Good Day Australia,
Driving to work today I thought of how people get paralysed when they are caught up with an expected situation and decided to post something about it. I hope you all enjoy this one.
When you feel everything is going according to plan, an unexpected resignation or premature retirement letter reaches your human resource department. What’s your reaction?
Did you think of talking to the person trying to understand the reason behind the decision? Is it possible to reverse this decision?
In case that the situation is irreversible, an action plan should be developed and followed.
Informing all your team about the resignation through a formal circular to the staff clarifying and prevent any sort of negative rumour is a major step.
A next candidate for the position should be appointed; the decision is if an internal or external person will take the job. In case there is not a perfect match there is a possibility to wait and take the process slowly as there is nothing worse than hiring or promoting someone that is not suitable or is not ready.
After stabilising the situation meetings could be held to determine how things will be from now on and engaging the staff in general as a team to get through together.
As a suggestion, do not panic because this feeling can be passed on to others and the situation might get out of control. Always have a back up plan around crisis management involving any risk that can affect your business.
Have you had any sort of experience related to losing a key employee? How did you manage it?
Our Vantage Performance team is looking forward to interacting with you again.
Have a great day,
Vantage Performance Team
Turnaround Management Specialists
www.vantageperformance.com.au
03 July 2008
What if one of your key personnel decides to retire or leave the company?
Has your business grown too quickly?
When your business has had sustained rapid growth and margin decline or losses at the same time, a red flag should be raised.
Increasing sales at the cost of margins is a condition that we come across far too often. Typically it occurs over time “naturally” as management teams often don’t have the systems and controls in place to understand by product or by customer how the increase in sales is affecting their profitability. Failure to pass on raw material or input costs is a key issue as management teams are too afraid of losing customers.
At the end of the day if you have faith in your products and/or services then at some point you need to trust in that and hold your ground or price increases, particularly if failure to do so may place your business in jeopardy.
When was the last time you checked your product range and conducted a pricing and margin review?
Our Vantage Performance team is looking forward to interacting with you again.
Have a great day,
Vantage Performance Team
Turnaround Management Specialists
www.vantageperformance.com.au
30 June 2008
End of Financial Year
Well another financial year has come to an end and it has been a real journey over the last 12 months.
Vantage Group has expanded significantly adding a new business to the Group: Vantage Human Capital (Recruitment, Employee Retention and Performance Management) being led by Richard Dunks as a Managing Director and also recently three new Senior Executives have joined Vantage Performance bringing with them different backgrounds of experience.
So Vantage Group wishes all our clients, friends and acquaintances a good start for the new financial year ahead.
For further information do not hesitate to contact Vantage on (07)3229 5750 or visit us on www.vantageperformance.com.au
Vantage Performance
Turnaround Management Specialist
04 June 2008
Our Competitive Advantages
We are specialists in turnaround management
We are a market leader in turnaround
We were a pioneer in Brisbane
We are a dynamic and nimble firm
Our level of experience and mix of staff
Our credibility as a specialist
Our suite of services is unique
Our podcast and newsletter
Vantage Financial relationship
Vantage Human Capital relationship
For further information contact Vantage Performance on (07) 3229 5750, or visit us on www.vantageperformance.com.au
Vantage Performance
Turnaround Management Specialist
03 June 2008
Day of Reckoning?
In our August and October 2007 newsletters we forecast that the US credit crunch combined with the Australian economy’s own issues will have a dramatic impact on our business landscape.
With the Australian economy showing signs of slowing, we take a look at what has happened during the last few months and where the Australian economy appears to be heading. We also provide a list of key initiatives for managers to use in preparing their business for an economic downturn.
US Credit Crisis
Although the Federal Reserve appears to have brought the US financial system back from the brink, the ongoing credit crunch continues to filter through global credit markets, including our own.
Experts are now predicting that the credit crisis will extend beyond 2008 as increased borrowing costs and reductions in available credit spread from corporations to consumers. This is expected to take the form of a tightening of controls around small business and consumer credit via a combination of higher interest rates and more stringent qualifying criteria.
Oil Price
The price of oil has risen 37% during 2008 to over US $130 per barrel. Although Australia has been somewhat sheltered from the fallout of the high oil price by the strengthening Aussie dollar, continued unrest in the Middle East, steadily rising demand, flat production and a weak US dollar continue to provide upward pressure on prices. Some analysts forecast prices of US $150-200 per barrel over the next 6 months to 2 years. Ever increasing fuel prices continue to hit business' bottom line both directly in the form of increased fuel costs and indirectly via increased input costs.
Rising Labour Costs
The cost of attracting, securing and keeping appropriately qualified employees continues to be a burden to small and medium sized businesses. With unemployment at a 30 year low of 4.3% and an unprecedented number of public infrastructure projects competing for skilled labour, the current labour shortage is likely to continue for some time to come.
Rising Interest Rates
Borrowers have borne the brunt of four successive 25 basis point increases since August 2007, taking the official cash rate to 7.25%. The major banks have also added some increases of their own as they seek to pass on higher wholesale borrowing costs driven by the credit crisis. With inflation running consistently above the Reserve Bank's target range analysts predict more rate increases this year.
The cost of servicing household debt is finally starting to slow discretionary expenditure. When coupled with increased fuel and food costs we expect the slowdown in the economy to broaden and accelerate.
High Inflation
Surging petrol, food, housing costs and increasing wages contributed to Australia's annual core inflation rate of 4.4% in the first quarter, putting it outside the Reserve Bank's target range of 2%-3%. Inflation is forecast to remain above 4% for the remainder of 2008 before falling to within the target range toward the end of 2010.
