EXTRA: What happened to Business Acumen?

EXTRA: WHATEVER happened to Business Acumen?

We tell this story, in a subscriber-only extended version here, to illustrate the points made in our print edition's Liquidation Epidemic special report: There must be a better way.

The decimation of Australia’s SME sector – including far too many agribusinesses and generational family concerns – is now a fact. The concern now is that new businesses, many similar to the types that have vanished, along with others completely new and reliant on new technologies, are being touted as Australia’s ticket to new economic and employment success.

If that had been the official realisation in 2009 rather than 2014, Business Acumen may not have even needed to conduct a feature report of this nature. 

Business Acumen is not seeking to blame but to explain. From an understanding of where Australia is standing, right now, it must logically be easier to chart a more successful course.

From our own experiences of liquidation and the evidence we present in this report, we see that an attitude change is needed among such pivotal organisations to the business sector as the Australian Taxation Office, the Australian Securities and Investment Commission and the major banks.

This is a plea for collaboration with business people rather than blind procedure. This is a plea for such vital organisations to listen for a moment, rather than tell all the time.

This is a suggestion that the system might work better if these organisations adapt to the new environment wrought by the digital revolution – a revolution in which there is more connection, more collaboration and more integration. It means the ATO, the banks and ASIC becoming economic team players – because team sports are where Australia really shines – instead of judgemental spectators. At the moment Australia is losing from the situation in which these vital players may know and work to the rules of the game, but cannot be relied upon to play in the spirit of the game.  

What happened in the lead up to, and during, the Acumen Media Pty Ltd liquidation process is instructive and may help others caught in similar situations to see the signs, understand the environment, and perhaps navigate a way clear. And realise that, at the moment, administration/liquidation remains a zero-sum game in Australia.

 

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THE Business Acumen magazine experience is, unfortunately, fairly typical of the small and medium business routing that occurred from 2011-2013 across Australia.

Business Acumen magazine’s then-owning company, Acumen Media Pty Ltd, was directed into liquidation in the Federal Magistrates Court of Queensland on March 23, 2012, at the request of the Australian Taxation Office. It was the magazine’s eighth year of publication.

Five of those years had been reasonably profitable. It employed about six people on average, in the first phase of its life. It drew and paid GST on advertising, subscriptions, postage, courier fees, printer maintenance, paper, digital toner and inks … and of course the other regular business costs such as power, rent, body corporate fees, staff amenities.

The first year of Business Acumen Queensland – 2004 – had been tough, but it had the benefit of emerging from a fairly successful graphics and large format printing company, which shared its directors and some staff.

From then up until 2009, with the GFC and financial collapse of several major advertisers, the magazine had enjoyed steady circulation among CEOs, business owners and business leaders, along with vital advertising revenue growth. Business Acumen had been invited to join the business community-minded mentoring group Queensland Leaders in 2006, and began an association of circulating to, and drawing fascinating stories from, its group of leading Queensland CEOs.  A mark of the integrity of Queensland Leaders has been that this association continues today, stronger than ever, and it was encouragement from Queensland Leaders that helped energise Business Acumen’s return to full print and online publication this year.

The magazine’s early years drew increasing support in subscriptions and advertising from the Queensland Government’s State Development Centres, from where it was distributed to the business leaders that department’s teams were working with regionally; the new Brisbane economic development arm, named Velocity at that stage, then Brisbane Marketing; and a range of innovative businesses, including Zernike Australia which had also launched its Innovation Series in 2004. Business Acumen teamed up with the Innovation Series in a fruitful partnership that endures to this day and has, since, expanded to Melbourne and Sydney.

Acumen acted out its mantra of being overwhelmingly positive about business and striving to help create business opportunity through publicity. The magazine and website had a focus on innovation and presented many inspirational case studies. A simple but welcomed formula.

There were many winners who knew how to leverage the positive publicity Business Acumen generated, and was increasingly sought out for, by business leaders. Take Absolute Data Group (ADG), whose CEO Tammy Halter found that the pre-seeding of Business Acumen editions featuring stories on ADG, by the Los Angeles Trade Queensland office, played a helpful role in gaining a hearing from the US military on her innovative electronic technical data manuals. ADG won a series of breakthrough contracts with the US Air Force and Coast Guard.

There was the Brisbane start-up which designed lockable surfboard racks. Business Acumen was contacted by a large US sporting goods distributor, who just happened to pick up the magazine from his Brisbane hotel’s executive lounge, and passed on contact details.

