2020: A Year of Reality; or Just Clearer Vision?

We have now had the better part of 30 years consistent growth, with a burgeoning economy, steady employment (kept at around 5% unemployment, even if we change the measurement to do so) and confidence in the future. Well, in many parts at least. Even the 2007/2008 Global Financial Crisis (GFC) was no more than a speed bump for the bulldozer that has been the Australian economy.

One of the key drivers of this achievement has been the incessant drive of market commentators and politicians in particular, to focus on nothing but the positive. Now, I’m not saying that this is a bad thing but one can be allowed some degree of scepticism when the same merely ignore or demean any form of negative indicator or concern. Those in the real world know that it is made up of swings and roundabouts, the good and the bad, the ups and downs, and I can go on! One focuses on the positives of the future (and of life overall) to get around the downs of today; a very healthy and balanced perspective to have.  

Nonetheless, as we opened into this year, one can be forgiven for feeling as though you have been thoroughly smashed! It began with the ongoing drought, then a heatwave, which then confined many by fires and smoke, then to floods and splashed over the top was the coronavirus. All have had significant financial impacts on a number of industries, and these impacts will continue for some time. In fact, some will still create impacts that we are, regrettably yet to experience.

The retail space has now faced failure after failure consistently from late 2019 and the commentary is that there are more to follow. At least one of these has declared that it has faced losses continuously over the last three years even with auditors looking on. The impact of the internet has now been known for some time yet no one has properly faced the combined impacts of high rents, high franchise fees, expensive licencing fees for brand names and the increasing expectation that fewer staff can do more on lesser pay.

I have spoken before about the need for attention to detail as we have watched for years as managers have increasingly at all levels said – “just give me the big picture” – and left the detail to someone else, commonly actually to no one. The realities of this are climbing to exponential proportions as business after business, and not SME’s, report wage shortfall after wage shortfall.  Many have even blamed foreign IT systems that cannot cope with Australia’s employment; all I can say to that is that it is a derisory put down on the capacity of Australia’s IT industry that I’m confident is not deserved. However, the lever is suddenly being pulled into reverse as bundy clocks and timesheets are suddenly back in vogue; a long way from the table tennis tables, relaxation cafes and video games being espoused by others. 

After all of this, we then wake up to find that the decision has been made overseas to shelve an iconic Australian brand in ‘Holden’ notwithstanding the significant investment thrown at it by the Australian taxpayers. In fact as an aside, there is a salutary lesson in this for business owners.

There is a time for charity and there is time for assistance. If you are ever asked to assist something, it is always better to assist with value rather than a hand out; it focuses the recipient’s attention on what they are doing. By way of example, had the Government acquired the plant and premises and offered them back for a decade at a peppercorn rent, and then later the  decision is ultimately made to close down then Government would have had something to show for its money in the end. The alternate would have been that had the offer forced the decision then at the time of the offer, then the valuable government resources could have been diverted at that time to a more sustainable long term solution. As business owners, we have all seen our fair share of the ‘fair weather friends’ that move on when the freebies dry up. To put a more recent focus on it, whilst GM was gifted $2.6 billion, the SME’s suffering under this year’s environmental onslaught is being offered interest free loans. No charity here.

So what else does 2020 have in store for us? So far, the above represents the first six weeks; there are 46 to go! Are we like ‘Wile E. Coyote’ having just run off the edge of the precipice and about to look down only to realise the ‘reality’ or are we simply running at peak efficiency? One thing is for sure, those that are only prepared and organised for fair weather sailing are quite likely to have an uncomfortable year.

So is it merely more clarity that we are experiencing, or are we about to truly confront a reality? That is an excellent question. The only practical answer is to ensure that our plans cover a wide birth of contingency, as the financial flow on effects will be increasingly felt as they are passed further out through the economy. For some, this may mean knowing exactly when to stop so that they do not waste the hard earned capital that has taken years to create. For others, it will be carefully managing a plan that has real and substantial light at the end of the tunnel. 

One thing though, maybe it’s time to focus on keeping the system alive rather than merely how much more of it I can stash into my own back pocket; who knows, it might just go round and come back one day and be that dollar that saves you!

Enjoy the read.