High Australian Dollar
The Aussie dollar has continued its rise from US $0.88 at the end of 2007 to all time highs of US $0.96. Although this reflects the current strength of our commodity market, a significant portion of these gains are due to the weakening US economy. With no end in sight, the strong Aussie dollar will continue to undermine the competitiveness of non-mining related exporters, and increase the profits of importers.
With all indicators pointing towards tougher times ahead, it's time for management teams to focus on strengthening their balance sheet. This can be achieved by optimising working capital through initiatives such as:
Ensure Forecasts Are Up To Date: Now is the time to review processes which govern working capital and cash-flow decision-making. Robust systems will enable managers to identify needs and implement appropriate solutions on a timely basis.
Reduce Debtor Days: Strategies to reduce debtor days include:
- Incentivising staff to reduce overdue accounts
- Providing discounts to customers for early payment
- Strengthening reminder and debt collection processes
- Tightening the credit application process
- Implementing penalty charges for late payment
- Making sales staff accountable for client collections
- Using the 80/20 rule to cull low value/non-profitable customers
- Implementing cash only sales for certain circumstances
Tighten Cash-flow: Early identification of potential liquidity problems is vital in a slowing economy. Managers should increase focus on cash-flows through targeted internal reporting, and tightening controls on non-essential expenditure.
Stock Levels: Strategies to reduce stock levels include:
- Re-defining optimum stock levels of raw materials
- Reviewing batch processing levels
- 80/20 rule to liquidate obsolete & surplus stock
- Implement just in time purchasing
- Return usable excess raw materials to vendors
- Utilize inventory on consignment from suppliers
Consider Debtor Finance: Debtor finance can deliver a major boost to cash flow as debtors are sold to a third party financier.
Cull redundant products: Products which are no longer in-line with core operations should be identified, and a decision made as to whether to strategically increase their viability or remove them from the business's product range.
Review Credit Arrangements: Paying creditors early (even if attractive discounts are offered) puts unnecessary pressure on working capital. Managers should also assess the strategic position of suppliers and identify opportunities to renegotiate agreements on more favourable terms.
Ensure Optimum Workforce: Employee remuneration and related costs are a significant expense for most businesses. Aligning employee numbers and remuneration with industry averages, and optimising available technologies to reduce labour input can assist in reducing employee expenses.
Some managers will have sufficient resources and time to execute these tasks. However, a significant number will require the expertise of corporate turnaround and performance improvement advisors to ensure a rapid and timely implementation.
For more information please feel free to contact one of the team at Vantage Performance.
Regards
Michael Fingland
Managing Director
www.vantageperformance.com.au
Turnaround Management Specialist
Vantage Performance News
Vantage Performance has recently added another Senior Executive to the firm.
Elizabeth Mawby - Senior Executive
Elizabeth has considerable experience in the areas of auditing, corporate taxation, insolvency and business process improvement.
She began her career in public practice, specializing in auditing large privately owned businesses both in Australia and the USA. After a number of years in public practice, Elizabeth moved to the corporate sector, working with resources companies ExxonMobil and Rio Tinto. She has acted as financial controller of various Australian and International operations, and has extensive experience in financial reporting, analysis (including KPIs, budgeting and forecasting) and process improvement.
Elizabeth’s assignments have taken her to the USA, UK and south east Asia.
Qualifications: Chartered Accountant, Bachelor of Business, Graduate Certificate in Applied Finance
Memberships: Institute of Chartered Accountants of Australia
For further information, don't hesitate to contact Vantage Performance on (07) 3229 5750 or visit us on www.vantageperformance.com.au
Vantage Performance
Turnaround Management Specialist
13 May 2008
Our Services
- Strategic business assessment
- Business risk assessment
- Business plan execution
- Profit improvement strategies
- Strategy formulation
- Strategic marketing
- Financial performance analysis
- Human resource assessments
- Working capital funding strategies
- Business intelligence systems
- Financial modeling / forecasting
- Employee incentive programs
- Industry analysis/benchmarking
For further information contact Vantage Performance on (07) 3229 5750, or visit us on www.vantageperformance.com.au
Vantage Performance
Turnaround Management Specialist
Case Study
Background
Mobile phone distributor and logistics company
Listed company with sales of $600m p.a.
Multi-site business, 500 employees
Loss of $30m (profit of $15m in previous year)
Bank finance $72m (strained relationship)
Key issues
Risk of short term facility breaches
Management’s corporate strategy flawed
P&L and cash flow forecasts too optimistic
Key business drivers and risks identified
Poor management of cash flow and working capital
Restoration of bank relationship essential
Significant profit and cash generation opportunities
Viability of business is questionable in current form
Several non-core businesses not adding value
Equity injection required
3 Phases
Assess short-term cash and financing needs
Viability review and develop turnaround plan
Implement & monitor turnaround strategy
Outcome
Managed to avoid a likely collapse
Some non-core businesses sold or closed
Significant reductions in cost base
Significant working capital improvements
Bank debt down to $12m ($60M improvement)
Bank relationship restored
Successful rights issue of $3m
Revised budgeted EBIT of $3m (ie. $33M turnaround)
For further information contact Vantage Performance on (07) 3229 5750, or visit us on http://www.vantageperformance.com.au/
Vantage Performance
Turnaround Management Specialist
Vantage Kokoda Challenge 2008
Kokoda Challenge was a success! Vantage Group raised funds for Young Care and in return directors and friends from Vantage Group completed the Kokoda Challenge.
Congratulations to the brave directors of Vantage Performance and Vantage Financial, Michael Fingland, Brett Fingland and Rob Kirkpatrick in finishing the Kokoda track within ten days.
VANTAGE PERFORMANCE
http://www.vantageperformance.com.au/
VANTAGE FINANCIAL
http://www.vantagefinancial.com.au/
Vantage Performance
Turnaround Management Specialist
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