John Linton
.....according to a "vital information for small businesses" pamphlet from a major bank I glanced at over what passes for breakfast this morning. Thank you for the reminder - I never would have thought of that.
I suppose it's nice that the banks still have money to waste on this sort of nonsense seeing they are all in such financial distress - this one particularly - Citi Group who at the same time I was reading their advice to "small businesses" was announcing on the FOX business news that they were laying off 52,000 of their staff and cutting their expenditure by 20% in 2009 after getting a major whack of the US Government's bank bail out money. Not sure I want to seriously consider advice from 'financial experts' with 'credentials' like those guys.
Any small business is more than aware that cash flow is the vital part of staying in business and if they don't know that they aren't in business - they didn't pay their first month's bills. I guess the genii who operated Citi Group should have taken their own advice - apparently they didn't see a "down turn in the business cycle" (their CEO's words in his staff cutting announcement this morning) despite the world's stock markets being constantly mauled by the 'bears' for the last 12 months and their company's loan defaults increasing each month for the same period.
(Maybe I should run a major bank on the basis that ever since the Dudd was elected I have been saying that business 'feels bad' and have been taking very cautious actions ever since that time - in terms of 'conserving our cash flow' and not committing Exetel to any borrowings - it would have been hard to do any worse than the people in charge over the past 18 months).
When I think back to the time that I began to suspect something was 'not right', about the time Krudd was elected and he started making his ridiculous statements about how Australia would proceed under his 'visions' (I always thought visions were what teenage girls suffered from in semi-religious societies or what you got from chasing the dragon?), I am very grateful that we pulled back from borrowing large sums of money to deploy 120 ADSL2 DSLAMs and buy a 450 square meter floor in a Sydney CBD office building. We did proceed with the completion of the Inter-State deployment of our own PoPs and a, for us, significant investment in setting up the company in Sri Lanka - but they were cash investments with no loan/lease implications in to the future - they were, as always at Exetel, funded out of monthly profits.
Perhaps more by good luck than good judgment Exetel has actually improved most of its financial ratios over the past 12 months:
Total Employees to annual revenue now 1:$A1,200,000 (from 1: $A1,100,00)
Total Employees to customers now 1: 2,250 (from 1:2,100)
Salary dollars to customers $2.00 per customer (from $2.50 per customer)
which, as far as I can gather from what I read about business ratios in our sort of business, makes us more efficient than all of the US and European, and even the Japanese commercial 'super stars' - though I wouldn't put much credence on some of what is currenty being reported.
It's really good to be able to 'rattle off' such encouraging numbers but the cold, hard reality of today's business environment and its very unclear futures is that no-one can be sure about what's going to happen so the only real strategy, for conservative people like those who run Exetel and who are using their own 'capital', is to ensure that all expenditures are reduced to very lowest levels they can be and any 'spare' cash that the company generates is 'hoarded' and not spent.
Inevitably that meant, for us, increasing our prices and in theory doubling or perhaps even trebling our small monthly profits if the various unknown future situations turn out on the neutral to good side rather than on the bad to terrible side. If they don't turn out as bad as they could do then we will have built up a small cash reserve for the first time in Exetel's "life". If they turn out negatively then we have a better chance of surviving intact than we would have done had we not taken the precautions we have put in place. Whatever happens I don't see Exetel having to fire 20% of its personnel (or any for that matter) but I'm pretty sure that will not be the case with more than one or two of the companies with which we compete - not to mention Australian companies generally.
Among the thoughts that went through what remains of my mind reading the Citi Group pamphlet this morning was the definition of a 'small business'. I seem to get continual comments that I shouldn't describe Exetel as a small business by a surprisingly wide range of people from our banks, accountants, lawyers, suppliers, agents and more than a few customers. To me Exetel is clearly a small business because it is characterised by:
1) It's the smallest, by a long way, among the companies it competes with for business.
2) The top 5 communications providers are all over a market capitalisation of $A1 billion with Telstra being over $A50 billion
3) Exetel's long term and short term decision making and operational management is done by 2 or 3 people.
4) All hiring is decided by one or two people
5) The 'top' management of Exetel is still 'intimately' involved in two way communication with its customers on basic details
In almost every other respect Exetel is operated as a 'small business' - in many ways it's operated as a very small business so there is no basis on which Exetel could be described as anything but as a 'small business'.
Irrespective of how Exetel is defined by any particular person and irrespective of how unqualified Citi Group is to 'lecture "small business" on the virtues of cash flow management I have never lost sight of the key business control objective of managing Exetel's cash as if it was my last cent - probably because it is.