There was the James Cook University and MDB Energy-developed algae-based carbon dioxide capture and conversion system, which was struggling for recognition until CEO Andrew Lawson’s appearance at the Innovation Series and a story in Business Acumen helped to cut through the right corridors of the Queensland Government. Within a year MDB had a grant and trials operating at Stanwell’s Tarong power station in Queensland, then on to Victoria’s Loy Yang A plant and NSW’s Eraring power plant.

There was also the ongoing relay, to business leaders and owners, of information on government programs, grants and changes brought through the taxation system by the ATO. This was all part of the business community service territory for Business Acumen magazine.

None of this was considered or deemed relevant when, on March 23, 2012, ATO’s representative legal firm, Gadens Lawyers, told the court its client, the ATO, believed Acumen Media Pty Ltd should be wound up and its assets liquidated to recover a taxation debt of, by that time, approximately $160,000. It was a mix of GST, PAYE, penalty fees and penalty interest. A post-flood income and cashflow crisis throughout 2011 had meant there had barely been enough cash available to keep staff employed, let alone service the ATO debt.

The ATO’s position was that it was not confident of Acumen Media’s legal representative’s claim that the debt would be serviced by the impending publication of its 2011-12 Queensland Yearbook. Acumen Media’s solicitor’s request that an adjournment of the case be made for that publication to complete (and advertising funds to be collected) was rejected on the ATO’s advice.

The ATO’s position to the court was that it was ‘not confident’ any further delay in liquidating the company would stand a better chance of collecting the debt. There had already been several adjournments granted – which the Registrar noted were at the ATO’s request – and this latest request by the defendant’s legal representative was opposed. The Registrar took the ATO’s advice and nominated the pre-nominated liquidator, Bentleys. The order, and Acumen Media Pty Ltd, was summarily executed.

There were 40 small and medium businesses being considered in that morning session. Of those, 27 were earmarked to be liquidated by the ATO and just a couple of other petitioners.

A notable exception was the property company of the Gold Coast Titans, which fought well to escape a summary decision a week earlier to be wound up by the ATO, only to be in court that day again as creditor Reed Constructions took over the action. The matter went on to be considered in another court hearing that day: about a month later, Gold Coast Titans (Property) went into voluntary administration, but the club itself restructured and the up-and-coming team staved off liquidation with the backing of the NRL.

Editor and Acumen Media director Mike Sullivan was sitting in the court that day, watching this disastrous turn of events unfold. For the Business Acumen editor, this came in an excruciating way.

In his briefcase, at his feet, were two copies of that Yearbook, numbers 999 and 1000, produced on Acumen Media’s in-house digital press the previous day. Another 9000 copies of that edition were set to be printed and distributed over the following weeks.

Mr Sullivan realised, in a cold sweat, that he had made the disastrous and fundamental mistake of not representing the company himself. A former court rounds reporter, he later lamented that he should have simply asked the permission of the court, held up that magazine, and politely pointed out that the print and distribution process was well advanced and stood the best chance of a positive outcome for the ATO and all concerned. It may not have worked, given the ‘liquidation system’ was in play, but it should have been tried.

But he was tired. He froze. He described it as a “surreal” sensation. His every inclination had been to rise and ask the leave of the court to present an item of evidence to Acumen Media’s solicitor. But things were moving so fast and the people did not stop talking … the court was eager to get through the morning’s list.

Mr Sullivan later admitted his mind was blunted and exhausted after 18 intense months of fighting to keep the company alive. Acumen had endured a steady loss of clients, many of them with unpaid advertising bills, to liquidations and closures, along with the withdrawal of all advertising by its bank – accompanied by the same frantic tightening of bank credit and loan covenants that all Australian SMEs experienced from 2008 onwards.

At a crucial time in negotiations with the ATO he also had been personally beset with the deaths of two friends in November and December, 2011, both from brain tumours.

A month before that he thought the worst had passed when the ATO send a letter announcing that it had garnisheed Acumen’s Westpac trading accounts. This had come after an intense series of ATO requests, discussions and reports were made in order to assess Acumen Media’s ‘viability’ in the damaged trading environment that followed the January 2011 Queensland floods.

Mr Sullivan was relieved at the time, as the garnishee seemed to give permission to continue to bring the flood-affected Queensland Yearbook to publication, it was just that any money collected would be going direct to the ATO. He would have to find operational funds, mainly to pay staff. But at least Acumen could still trade.

It was a relief to have the liquidation threat sidelined, he thought … but it had not.

For whatever reason, the ATO did not take funds from the business accounts and the next contact was a summons announcing the winding up hearing in the Federal Magistrates Court.

