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Management

Reminder for SMB owners: profit comes first

By Leon Gettler, Talking Business >>

MANY small business owners work their butts off to keep their businesses going. One of the problems they have is they don’t know how much cash they’re burning. And alas, too often, they run out of cash.

Rocky Lalvani, who serves as a chief profitability adviser for business owners in the US – and is the founder of Profit Comes First – has a simple formula for business owners.

Everyone is told by their accountant that profit equals sales minus expenses. What Mr Lalvani believes they need to do instead is say sales minus profit equals expenses. This forces them to constrain expenses.

He said it was amazing how many business owners fail to do that. Instead, they just focus on revenue, which he said is easy enough. The rubber hits the road however when they look at their costs.

 “What it does is it constrains your spending because, more often than not, business owners spend too much,” Mr Lalvani told Talking Business. 

“By looking at it differently, they are forced to constrain themselves.

“It’s a whole change in the equation, it’s a whole change in mindset.”

A sensible new approach for business owners

Mr Lalvani said this approach is a big change for many business owners.

“If you’re a business owner, and I’m going to invest in a business, do I not expect a return on my investment?” Mr Lalvani said.

“But how many business owners actually track their investments and track the return on the investment in the business they own? They wouldn’t put up with this with anyone else.

”How often do we talk about the bottom line? Everyone talks about what their revenue is. For a lot of people, it’s real easy to drive revenue. What’s really hard is to keep it and it’s a very different skill set.”

He said his formula sets up early warning signals for businesses when they are running out of cash.

“Because of the way the system works, you’re getting early warning signals that there is not enough cash in your expense account,” Mr Lalvani said.

“Too often business owners don’t know until much later that they ran out of cash until it’s too late. This system creates early warning signals.

“It prevents a lot of those sleepless nights and freakouts.

“When I look at my clients, my clients who have the most cash tend to be the ones who follow the system and do it well.”

Owners must pay themselves properly

Mr Lalvani said business owners need to pay themselves an appropriate salary for the work they do.

A lot of business owners start work at 6am and are still going into the night. But are they compensated for those hours? Do they give themselves the six figure salary they should get for those hours?

“They need to know how much they’re getting, whether or not their business is profitable,” Mr Lalvani said.

“We go through and look at the entire business from beginning to end. What does your lead flow look like? How many of your leads convert? How much is it costing you from marketing to get those leads? Is that a good number?

“Is that a thumbs up, is it a thumbs down? What do we need to do to improve the sale process? What’s your retention rate? What’s your average sale?

“All of that helps drive revenue.

“Now, our second bucket is how you drove all that revenue. What does it cost you to run your business?” he asked. “So, looking at all the operational costs and efficiencies.

“And the last bucket is the cash bucket. Because your profit and loss can say you’re profitable and you have no cash because it’s tied up in accounts receivable. Or it’s tied up in inventory. Or you have a lot of debt,” Mr Lalvani said. 

“Profit is a fictitious number your accountant came up with. It doesn’t equal cash in the bank.

“So we look at the entire process completely to help business owners have more cash and to work less too.” 

www.profitcomesfirst.com

www.leongettler.com

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

https://shows.acast.com/talkingbusiness/episodes/talking-business-8-interview-with-rocky-lalvani-from-profit-

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Workplace training declines – and we're losing out on wage and productivity gains

WORK-RELATED training is declining in Australia, despite it bringing higher incomes for workers and increased productivity for employers, the Committee for Economic Development of Australia (CEDA) has found.  

In Learning curve: Why Australia needs a training boost, CEDA analysis of HILDA data shows workers’ incomes are 20 percent higher the year after starting work-related training.

“Workers who trained were also more satisfied at work and more likely to report a promotion the year after training,” CEDA head of research Andrew Barker said.

“For employers, greater staff satisfaction and engagement are associated with higher productivity.  Given the need to lift Australia’s productivity performance, increasing training should be a focus for employers and policymakers. 

“These findings show work-related training is important to everyone – for employees in terms of their future incomes and career progression, and for employers in terms of employee engagement and productivity – even though it can sometimes feel like yet another task on the to-do list.

