Is Government a Business

Small businesses have an imperative unlike any other sector of society, it’s called cashflow and it is this very vulnerability that makes us in my view, the most important part of the economy. We hear often about the losses that QANTAS have been making in past years and the projected return to profitable trading. Debt and deficit at all levels of Government is in the news almost every day, the distinction between debt ie level of borrowed money and deficit which is a shortfall in the cashflow of government is important.

Doctor - No Face

Too many in society don’t understand how to manage cashflow and the term budget is anathema to most. Perhaps the biggest barrier is it’s something we have very little knowledge around the basics and as a consequence it’s viewed as something too difficult. Members of the foundation have free access to the “essentials pack” and one of the modules – Financials, Budgets and Cashlow”.

The reason small business is so important to our economy is that they must react immediately to external influences otherwise they go broke. Government and big business can ride out cashflow crisis, sometimes for years. Small business won’t last a month if they don’t adapt, change, innovate; they don’t have any other option other than to be profitable or disappear. That’s very healthy, in fact critical to ensure that our economy doesn’t stagnate. I’m not anti-big business just for the record, but it’s important to understand why I focus on small business as my main interest.

So the question is should government be in business, well the reality is they are! The delivery health and education for example are services, and private enterprise or government can deliver them. I often get into discussions about the concept of universal or “free” services and why that’s better a system than paying a private company that have to make a profit.

To start with government does not deliver these services for free, they collect taxes and pay the costs on behalf of us. Like cashflow, delivery of universal health is also not well understood and looking at better ways to deliver services is a sensitive topic. I was chatting with an elderly couple recently and they were comparing the contrasting very different experiences they each had had in the public health system.

At one hospital the service was extraordinary, at the other it was very different. Arriving by ambulance transport service, he was taken in a wheel chair up to his appointment by a hospital wardsmen. Taking his patient to the head of the line, he was told by the receptionist that he would have to go to the back of the line and wait. Now the wardsmen already had a call to pick up another patient, which he told the receptionist who promptly ignored him. Leaving the patients documents on the counter he responded by saying to call him when the patient was ready to be taken back to his transport.

A long story short, the patient waited patiently and after three or four attempts to find out where his appointment was at, decided to leave after 4 hours without seeing his doctor as it was apparent his paperworkj was not going to be processed only to find that his transportation paperwork had been shredded by the receptionist. The biggest difference in this story contrast in standard between two hospitals in the same town and significantly that in a universal free system, the patient cannot chose to go to the other hospital.

This highlights for me the difference between small business and particularly government. While there are many dedicated professionals in the health services, there is no imperative to deliver great service. The wages next week will still be paid, the government may change but the headlines stay the same.

If we had a system where all health was delivered by private enterprise, but had a system that saw reduced taxes so that the majority become responsible for taking out their own insurances and choose where they go. Bad service means that a bad hospital will become unprofitable as customers vote with their feet. The improvement from the imperative to perform in both courtesy and quality of medical treatment will see great hospitals become the norm.

And those who cannot afford to be part of this system, well they ARE a part of it as the cost is still met by government, just that the patient has the choice where to go and use the credits provided to the vulnerable. No different to health being universal but the outcomes are demanded by the patients at the point of delivery, not by complaint at the ballot box which changes little.

The really sad part for me in writing today’s post is that conversations like this are not yet a normal part of our society, there may be better solutions than mine but we need to explore them. We seem to be more focused on taking less responsibility for ourselves and for my mind this delivers a lower standard outcome.

 

Trevor Dixon

Chairman Small Business Foundation

For more on “Enterprise” – The Art of Freedom, visit:

www.smallbusinessfoundation.org

 

 

 

 

 

 

 

 

 

 

 

 

 

Society needs to Unplug

I often get asked how I manage to fit everything in that I do and my default position is to jokingly reply that there are 36 hours in every day.  Coming from a military background, the concept of overtime is something that has never meant much to me personally and in my younger days as a manufacturing manager while not common every day I have done a number of round the clock shifts and one marathon at 32 hours.  Getting ahead is not a matter of luck, its about hard work and managing your time.