Urgent phone contact took place, desperately seeking the case officer for the company. As frustrating as the phone chase was, stretched to hours in waiting time, there seemed to be an opportunity to complete the publication – although the ATO now wanted more company information, cashflow and budget projections so it could assess again if Acumen Media was viable.

At a time when all effort was directed to client contact and getting the stories, design and advertising material finalised to go to press, days were to be lost in meeting the ATO’s requests.

One hold-up was an assessment required from an accountant. Accounting figures were delayed past the nominated deadline by the unexpected business travel of Acumen Media’s accountant – a friend who was not charging to complete the task, understanding the situation and wanting to see Business Acumen survive.

Another black mark went against the company.

The first black mark had been for earlier budgets and accounts figures, such as the aged payables and receivables ledgers, which reached the ATO a day later than specified, mainly because of technical barriers in the ATO’s system at that time.

The Acumen Media team was astonished to learn that these items had to be either received by mail or faxed, by the deadline. They could not be e-mailed and Acumen Media was informed there was no e-mail address available to receive them. They had to be faxed, a process that took almost a complete business day of dialling, re-dialling and waiting for the ATO’s line to accept them. Those lines dropped out many times, usually with just the first page transmitted. What was not understood, when the 29 pages finally did go through, was that the nine final crucial pages had dropped off. They had apparently not transmitted, although there had been no warning.

In a letter, a week later, the ATO pointed out that all the information requested had not been received. This would accelerate the winding up.

BACK TO COURT

He’d had little sleep.

On March 23, 2012, Mr Sullivan had “stupidly been worried about having enough money for petrol and parking that day” to attend the court hearing. Money had been very tight for many long months. He had parked at a friend’s home at Spring Hill and walked down the hill to the Federal Court, rushing to make the start time. The Acumen Media case did not arise until the second hour of the hearings. The sweat formed cold on his back in the court room.

Just a day earlier, when he had been informed by the ATO’s lawyers that an expected further adjournment was not going to be granted, he had desperately called on a solicitor friend who had been helping him with other looming business debt issues that go, as any small business director knows, with this territory.

He had unfortunately not been available, but delegated another solicitor from his office who was briefed and fully expected to be able to buy time to complete the publication and settle the tax debt.

Mr Sullivan estimated to the solicitor that full publication of the Yearbook and collection of the proceeds would have settle the ATO debt within 4-6 weeks. Buying time to ‘get product out’ and recover debt obligations was the goal. This is precisely what Mr Sullivan and his accounting helpers had been putting to the ATO since the wind-up action surfaced in late 2011.

“It felt like a team sport contest in which the result was challenging, but within reach,” Mr Sullivan said of those weeks.

“We had a good team. We had a good track record of ‘helping’ business and the government, because our editorial stance was always a-political and to be ‘overwhelmingly positive about business’. Business Acumen could continue its role of helping to create business opportunities through publicity.  Our opposition on this occasion, the ATO, was tough but would surely play fair. The winner would always be Australia.”

It was a naïve and fatally misguided confidence.

Yet that attitude was what had probably sustained the Business Acumen team since the event that had triggered this company’s latest financial crisis: the Queensland floods of January 2011. Acumen Media’s offices at Kerry Rd, Archerfield, had not been inundated – but most of the Yearbook’s key client list throughout Queensland certainly had.

That was why the Yearbook became known as the 2011-12 Yearbook … the aftermath of the floods had prevented publication of the 2011 Yearbook. Most of the paying clients in that publication were regional council economic development organisations using the Yearbook, which was distributed nationally and internationally, to outline their competitive advantages, to draw business and investment to their regions.

Most of those regions were now deeply in crisis and could not afford to publish. They invariably asked not to feature until the crisis had been sorted out. It was to take more than 12 months.

Another major advertiser and long-term sponsor of the Yearbook, one of the big four banks, pulled out at a very late stage, without explanation and in breach of its contract commitment. Enquiry revealed a change of bank staff had prompted a change of priorities.

RESCUE ACTION

When, on the afternoon of March 23, Mr Sullivan called around to the office of the appointed liquidators, Bentleys in the Brisbane CBD, the first commiserative words uttered to him were,  “Well, we didn’t expect to see you here today …”

The ironies stacked up. On page three of the latest regular edition of Business Acumen had been a story on Bentleys’ capital raising support for innovative early stage companies. Acumen Media’s liquidators were aware of the coverage and thankful. They shook their heads in disbelief as its editor dropped a copy of the freshly printed Yearbook on the table, 9000 copies short of solving the problem.

