September/October 2021 - Bay of Plenty Business News

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12 BAY OF PLENTY BUSINESS NEWS September/October 2021 What you need to know about the Clean Car Program Some 27 years ago I walked into an office for my first accounting job and a couple of weeks later I was hooked. I loved everything about it: the numbers, the challenge, and especially the people. That was back in Russia (my home country) – today I live in beautiful Tauranga and have done for almost 20 years. After so many years of working with business owners, I have noticed how hardworking and determined business owners are; I see my job as helping business owners to see the bigger picture. We often discuss business strategy, goals, and aspirations. I cannot stress enough how important it is to read and understand your business numbers. Your cash flow can often tell us if you are winning or losing. To put it simply, I aspire to be your trusted adviser, who is looking out for you, assisting you in any way possible. Sometimes I am your critic, but mostly, I am your biggest cheerleader. Clean Car Program You may have heard about the Government’s Clean Car Program which is part of our government’s response following the Climate Change Commission issuing its recommendation in May 2021. The Commission was formed in May 2018 and provides independent, evidence-based advice to government on climate issues. Following the recommendation, on 13 June 2021, James Shaw and Michael Woods announced the Clean Car package. In essence, if you purchase a new or imported second hand electric or plug-in hybrid vehicle you will be given a cash rebate of up to $8,625 for a new fully electric vehicle and $3,450 for a used vehicle. For a new plug-in hybrid you will be given a rebate of If you purchase a new or imported second hand electric or plug-in hybrid vehicle you will be given a cash rebate of up to $8,625 for a new fully electric vehicle and $3,450 for a used vehicle.” $5,750 and $2,300 for used import. Current approved rebates are applicable from 1 July 2021 to 31 December 2021 and will be reviewed every year. The rebates will also expand from 1 January 2022 to include low emission vehicles, like the Suzuki Swift and Honda Jazz. To claim a rebate, you will need to apply via the NZTA website and provide a copy of the vehicle offer and sale agreement, proof of the registered person’s bank account, and your GST number (if the vehicle is being used for business purposes). What about the fees? The most popular question is about the fees – when, and how much will I be charged if I purchase a petrol vehicle after 1 January 2022? TAXATION > BY VALERIE ROWE-MITCHELL Accounting and other money matters with Valerie Rowe-Mitchell, owner of Emerald Business Advisers. Valerie can be reached on 07 579 5777 or valerie@emeraldbusiness.co.nz Fees will be charged on higher emitting vehicles and will start from 1 January 2022 when they are first registered in New Zealand. For example, the fee for a Ford Ranger will be in the region of $2,780. A Toyota Hilux will attract a fee of $2,900. I assume the fee will be paid by the dealer if they are registering a vehicle and most likely be passed on to the buyer, or the fee will be charged to an individual who is registering the vehicle in New Zealand for the first time. Will there be any exemptions? Yes, agricultural vehicles for farms, such as tractors, harvesters, mowers, toppers, bailers; military vehicles; special interest vehicles; vintage and veteran vehicles; scratch- built vehicles and modified vehicles certified by the Low Volume Vehicle Technical Association Incorporated will be exempt from the Clean Car Program. Check out https://www. nzta.govt.nz/vehicles/cleancar-programme/ for more info. Feel free to get in touch, I would love to hear from you. Stressed sector working hard for New Zealand A new survey commissioned by Registered Master Builders for its annual Constructive Forum highlights key issues facing the building and construction sector: • 95% of respondents reported issues with increased costs, delays, customer complaints and product substitutions due to a lack of available building materials. • 88% reported that stress and mental wellbeing was a significant issue • 70% of respondents say it’s harder to get the staff they need now than it was 12 months ago The Registered Master Builders Association’s annual State of the Sector Survey has revealed that while the building and construction sector is optimistic about its business prospects and the economy, reflecting the current boom, it is facing huge constraints and challenges. Released at this year’s Constructive Forum, the survey identifies the biggest challenges and opportunities facing the building and construction sector. Over 300 industry leaders from across the sector responded to questions about the economy, critical issues the sector is facing, and their outlook for the sector. Master Builders Chief Executive David Kelly said that respondents were asked to rank the most critical issues impacting their businesses in 2021. “The three most important issues were: the supply chain disruption, product availability and increasing product substitution; the rising costs of construction; and, acute skilled labour shortages. The sector is stretched to breaking point, largely due to factors outside its control.” These issues are imposing significant stress on builders, with 88% reporting that stress and mental wellbeing was a significant issue for them. David Kelly expressed his concern, “It is worrying but not surprising that our workforce is