“The time and money devoted to training underline its economic importance. We estimate employers and employees invest a combined $12 billion a year in work-related training. Of this, $7 billion is the direct cost of delivering training, while the remainder is the time spent by employees on training. 

“Despite its importance, it is under-researched, and its decline has received little attention.”

Work-related training is structured learning such as short courses or online modules to help people become more effective in their jobs.

It can be voluntary or mandatory and can range from help to get started in a job to senior leadership training and compliance training.

Participation in work-related training has declined by 14 percent since 2007 in Australia, falling in 17 of 19 industries. This is concerning when Australia urgently needs to boost its productivity.

The decline has occurred even as participation in work-related training has increased in most other developed countries over the past decade. 

“The decline is surprising given strong wage growth for those who do training, productivity and staff-retention payoffs for employers and the increasing need to update skills in a changing economy,” Mr Barker said. 

“Time constraints are one key barrier identified by both workers and employers.

“Another is concerns that staff will take their new skills to a competitor after receiving training. But our analysis found participants were actually less likely to move jobs after receiving training.

“Employers should also take care that compliance training does not crowd out time for upskilling in more functional areas.

“Compliance training can be necessary to ensure safety, but when poorly delivered it can cut the time available to develop more practical skills.” 

One-third of Australian occupations face worker shortages. The need for work-related training is also increasing due to other trends including: 

•    Shifts such as digital transformation and the energy transition, which require retraining and upskilling as new roles emerge and industries adjust;

•    Artificial intelligence (AI), which is reshaping roles, changing how work is organised and the types of skills in demand;

•    The failure of tertiary education to fully meet the need for technical skills at the leading edge of industry practice; and 

•    An ageing workforce, which means there is a greater need to update skills to today’s needs, and an increasing need for lifelong learning. 


To address the decline in training, employers should:  

1)    Build a culture that values and encourages learning by understanding the barriers to training across the organisation;

2)    Measure the return on investment from training initiatives; and

3)    Better target compliance training through measures such as regular evaluation and minimising unnecessary re-training.


Governments should:

1)    Develop transparent and consistent accreditation of work-related training at the federal level, beginning with formal micro-credentials developed in collaboration with education providers, and incorporate this data into the new National Skills Passport currently under consideration; and

2)    Work to reverse declining literacy and numeracy skills among school students, ensuring disadvantaged children can meet the minimum standards necessary to enable learning in later life. This will require work at both the federal and state/territory level.  

“Done well, workplace training offers significant benefits for relatively low effort,” Mr Barker said.

“At a time of weak productivity growth, high skills mismatch, skill shortages and low job mobility, we should do everything we can to improve productivity and workers’ career trajectories through training.”

www.ceda.com.au

 

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Is your workplace honestly inclusive? This is the week to think about that

THIS WEEK is officially Inclusion at Work Week (November 18-22). It is an impetus for Australian businesses to genuinely reflect on whether inclusivity is truly ‘the way we do things’ – or not.

Inclusivity is real as a consumer expectations. It is also a reality that evolving workplace legislation is playing a role. Research is also pointing the way, showing that companies taking the lead with genuine inclusivity set themselves apart as employers of choice.

But how many Aussie businesses are actually ready to meet this challenge? 

Recent data from the Diversity Council of Australia (DCA) reveals that 75 percent of Australians now consider diversity, equity and inclusion (DEI) a key factor when deciding where to work[i]. Businesses that fail to prioritise inclusivity risk falling behind in attracting top talent and fostering employee engagement.

Furthermore, the AHRI Diversity, Equity, and Inclusion Report 2023 highlights similar trends. About 84 percent of human resources (HR) professionals state that DEI is crucial for their organisation’s success, yet fewer than 50 percent feel enough focus is being placed on it. Only 45 percent actively measure their organisation’s diversity profile, signalling gaps in comprehensive DEI practices​.

More than just ticking boxes

Greg Luck, CEO of AimBig Employment, a national provider of employment services for people with disabilities, believes the path to genuine inclusivity is about more than just ticking boxes.

“True inclusivity is about creating a culture where everyone feels they belong and can thrive,” Mr Luck said. “It’s not enough to have policies on paper. Businesses need to go beyond corporate rhetoric to embed inclusive practices at every level.