Close up of remote in hand with shallow depth of field during television watching

Now while there may not be more than 24 hours in a day you can accomplish far more than others around you by doing more with the time you have.  Small business owners do this from necessity, there is always an imperative to improve cashflow whether its from growth, slow seasonality, competition, there is always something putting pressure on business owners to do more hours at work.  Getting that balance right at home is even harder in this situation; conversely if you are an employee that simply wants to get ahead in life, you too can make more use of your time, be it to undertake studies or start an online business from home for example.

For my mind one of the biggest obstacles that challenges us for time is a problem of our own doing.  The box that sits in the lounge room might provide escapism and seem like leisure time but before we know it, 5 or 6 hours at night, a couple of hours in the morning and all of our available time can disappear.  Even if you don’t want to get ahead, the time spend with the family is a much better life work balance than sitting in front of a screen 24/7 and that includes mobile devices like smartphones.  My advice is simple based on when I find my most productive time – turn off the TV!

At home we spend the evening at the dinner table, chatting about things like why we there are rules not just enforcing them as parents.  The kids rarely watch TV during the week, spending their time in between family, music and sports and in my daughters case, ballet.  The art of conversation is essential if you want to get into business for yourself, small business especially is all about people, people and people.  If you can converse easily, break down trust barriers and establish a relationship it is much easier to communicate value to your customers, work smoothly with your employees and get great deals from suppliers.

During the financial crisis that hit world in 2008, one stimulus package in 2009 released $12.7 billion in cash payments, anecdotally that money was spent on flat screen TV’s.  That may not be far off the truth as the single biggest beneficiary, writing down $1 bn of corporate debts within one month of the stimulus release was Harvey Norman.  Over 90% of all stimulus money was used to reduce debts within a very window after being released, this is a very strong argument to suggest that it didn’t stimulate the economy at all…

The art of conversation starts at home, you can do far worse for your family than practising it from an early age and making it a habit they will appreciate when it comes time for them to make their own way in the world.  Conversations about bigger issues such as how to set the conditions for our economy to prosper above and beyond the tired old approaches taken by governments to date may also be possible in the wider community…

 

Trevor Dixon

Chairman Small Business Foundation

For more on “Enterprise” – The Art of Freedom, visit:

www.smallbusinessfoundation.org

You’ve Got to do the Yards

It usually takes about 25 years to become an overnight success, and while we might see a plethora of reality TV shows launching the careers of singers and chefs along with the famous for being famous brigade of Big Brother et al the truth is that most of them do not go on to become true stars.  There are of course exceptions, Kelly Clarkson, Guy Sebastian, & One Direction come to mind as well as home cook Julie Goodwin and some of her compatriots who seem to spring up now and again.

Young businesswoman opening stage curtain to another reality

The banal reality TV stars though are most certainly 15 min of fame wonders with only one I can think of who has had a modicum of success as a radio host.  The true reality is that to be successful you have to do your apprenticeship, you need to acquire knowledge, apply it very well and become respected for what you do.  Once you develop expertise in your chosen field of endeavour you have an opportunity to become known for what you do; at this point if you harness it well you can command your market and demand a premium price for what you do.

A real success and terrific personality that is felt through the medium of TV is Maggie Beer.  She has not had any formal training as a chef, yet has an amazing career spanning almost five decades.  Her only paid cooking job was at a Scottish sailing school during a European trip in her early twenties.  The IPO of her company Maggie Beer Products is expected to raise $30 million, a considerable sum but one she has entirely earned from a lifetime of work and commitment.  Not everyone will make that sort of money from their profession, but it is up to you to learn, do the work and gain from what you deliver for others in life.

Maggie Beer says the greatest mistake she ever made was to give her company her name.

“Because, as such, we can never sell it. I couldn’t bear to sell the whole business. Over the last five to seven years we have had a lot of approaches to be bought and I have never entertained them,’’ she tells The Weekend Australian in an exclusive interview.