The three Bentleys men assigned to the liquidation interview began to discuss a way forward. There might be a way that Mr Sullivan could complete the Yearbook publication, collect the money to get the best outcome for the ATO and then get permission to continue publishing the magazine into the future. This had, in fact, already been quietly suggested by Gadens Lawyers after the court case, prefaced by the optimistic suggestion, “Look, it’s not the end of the world … ”

Not yet it wasn’t.

Over the following two weeks, as Mr Sullivan began writing the detailed eulogy for Acumen Media in the form of the required financial, legal and property records – gathering everything of “value” for the liquidators – he began to understand that his own legally-required actions were driving more nails into the coffin, not resuscitating the business.

For a start, access was removed to all bank accounts and the liquidator controlled them. This allowed them to collect more than $20,000 in past advertising payments that subsequently came in, which were to eventually be divided up as the court-deemed payment to the ATO of $5087.50 and $15,000 retained by the liquidator as fees. In the liquidator’s final report, it would be pointed out that this sum was less than half what the actual costed $33,000 fee should have been for a liquidation of this nature.

With no income and no bank accounts, there was now the desperate dilemma of how to pay staff members and, indeed, operate. With the Yearbook rescue and resuscitation looming as a mountain in the background, the landslides of liquidation began to impact proper.

Clients and suppliers were notified by the liquidator, as is part of the process, from the supplied MYOB file lists. A notice was posted in the daily newspaper. This induced a rolling period of explanations and mild panic as the contagion spread and even suppliers not owed money cut off any potential service. Most were commiserative, but wary.

The most devastating of these losses was Lanier, a marketing partner and supplier of Acumen’s digital press – and a vital cog in the printing of the Yearbook and any future editions. In fear of having the liquidators resume their machines, they urgently and rightly sent in a team to dismantle and take them away.

The Acumen Media land lines and VoIP phones were summarily cut off. All mobile phones, with another telco, were also cut off and numbers lost. The landlord was notified and made moves to change the locks on the building, but understood the situation once explained and was thankfully persuaded to hold off.

All the while, discussions ensued with Bentleys about a purchase of the rights from Acumen Media (in liquidation) to publish Business Acumen on the basis that a majority of proceeds would be passed back to the ATO. That was the desired outcome. Bentleys was bound to proceed with the liquidation process, to the letter of the law. On that basis, a request to use the funds that had come in to the Acumen Media account, to finalise the printing of the Yearbook, and bring in its advertising income, could not be granted.

But there was still hope.

Budgets presented to the liquidator were seen as viable, but all had the same hurdle: no funds could be clawed back, another company had to purchase the rights and that company also had to have enough money in hand to pay staff and pay for printing and distribution.

A couple of false starts ensued in the coming months as potential buyers and collaborators tried to fashion deals that worked for them. But all were hampered by the fact that Business Acumen was not being published and the confusion of the liquidation required a re-building of confidence among advertisers before, realistically, any payments would be realised.

The fight was steadily lost. Business Acumen staff had valiantly tried to hang on, without pay and in their spare time, to be ready for the re-birth, but to no avail.

In the wake of the company liquidation, print company Geon Group successfully petitioned the Federal Magistrates Court in Sydney to declare director Michael Sullivan personally bankrupt, seeking payment of a $37,000 residual debt, plus almost $20,000 in costs and interest.

Little if any of that claim was realised by Geon Group as Mr Sullivan’s mortgage-secured business banker, NAB, had soaked up a large part of the equity in his family home through a long period of charging fees and penalty interest compounding on a rolling bill approaching 19 percent per annum. Less than 12 months later, Geon would itself go into administration and then liquidation, owing creditors more than $29 million.

Through a quirk of the way it had been established, the ownership of the Business Acumen website and e-newsletter system was outside the scope of the liquidation and so, off his own bat and without income, Mike Sullivan kept populating the site with news in the hope of an eventual rejuvenation.

This finally came on December 17, 2012 when Screamer Media Pty Ltd purchased “such rights and title as Acumen Media Pty Ltd (in Liquidation) own in the publications and titles” from Bentleys.

The edition you are reading is the second print edition of Business Acumen published by Screamer Media Pty Ltd and printed on its in-house digital press.

Business Acumen now circulates nationally and has an innovative digital print and online information mix that gives subscribers access to extended and prior information not available to the general public.

The 2011-12 Business Acumen Queensland Yearbook has been published as a digital magazine only, available to all readers as a free download from the website.

www.businessacumen.biz

ends

 POSTED JULY 23. 2014.