feeling under stress. If every one of our members’ building projects is delayed by even one week, collectively our members and homeowners are incurring almost $100 million per annum in lost profits and extra costs. After all, they live in the communities where they work so they’re at the front line delivering the homes that New Zealanders desperately need.” “They like the rest of the community also have to navigate the stresses of Covid. And they have the added uncertainty, even in boom times, that it can’t last, and the industry does suffer hugely when it changes.” The survey also found that finding skilled staff is an acute problem for the sector. Almost 70% of respondents say it’s harder to get the staff they need now than it was 12 months ago, with 37% say that it is substantially harder. “Finding skilled staff has been in the top three issues since we began the survey in 2018. The sector is crying out for experienced people across a range of specialist areas. Uncertainty around immigration settings only exacerbates this situation,” stated David Kelly “This is also more complex than many people realise. While training is an important piece of the puzzle – it will not solve the problems we have today. We need experienced skilled workers, and they are competing for those people with other countries and sectors. “The Government’s apprentice boost scheme has been appreciated, apprentice numbers are at an all time high and we are pleased to see more employers commit to training. This is a vital part of the puzzle to ensure we have the skilled workers we need in the future, but it is not the complete answer today.” Supply chain disruptions and consenting issues were also highlighted as barriers to building. Cost escalation, building delays, and customer complaints were reported by 95% of respondents. Consenting delays are also a huge problem according to David Kelly, “More than half of our respondents are experiencing delays of longer than three weeks for consents, more than five days for inspections and three to four weeks longer for code of compliance. These delays affect both builder and customer.” “If every one of our members’ building projects is delayed by even one week, collectively our members and homeowners are incurring almost $100 million per annum in lost profits and extra costs. This is a phenomenal number, especially when you consider that just a one week delay is very conservative. This is a key part of our productivity conundrum and will be a key focus for the Forum this year.” The annual Constructive Forum is an industry led effort to enhance collaboration, build resilience, and ensure a vibrant and sustainable sector that delivers for New Zealand. Its purpose is to bring the entire supply chain together, from Government, finance, land, design and build, and key enabling sectors such as research, training, and regulation to work together and identify ways to lift performance in the sector.
September/October 2021 BAY OF PLENTY BUSINESS NEWS 13 The less appreciated approach to making money in franchising Franchisee entrepreneurs are attracted to buying a franchise business for a variety of reasons including brand passion or wanting the support and guidance of an established business system. Universally, people invest time and effort into a business with an expectation of a financial return. The conventional approach has broadly been one of two options depending on the individual’s risk profile, experience, and capacity to build and develop a business. The first, invest into a new or greenfield opportunity – grow the business and hopefully enjoy both positive cash flows generated by a profitable business, and capital gains over time by increasing the value of goodwill. By and large franchises grow their footprints on this platform with franchisee entrepreneurs. The second approach is to purchase an established well-performing business with a proven trading history. This tends to attract franchisee entrepreneurs with a lower risk profile. They have the benefit of being able to see the history and performance of the business, and in many cases it can be an easier operational path to follow. They are of course making an assumption, and assuming an associated risk, that they will be able to maintain the performance of the business, continue to enjoy the benefits of the business’ profitability and protect the goodwill component. The less-appreciated approach There is a third and very neglected option for franchisee entrepreneurs, and one that I would suggest provides a number of potential upsides versus the two traditional approaches – this is to purchase an underperforming or even unprofitable franchise business. This sounds like it flies in the face of the universal objective of generating financial returns, but first we need to look at where and how financial return is generated. What’s driving performance and can it be altered? The incomparable advantage of buying into a franchise system is the ability to see and use benchmarking information. Independent businesses may have industry benchmarking, but a good franchise system will have not only an abundance of benchmarking information but more importantly, an understanding of what and how these outcomes or measures can and are influenced. When looking at an underperforming business, the potential franchise purchaser needs to ask the questions: is it a good system, how does this business unit perform against others, what key performance indicators are out of kilter, and can I influence these? Is it sales, a goods management or cost of goods issue, or is it wages or