Green shoots are showing and business confidence is starting to re-emerge, but capital is still thin on the ground and experts continue to warn against over-confidence. Christine Retschlag examines ways your business can survive a growing economy.
The industry is abuzz with talk of a post-recession recovery. strong companies sprouting fresh shoots, and weaker businesses undergoing a much-needed cull.
But commentators are cautioning big and small business against hasty expansion, warning it would be foolish to replace workplace fear with corporate greed, despite positive economic signals.
And employees, who have been burning the midnight oil to appease the boss, are now beginning to experience itchy feet and look around amid early signals of upward pressure on wages.
KPMG demographer Bernard Salt believes, while there is much positive commentary about the economy and the fact the “worst is over”, it has not yet converted to action.
“Consulting is still depressed, largely I think because, despite all the positive talk, there’s not enough confidence – or I suspect access to finance – to initiate large projects,” he says.
“When action meets rhetoric, that’s the time that the recovery begins for the property industry. I am sure that business will proceed with caution even when the recovery is clearly underway for the property industry.
“A lot of people have been burnt by the GFC, so growth in the years ahead will be modest and cautious. If you look at the late 1990s, there was a lull between the depths of the recession (1992) and the next up tick (probably from 1997 onwards). If this model holds, then it will be 2014 before there’s confident expansion.”
Salt says there is no universal approach to how businesses can manage the upward swing.
“We live in difficult times and there are few businesses out there that are not focused on costs. And in some respects, it’s not such a bad thing,” he says.
“A boom breeds lazy behaviour, business gets slack and, frankly, bloated. A recession pares everything and everyone back to true value.
“It can be positive in the sense that all those wannabe competitors who thought they could take you on in the boom are now exposed as second rate and simply fail.
“The GFC is like a bushfire, it singes off the undergrowth allowing the best and brightest to grow into clear space/markets.”
Salt says if Australia is going to grow at record rates, businesses should focus on a range of property types in a range of locations, while in terms of the human cost, employees who have had their hours slashed should be re-engaged.
“Expand cautiously, employing people on your terms and with a specific brief and with specific KPIs,” he says.
“Don’t get sloppy just because business is on the uptake.
“And don’t be surprised if you see a more demure Gen Y after the GFC. They are smart enough to know that the world has changed.”
CommSec chief equities economist Craig James warns big and small businesses should not expect to “hear any bells ringing” to indicate the end of the recession, but rather, should stay educated on the signs of a recovery.
“In a broad sense they should be reading the newspapers, looking at the media and getting a sense of the economic indicators. If you keep on top of that, you will get an idea of what is changing and turning,” he says.
“It is about being in touch with your own local domain as well and talking with your customers and suppliers and keeping on top of things.
“The indications that we are getting from the HR industry is that the market has already turned and employees who have been sitting quietly in their seats are getting ready and looking for opportunities in the market.
“We are seeing that in our industry … the ability to attract good analysts. We are already seeing some upward pressure on wages.”
James says any expansionary moves should be cautious and that business owners should remain “impassioned”.
“It is a case of always paying attention to the detail – your creditors, debtors and stock turnover,” he says. “These are the fundamental aspects that people should always be focused on whether it is good times or bad.
“People shouldn’t lose sight of the business basics, at the same time looking for the most cost efficient ways of working such as social media. It is a case of treading fairly carefully.”
Staff strategies
Recruiting commentator Tim James, senior regional director of Hays Property, says caution remains, but confidence is returning.
“Employers are recruiting staff to drive revenue, minimise risk and improve processes as well as rebuilding teams which have been coping with an increased workload due to past redundancies. Headcount approval is attained more easily and some headcount freezes are lifting,” he says.
“The use of short-term and long-term temporary staff can help a business prepare for new projects or clear backlogs in work. The use of temporary recruitment allows employers to move cautiously back to their previous staffing levels.
“The recruitment of permanent staff will usually commence with business-critical roles or in cases where very specific skills are required for business growth.
“The significant increase in the number of restructures will also lead to recruitment needs as new roles are created in affected terms. For example, restructures have created senior vacancies for financial directors, financial controllers and finance managers.”
Where is the money?
Bill Morris, from the Midwood Queensland Investment Report, warns the expansion in the property industry cannot begin in earnest until sufficient capital becomes available for lending.
“This situation is stifling property development more than any other contributing factor. The best measure of the availability of capital is Private Gross Capital Formation (PGCF), which includes capital required in all business sectors, of which approximately 25 percent of the total is for land and housing development,” he says.
“Businesses which depend heavily on the property sector should recognise that Australia is in the middle of a severe credit squeeze, despite talk of a ‘recovery’. We have not experienced a true credit squeeze in Australia since 1961, and therefore most people, except the elderly, have never experienced a credit squeeze.
“Businesses involved in property development should be looking to raise a higher proportion of funding through equity capital rather than debt. This can be achieved either by using conventional unlisted property trusts for multiple projects, or investment syndicates designed to finance specific projects.”
Morris forecasts three to four years before recruitment in the property sector returns to a level that satisfies underlying demand.
Ernst & Young partner/real estate leader Stephen Chubb believes the time to expand is now, citing interest rate rises as the most important economic signal.
“There are signs of increased activity in real estate, particularly in the residential sector. The high Australian dollar does not seem to have deterred the increased interest in Australian real estate from offshore investors,” he says.
“For most companies, access to cash remains the key to expansion, whether capital or debt. One of the key lessons from the recent downturn was to manage cash appropriately.
“Another key lesson was to ensure a broader perspective on financing risk is undertaken to encompass timing risk, currency risk, liquidity risk and concentration risk.”
Top 10 survival tips
- Proceed with caution – focus on key performance indicators
- Don’t replace recessionary fear with boom-time greed
- Re-employ those whose hours have been slashed
- Retain staff who have supported you through the tough times
- Use short-term and long-term temporary staff to prepare for new projects or clear work backlogs
- Select and secure the best permanent staff before competition for skills rises further
- Businesses involved in property development should be looking to raise a higher proportion of funding through equity capital rather than debt
- Stick to business basics but recognise not one solution fits all
- Look at cost-efficient ways to expand and attract new customers such as social media sites like Facebook
- Listen to your customers and suppliers – keep your ear to the ground
AIBS National News Feed
Comments
Post has no comments.