“To create real change, businesses must move beyond token gestures,” Mr Luck said.

“It’s about reshaping organisational culture, policies, and processes to make diversity and inclusion central to every aspect of the workplace. This requires a strategic commitment and the willingness to learn, adapt, and grow.”

Yet, many companies still grapple with how to effectively integrate inclusive practices into their day-to-day operations.

DCA has also highlighted that too many businesses were focused on surface-level changes without addressing the systemic barriers that hinder inclusivity.

Mr Luck said, “Businesses that seek expert guidance can ensure they’re taking real steps toward meaningful change. AimBig Employment partners with employers to provide guidance on inclusive hiring and supporting people with disabilities.

By partnering with experts, companies can move beyond surface-level fixes and transform inclusivity into a core element of their workplace culture, he said.

“Businesses often need expert help to ensure their inclusivity efforts are genuine,” Mr Luck said.

“With AimBig Employment’s guidance, companies can move beyond surface-level gestures and integrate inclusivity into everyday operations, fostering innovation and engagement. True inclusivity is more than a slogan—it’s a strategic advantage.”

As Inclusion at Work Week approaches, AimBig has offered Australian businesses some thought starters to reflect on their efforts.

Inclusivity audit checklist

  1. Do employees feel a sense of belonging? Ask your team: Do they feel valued and included in everyday decisions and interactions?
  2. Are leadership and middle management actively engaged in inclusivity? Inclusivity starts at the top — ensure leaders are promoting and embodying inclusivity.
  3. Do your policies reflect inclusivity, or are they just words on paper? Review recruitment, retention, and promotion policies. Are they genuinely inclusive or mere formalities?
  4. Do you have feedback mechanisms to identify inclusivity gaps? Regularly solicit input from employees about their experiences regarding diversity and inclusion.
  5. Are you setting measurable goals for inclusivity? Having clear, actionable goals is essential to track progress and hold your business accountable.

 

www.aimbig.com.au.

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SMEs mistake transactional focus as ‘good business’ – instead of building long-term relationships

By Leon Gettler, Talking Business >>

WHAT is the biggest mistake small-to-medium sized businesses make?

It’s all about the “big mistake” of putting the focus on the transaction, not about building relationships. More importantly, such businesses ignore the importance of creating a great culture.

Cesar Hasselman, the founder of AMH Consultancy said this has become a major issue for so many businesses, now, that tend to be focused “purely on the transaction”.

“Being a business owner is a journey,” Mr Hasselman told Talking Business. “You have a specific need. 

“If you can take away the transaction, with [focus on] the relationship and understand what’s more than that, around that, and you can understand people, I believe you start to create long-lasting relationships and you start to create a good network,” he said.

“But if you’re just looking for the trade, you’re always worried about your time. And everything is about me, me, me – then it will be hard for having good long-lasting relationships.

“Transaction is supposed to be a consequence. If you keep yourself focused on ‘what I can get’ from that person, it’s something that will make people annoyed and, probably, your relationship will not last that long – or it will be superficial.”

Find common areas of interest

Mr Hasselman said much of the challenge comes down to finding things the business owner and the client have in common – and where they can share information from the industry.

“You need to figure it out,” he said.

“I used to say ‘When you’re going to do a transaction with someone and you walk for the first time into their office, you’re not supposed to look at things superficially. You’re supposed to read who they are and what they have’.”

Mr Hasselman said this went to the question of establishing the culture in the business. How important is culture in a business?

“I believe it’s more important than sales,” he said.

“Culture is what can drag you up and down. Culture is what people do when you’re not present. Culture is what people do as extras without your asking for it. Culture is when things are changing and you have drama outside. Inside is what will support you to get through it.

“As solid culture is what will get your business into a much better place – and a destructive culture will get you out of your place.”    

Get it right from the start

This is critical, he said, when people are setting up their businesses.

“If you set up a business, you have the opportunity to start with all your values which will become part of your culture,” Mr Hasselman said.

“If you have strong values and needs … these will become part of your culture if you do it properly.

“But if that changes, and you need to look for money to survive, then the culture will change.

“So culture is a day-to-day task. You build that up and you have to be aware of it.”

