Looking forward to another interesting year in my practice

Looking forward to another interesting year in my practice.

Whilst many enter the 2023 Financial Year with trepidation, I am confident that it can be a good one for my clients.

Where some see danger, I see opportunity.

One of the biggest issues my clients are facing is the scarcity of labour.

Whilst this is constricting growth for some of my clients, it is ultimately not as dangerous for our Economy as high unemployment.

Consumers have money in the bank due to having limited chances to spend it whilst restrictions were imposed.

They have jobs and often the ability to command a pay increase.

This is better for business than people with empty wallets and no jobs.

My clients are winning the war for talent by getting smarter about how they retain and attract staff.

They analyze their employees’ motivations for working and respond with benefits accordingly.

For example, in our business (Fordham - a specialist part of Perpetual ), we have responded in the following ways:

1. Growing and supporting a family - 20 weeks paid parental leave for either parent to use flexibly and inclusion of different family types - from birth and adoption to surrogacy, permanent foster care, and kinship care arrangements.
2. Priorities outside work - an additional ten days of leave per annum which can be used to support an employee’s community or wellbeing.
3. Flexibility - we believe all roles can be done flexibly and adopt a ‘work where you work best’ attitude.
4. Freedom - Sabbatical Leave allows employees to do volunteer work or take time out to spend with their family or on a life-changing project.
5. Reward - $7,500 when employees’ referrals become Perpetual employees, paid one month after the successful candidate joins Perpetual .

Another big issue faced by my clients is supply chain disruption.

I am helping my clients tackle this issue by:

1. Delays at / from point of origin - I develop strategies with my clients to diversify where they source inputs / products from - long-term risk mitigation.
2. Lack of priority - I help my clients understand their pricing and cost structures so that they can better understand the capacity they have to offer suppliers incentives and the tolerance their customers have for price increases.
3. Ranking customers - I help my clients analyze how profitable each of their customers are so that they can identify which ones to give preference to.

Inflation is inescapable.

The concept of having full visibility of what contributes to a business’s profitability will be vital to dealing with inflationary pressures.

A business has got to know when it can afford to pass-on cost increases and when it can absorb them.

Businesses also need to understand how each of their products and service offerings drive profitability so that they know which parts of their offering they can withhold in low-cost options offered to customers.

I help clients cost product and service bundles so that they can strike a balance in their low-cost offerings between:

1. withholding the parts that are least profitable to them; and
2. retaining the parts that are most desirable to their customers.

A business can only do this if it understands how costs apply to every part of its enterprise.

Interest rates are on the rise.

There are two angles from which my clients are approaching increases in interest rates:

1. prudently managing their Balance Sheets and costs; and
2. readying themselves to seize opportunities presented when other businesses become distressed.

None of my clients rely on unhealthy amounts of debt but they all use debt strategically (leveraging growth with tax-deductible debt).

Managing interest rate increases will require:

1. forecasting cash flow (e.g. to allow for debt to be amortized);
2. understanding which costs can be absorbed and which need to be passed-on; and
3. reviewing existing facilities to ensure that they are fit for purpose (e.g. ensuring the business is only paying interest and charges when it needs to).

The permanent structural changes to our Economy created by the Pandemic, labour shortages, supply change disruptions, inflation and interest rate rises will cause some business owners to cut their losses and some to ‘hit the wall’.

For those who can run those businesses better because of their resources, scale, technology, brand or operational superiority, this will create acquisition opportunities.

Many of my clients have readied their Balance Sheets for such opportunities.

My clients and I have drafted lists of likely targets - some we have approached and others we are laying in wait for.

An issue my clients in particular are well-prepared for is ever-increasing scrutiny from the Australian Taxation Office.

Protecting my clients with good Tax Governance has always been of paramount importance to me.

If you cannot substantiate everything you have reported to the Tax Office (or, worse still, have not reported everything) it is no longer a case of ‘if’ the Tax Office will catch you but ‘when’.

The last two years have changed the way people work permanently.

Many of my clients have already adapted to this.

1. Structuring employees’ days to facilitate communication and maximize productivity (e.g. creating an operating rhythm that: brings work streams together regularly; expects employees to commit to delivering certain outcomes; and holds employees accountable for delivering on their commitments.
2. Recalibrating floor plans to shift space away from regular siloed work (e.g. permanent desks) to collaborative spaces (so that teams have a central place to meet and work together).
3. Making sites a desirable destination for stakeholders (e.g. improving: food and beverages offered; aesthetics; comfort; and amenities).

Ultimately, whatever the 2023 financial year brings, it is but one year on a private business owner’s journey.

Being able to extract reward to compensate for all the hard work and risk involved in running a private business requires planning beyond the year ahead.

That is why I will be meeting with clients again at the beginning of this Financial Year to review their Business Owner Plans and consider what lies ahead for them on their Fordham Wealth Journey.

To all those in my network, I wish you all the best for the new Financial Year and I look forward to working with you over the next twelve months and beyond.