sales models will be acquired.

   Goodluck everyone.

9. Ben Missaghi Says:
   October 30th, 2008 at 12:13 pm

   when a system that prevents among others the gradual control of wealth in the hands of a few and resulting state of both extremes, wealth and poverty.
   the financial techhnician need to evolve an economic system wich would function in full conformity with the sprit and exact provisions of cause on this and similar subject. in jeneral, however one thing, is certain that the cause neither accepts the theoriesof the Capitalistic economics in full, nor can agree with the marxists and Communists in their repudiation of the principle of privete ownership and of the vital sacred right of the individual.
   Woluntary sharing,and this is a greater thing than the equalization of wealth.for equalization must be imposed from without, while sharing is a matter of free choice,
   please note. i will be happy to put more input if you are intersed, very important one wich i like to tell you is about, Application of Spiritual Principle to Economic System if you do like, just email me back and i be tell you, Kind regards Ben Missaghi

10. Paul Wilson Says:
    October 30th, 2008 at 12:13 pm

    Where’s the downturn? I’ve seen a steady supply of new leads coming through door weekly and it doesn’t look like its slowing, at least until Christmas. Admittedly my offering is digital services outsourced offshore, so I can provide cost benefits that are attractive to my clients…. that aside within the leads are numerous startups and new initiatives. As is my approach, the feeling I have is that everyone is digging in and being aggressive to ensure survival and that means spending money rather than being conservative and burying their pennies.

11. Mark Demicoli Says:
    October 30th, 2008 at 12:20 pm

    The mantra ahead is downsizing. People, pay packets, even big overheads such as offices, which smart operators can dispense with if need be. Inovation and flexibility increases with less beurocracy in smart business.

    For Entrepeneurs, micro businesses and the like, this is actually a no brainer cos we’re already there by necessity. It’s an opportunity to see larger competitors suffer under their own weight and Capitalise, big C.

12. Chris Says:
    October 30th, 2008 at 12:38 pm

    If necessity is the mother of invention
    is
    economic downturn the progenitor of innovation?…

13. Marjorie Anderson Says:
    October 30th, 2008 at 12:38 pm

    When times are tough - the tough get going. For NSW businesses micro and SMEs - there’s the NSW Enterprise Workshop entrepreneurial business development program. Its been helping to create and expand businesses sincce 1982. In the words of Neil Anderson, CEO of CathRx - now an ASX listed company – “The Workshop program is a practical person’s MBA! Participating in the program was a key step for me - …I developed the skills I needed to be a successful entrepreneur. On completion of the (4 mth part-time) program I had a realistic business plan and a network of senior very skilled people”. Marjorie Anderson, Workshop Executive Director

14. Glenn Holdstock Says:
    October 30th, 2008 at 1:38 pm

    There is a basic law of physics; big thing move slow, and the economy is indeed a big and complex thing. The impacts of the financial crisis are nevertheless filtering throughto the street; perhaps not so immediate and obvious in white collar service sectors, but, in Sydney, at least, if you talk to guys in construction, you hear that they are being hit hard right now.

    Developers I speak with, at least around here, are cutting hard. There is nothing on their horizon. One developer I know from the southern highlands outside Sydney is about to put off her 40 tradesmen at Christmas and fly to the Gulf States to teach English and wait out the dull days !!!! A good alternative if you can arrange it.

    I have a mate who heads up the local US branch office of a household whitegoods and he has been told to prepare a set of contingency plans, including one for for a 50% cut across the board in sales and local staff.

    Of course there will be sectors and regions that will be less or more affested. But there is a crunch coming. When someone like Alan Greenspan says “I got it wrong” and the theoretical underpinnings of a financial system are in ruins, wishful thinking and positive mantra alone will not see us all through unscathed.

    We are asking particular businesses in our area to keep a watching brief on their sector, and keep us posted of changes they notice, for example in sales and staffing.

    It is all in the stories you hear from people on the ground. Most economic data is lagged by many months.

    Getting back to my mate in the household whitegoods line, “make contingency plans”

    regards

    Glenn Holdstock
    Economic Development manager
    Sutherland Shire Council

15. Jean Cannon Says:
    October 30th, 2008 at 2:35 pm

    I believe that what you focus most on is wha tis most likely to happen. So I am not listenning to the doom and gloom
    I read a wonderful quote in the paper this morning while I was wainting for my plan to come home from a speaking engagement in Sydney - roughly it want a long the lines of - The politicians are like learner drivers who have veered off the road and are afraid they will hit a tree - they spend so much time focussing on the fear of hitting the tree tha tthey hit it. More experienced drivers focus on getting back onto the road

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