Mr Hasselman said this was also critical when recruiting talent – “they have to fit the culture”.

If the people brought in could destroy the culture, he said, “it’s much more expensive to fix and it’s better not to have them.”

www.amhconsultancy.com.au

www.leongettler.com

 

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

https://shows.acast.com/talkingbusiness/episodes/talking-business-34-interview-with-cesar-hasselman-from-amh-

 

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Headspace App making a positive workplace difference

By Leon Gettler, Talking Business >>

THE GROWTH of stress and mental health issues has become a dominant trend since the Covid pandemic.

Indeed, the pandemic only brought forward a trend that was already happening.

Dana Udall, the chief clinical officer for the Headspace App, said mental health issues are now out in the open globally.

Covid just exacerbated the issue.

“We’ve seen things like increases in depression, anxiety, suicidality, substance use and eating disorders,” Ms Udall told Talking Business. 

“Mental health issues have really burgeoned and we’ve seen this across the globe. More and more people are needing support, more and more people are seeking services.

“We’re trying to reach folks early and provide them with skills to help them manage their mental health needs.”

App is working on mental health front lines

The Headspace App has positioned itself well to do that. It is the leading provider of meditation and mindfulness well-being solutions globally, with more than 100 million users. About 30 million of those come from Headspace for Work partnerships with more than 4,000 global enterprises.

The Headspace App continues to rank in the top 10 most downloaded health and fitness apps from both Apple and Android stores and has been downloaded over 70 million times with millions of monthly active users. 

Some notable Aussie brands cultivating healthier employee initiatives via Headspace for Work include Movember, caresales.com, A2 Milk, Atlassian, University of Melbourne and Booking.com (just to name a few).

Ms Udall said while mental health issues arose during the pandemic, they continue even now that we out of the pandemic because it has “a long tail”.

Tele-health services weigh in

Ms Udall said more recently the big trend has been for people to seek help through tele-health services.

“We know in many parts of the globe there are just not enough mental health providers available, so people are more and more using their phones,” she said.

“We are on our phones all the time, whether it’s for banking or talking with loved ones or doing work – so what we’re seeing is more and more people wanting to access health care and mental health services through their phones.

“That’s some of the things the Headspace app offers, like mindfulness and meditation content, sleep-cast, movement, exercises or it might be actual services such as coaching or therapy.

“They can all be obtained through a cell phone.”

Workplace stress on a daily basis

Ms Udall said a Headspace App survey of CEOs and workers from around the globe had found that 89 percent of employees said they experienced “moderate to extreme stress” on a daily basis.

She said Generation Z was the group that felt this most acutely.

The key, she said, was to reach people early.

“One of the key things in the Headspace App that we are really focused on is prevention,” Ms Udall said.

“So teaching people lifelong skills like mindfulness and meditation – that they can use early on and over the course of their life, because we know that can help decrease the length of care if they need it – it can improve outcomes and can really improve their experience … because they can have skills (to draw on) so they don’t need as much help from professionals.”

www.headspace.com  

www.leongettler.com

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

https://shows.acast.com/talkingbusiness/episodes/talking-business-30-interview-with-dana-udall-from-headspace

 

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Lessons in improving Australian business cyber defences: people, processes and technology

AUSTRALIAN businesses face a growing number of cyberthreats as the digital landscape evolves.

Malicious threat actors have become increasingly sophisticated, particularly with the help of artificial intelligence (AI). Their attacks are also more targeted and include info stealer malware, AI powered impersonations, and ransomware.

The Logicalis CIO Report 2024 revealed that 91 percent of Australian CIOs reported experiencing a cyberattack in the past year, emphasising the urgent need for organisations to enhance cybersecurity measures, practices, and protocols across their operations1.

The report points out how attackers now use advanced technologies like AI to inflict damage on businesses across varied industries. These technologies let them scale their threats easily to launch more precise, automated attacks across regions. 

The promise of AI in enhancing defensive operations is already being realised, with analysts benefiting from AI's capabilities in mass data parsing and logical reasoning.

However, there needs to be more emphasis on the importance for defenders to simultaneously prioritise the development of intrinsic skills in their teams and to ensure the robustness and suitability of their current security operations processes.