perhaps fixed costs that can be improved? The franchisee factor cannot be underestimated and if the purchaser is able to align the performance of the businesses KPIs to the systems benchmarking, just a small number of factors could move the needle of profitability from red to black. Altering return on investment ratios For a vast majority of businesses, once established, their value is a function of their profitability or goodwill. Unfortunately, an underperforming business will often sell for less than its asset value. FRANCHISING > BY NATHAN BONNEY Nathan Bonney is a director of Iridium Partners. He can be reached at nathan@iridium.net.nz or 0275-393-022 This creates two opportunities for the purchaser; firstly, they can acquire the business for less than what it would cost to establish it. There are additional potential cash flow and establishment cost savings. Perhaps more substantial is the franchisee’s ability to improve goodwill and the relationship this will have on business value. Improved profitability creates goodwill which can create an opportunity for capital gains, for some business this can be substantial and create super return to investment ratios. Made all the more attractive as in most cases there would be no capital gains tax if or when the business is sold. Against this backdrop, I am not surprised that certain franchise systems have franchisees that are known as turnaround specialists who have bought and sold several businesses improving them along the way. As greenfield opportunities shrink in some established systems and as well-established profitable business opportunities decline or command higher prices, I would not be surprised to see an increase in the skilled and less risk adverse franchisee entrepreneurs backing themselves and successful brands to take advantage or franchised turnaround opportunities. ADVERTORIAL Spreadsheets – your Hidden Hazard? The integrity of your incident management process begins with a robust source of information; if you rely on spreadsheets to inform your business response you could be adding risk and cost. By ANDREW TAYLOR There’s reason for the wide-spread dependency on tools like Microsoft Excel. Being a universally recognised application, it is accessible to most users in any sized organisation, has excellent functionality and, importantly, it is inexpensive. However, the perceived low cost operationally of using spreadsheets to manage company-wide quality processes turns quickly into high overheads when Excel is applied outside of its capabilities. Spreadsheet hazards If you recognise some of Andrew Taylor, CEO Integral andrew@integral.co.nz these painful spreadsheet moments, you are not alone; ambiguity with the master document, left wondering what the current version is; multiple editors whose individual habits differ in their quality of formula creation; inaccuracy from manual entry and rekeying; broken spreadsheets as links and complex file structures fail. Time spent re-learning or modifying spreadsheets when someone leaves is not often measured but builds up fast. As there is no automatic or standard approach in Excel for debugging, mistakes can remain hidden. Spreadsheets do have their proper place in business management because of all the reasons they’ve become such a pervasive tool – accessibility, user familiarity, functionality for displaying, analysing, and conveying data. But being reliant on multiple spreadsheets as the source for timely, accurate information carries a load of risk that leaves you vulnerable, without the ability to audit the process efficiently. Incident Management When the pressure is on, as it is in incident management – complaints, audits, Health & Safety or repairs & maintenance – you need assurance the source of your information is accurate, and the reports get generated fast. When faced with an incident, if not using spreadsheets for converging all the critical details, then what are the affordable tools for tracking, response, and control? ICRA FREE TRIAL We invite you to get in touch with us to set up a free 14-day trial with no commitment to buy. You’ll see the full functionality of ICRA with your data and discuss your business context with us. Terms and conditions apply. Integral’s compliance register application, ICRA, gives the ability to have that one source of truth. Schedule and monitor workflow by company, site and team members via dashboards and emails. Trace issues by category, product and production batch. Attach documents, photos, investigation and close out details to incident. There’s potential to integrate with ERP, Production, CRM and other applications. You’ll have peace of mind that the spreadsheet data that falls out is reliable leading to sound decisions. At Integral we are intent on delivering businesses control, simplifying information management and data integration. We can show you how taking your current spreadsheets and loading them into cloud-based applications will smooth business process and take a load off your mind. Connect with Integral 0800 002 555 Visit icra.integral.co.nz Email icra@integral.co.nz Streamline the process, deliver control. ShareIT Share Register Admin Management ICRA Compliance Register Application Atlas Forestry Product Suite Software Development | System Integration | Cloud Computing | Ready-to-go Applications | 30 Years’ Experience Connect with us: Connect with us: integral.co.nz integral.co.nz info@integral.co info@integral.co.nz 0800 002 555 0800 002 555 Rotorua Rotorua • • Auckland • • Napier Rotorua • Auckland • Na
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