“I have spent all my life making sure there are no shortcuts. So the things that matter to me matter so much that no matter how attractive offers were, I said no.’’

Over the past 20 years Maggie Beer Products has grown to be one of the largest employers in South Australia’s Barossa Valley, producing more than 200 gourmet food products for local and export markets.  (1)
Very few people are lucky enough to put their hand into the proverbial bucket of compost and pull out a diamond ring, if you are however lucky enough to crack becoming expert at something very quickly that’s fantastic.  For the rest of us, it’s a matter of time not timing and continuing to put in the work.

 

Trevor Dixon

Chairman Small Business Foundation

For more on “Enterprise” – The Art of Freedom, visit:

www.smallbusinessfoundation.org

 

References

1. Damon Kitney, Victorian Business Editor,  The Australian: Full article here

An Honest Conversation

I have consistently been saying that the Greek economy was showing signs of recovery until the election of Alexis Tsipras’ Syriza party and how this was a repeat of the same type of irresponsible policies implemented under the New Deal in 1933 to deal with the Great Depression.

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This is an OECD chart showing the steady rise in Greek GDP post the crisis of 2008 with a recovery resulting from starting to sort out their previous mismanagement. There is an instant return to crisis once the same old policies were re-introduced 5 months ago.

For me, this demonstrates the importance of the underlying strength in getting the conditions right in an economy. Similar weakness has been exposed in the Nordic countries for example, they appear fine when it’s business as usual but as soon as an external pressure starts to influence their cosy bubble the high levels of Government expenditures are exposed. Greece was exacerbated on top of that due to the low level of tax revenues they were collecting.

No democracy will willingly vote for increased taxes and reduced services unless there is real leadership and honest communication from their political leaders about why it is in their real interests…

How German Reparations compares to Greek Bailouts

A friend comparing all final claims on German reparations from WWII being absolved in the final 1990 international accord after reunification started this conversation:

I feel it somewhat ironic that Germany can insist that Greece pays back its debt. The country defaulted three times in paying its debt and war repatriations in 1932, 1938 and 1948. Furthermore in January 1923 France and Belgium invaded the Ruhr to demand that Germany find the funds to pay its war debt. Helped lead to the rise of a certain Adolf Hitler!

Close up of flags of Germany and Greece

Who is Right Germany or Greece?

I don’t think that the stalling on Germany providing more bailout funds is because Greece hasn’t made payments; the conversation is all about how will Greece stop the haemorrhaging in it’s overspending and under collection of taxation revenue, a two-fold problem of it’s own creation. The Germans quite rightly don’t want to give more money if there is no prospect of any change in the conditions, which created the current crisis.

Very different consideration when making repayments to someone who has kindly lent you money to defaulting on reparations to right a wrong but you’re working hard on repairing your economy so that you can recover and then make payments.

Germany fixed it’s economy, so much so that even at the end of WWII it’s economic output was at the same levels as the start of the war and has continued from strength to strength today. A good example of getting the conditions right and perhaps worth the while of the Greeks to listen!

Given the correct analysis from you, but is it possible to fix the economy while in the Euro? Iceland bankers went back to fishing after their default.

I personally think that Greece being out of the Euro is the best way to fix their economy as they take back control over monetary policy.

Still a lot of pains involved as assets are lost to their creditors as part of the debt absolving in that scenario. Many people think that a default means that the debt if absolved and the world is good… There will be state securities in place that the creditors will take over and the Drachma once reinstated will be very weak. A weak drachma will be excellent for exports and tourism but will be very bad for investment in all domestic enterprise until confidence in the Greek government and new Greek bonds recovers. A huge risk however is hyperinflation and the potential requirement for humanitarian aid.

Perhaps most important of all either way is that sensible conversations take place that allow the Greek people to start electing good representatives that implement conditions to create incentive and reward for effort in their economy instead of populist policies designed only for their personal reelection.