Logicalis report reveals better ways

Logicalis Australia chief technology officer (CTO) John Griffin said, “Organisations often fall into the trap of thinking that purchasing the latest cybersecurity tools will solve all their problems. While this is important, it’s not the only piece of the puzzle.

“Sophisticated tools can be ineffective without the proper understanding and application; the saying, “a fool with a tool is still a fool” rings true in this context. It is essential to train employees adequately and establish clear processes for managing and responding to security threats in tandem with technology investments to fortify defences.”

There are two critical aspects of a cybersecurity program in which people and processes must converge with technology to deliver success.

A robust vulnerability management program. This involves regular penetration testing and third-party verification to identify and address potential weaknesses. Regular testing keeps organisations ahead of potential threats and ensures that their security measures are up to date.

A thorough understanding of security controls. Organisations must check controls regularly to ensure they remain effective and update them as needed.

“The third piece of this puzzle is homework,” Mr Griffin said. “It’s true that compliance with frameworks such as ISO27001 will create a higher baseline for security controls within an organisation. However, compliance alone does not guarantee security.

“Businesses need to go beyond mere compliance and focus on the effectiveness of their security measures. It is essential to understand that, while compliance is a good starting point, it is not a solution for all cybersecurity challenges.

People, process, technology, diligence

This is where the convergence of people and process, together with technology and due diligence, will prevail. Businesses should consider investing in ongoing security control testing and validation, including the automated testing of key controls, rather than reacting after the breach has occurred.”

Working with a trusted partner can help businesses address the vulnerabilities within their IT infrastructure proactively. IT vulnerability management services provide the expertise and resources needed to identify and mitigate risks.

“Organisations can address the most critical areas of their cybersecurity strategy by partnering with a knowledgeable service provider that will empower their people and processes.

“Having a cybersecurity incident response agreement with a service provider can be invaluable in the event of a cyberattack,” Mr Griffin said. “It gives businesses access to the necessary resources and expertise to respond to a breach effectively.  

“Preparation is key to handling a security breach; organisations must have their cybersecurity incident plans and communication strategies ready.

“Training employees on these plans and conducting regular drills can help ensure that everyone knows their role in the event of an attack. This preparation can reduce the impact of a breach significantly and help businesses recover more quickly,” he said.

“It is also important that the technology in the organisation is reviewed to ensure that the appropriate data can support any breaches that may occur. For example, the forensic fitness of current logging configurations is essential to investigating a breach.” 

www.au.logicalis.com

www.leongettler.com

Reference: 1. https://www.au.logicalis.com/cio-report

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Master Builders report sets building and construction sustainability goals for 2050

MASTER BUILDERS Australia has released its first annual report on the progress toward its Building and Construction Industry Sustainability Goals 2050.

Master Builders CEO Denita Wawn said the report marked an important milestone in the industry’s progress toward building a sustainable and resilient future.

She said these goals “seek to identify measures that are likely to affect business performance and develop actions to minimise the risks and/or maximise the opportunities of those material issues through an ESG governance framework”. 

Each of the eight 2050 goals have a 2030 ambition and a first three-year plan.

“While there is huge demand for building and construction work, including the commitment of governments to build 1.2 million homes over the next five years, the industry has been battling significant headwinds,” Ms Wawn said.

“Over the last year the industry has grappled with high inflation, chronic labour shortages, higher than anticipated interest rates, compounding changes to industrial relations laws, and new building regulations.

“These challenges have seen a reduction in private investment, an ongoing decline in productivity and higher than average insolvencies,” she said.

“Mindful of the practicalities of what is happening in the industry, Master Builders is moving at a realistic pace, leading transformation for the long-term benefit of the industry and Australia’s built environment.”

Key measures in the report include:

  • Working with government and the building supply chain on changes to support the goal for a net zero built environment.
  • Participating in reforms to building regulation on priority building resilience issues such as waterproofing and bushfires.
  • Increasing female participation with ongoing work of the Women Building Australia program and advocacy to government for greater support.
  • Partnering with a tech platform to provide much needed digital contract management and payment tools.
  • Working with the Office of the Federal Safety Commission to promote better safety outcomes on building sites.

www.masterbuilders.com.au

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