Saturday, April 11. 2009The Answer May Well Be "Blowin' In The Wind"......John Linton .......but not, at least as far as I can see, the winds that blow over Hunter Bay where I do most of my thinking. The first signs of 'trouble' in the very low end of the Australian communications market have become evident over the last two weeks although Exetel for the same reasons has had the best start to a month since we commenced in business in terms of new and churn orders received. That is because two different types of communications companies have either gone out of business or their "up stream" reseller has gone out of business and they have begun to switch their SHDSL and a small number of ADSL customers to Exetel - pleasing for our figures but worrying that it should be happening before there is any sign of Australia being affected in any way that I can detrmine. There has also been a new 'stream of enquiries' from 'brokers' and two very small ISPs asking for our interest in 'acquiring' other companies and ADSL1 and ADSL2 "user bases" - 4 in the four woring days of last week and three in the week before plus two emails today. We have also been approached by a 'broker' "on behalf of a major communications provider" on our interest in selling Exetel for a commercially sensible price. There was also a 'general approach' by one of our larger providers offering a 'third party's' services if any of their wholesale customers wished to discretelylook for a potential buyer of their company or if they wished to buy another wholesale customer of this particular carrier. Again, there was another large supplier to Exetel making discrete enquiries of whether I had heard any 'industry rumours' about one of their customers who had now gone pas their 'normal' 90 days payment patterns. 90 Days??!!! I have serious problems envisaging major carriers that allow trading on those terms which are pretty obviously 100% indications of insolvency. I don't regard any of these 'straws in the wind' as indicating any real problems in the overall Australian communications industry - the large carriers all remain very profitable (and charging the prices they do why would that ever change?) and the medium sized providers all give every indication that they might not be doing as wel as they once were but have no financial issues. So these small to minute companies would be unknown to anyone but their customers and their creditors and, perhaps, their bank contacts who bounce their cheques....certainly I had never heard of the two small companies who asked Exetel to take over providing to their customers and I have a reasonable knowledge of this industry. Perhaps because I have not been very well lately it did cause me to reflect on the stupidity of attempting to start up and then keep operating a small/tiny/minute communications company in Australia and just how incredibly difficult it has been for us to keep Exetel 'alive' in what were in reflection much easier times than exist today. This was made indelibly clear to me yesterday when I was told that another wholesale buyer of one of our largest providers sells 20 times more ADSL2 connections a day than Exetel does....with the humiliating follow up line "why doesn't Exetel become more like them and do what they do?" I will consider the implications of those two remarks (which I have to admit 'jolted' me severely) in the context of the other recent 'straws in the wind' over the balance of this long week end. Is there really, in fact, any point in operating a small communications company in Australia? The conventional answer is of course - no. The only reason you operate a small company is that it is just a step on the way to becoming much bigger and then even bigger and then......so is there any point in continuing to operate a company that has no plans to meet that criterion? I, personally, have had absolutely no interest in growing Exetel to any particular size (certainly to nothing that could ever be described as other than small) with my only interest in growth per se being to buy at better volumes (so we can sell at lower end user prices) and to ensure that each aspect of the business did not incur a loss by having too few customers/profits to cover the minimum capital investment and monthly operating costs of any particular location/product type. As I do much of the financial planning I have never put any figures down that didn't reflect month on month growth but that growth was and is always gradual and takes in to consideration the implications of larger customer bases and larger infrastructure costs as well as th whole raft of major problems of acquiring the management skills and capabilities needed for a larger company (of which I have been forcefully reminded over the past day or so). I was alway of the opinion that Exetel would need, eventually, to reach a size of around $A10 million revenue (with the revenue split over at leat 4 - 5 different 'streams' for the sake of 'prudence' - who is a very demanding female in business) a month to be able to make any real progress and that level of operation is still in the far distant future future and perhaps is in the too far distant future. We had hoped/planned to make signficant progress this calendar year and, while that still may eventuate, it is looking more difficult. If the price of becoming a "good sized customer" is becoming like (and therefore acting like) the example recently cited I don't think I'm 'up to the job' but then perhaps that's really Exetel's problem - I am not the right person to play a role in operating a communications company in Australia in 2009. While not becoming a "good sized customer" of ANY supplier has ever played any part in ANY planning or thinking I've ever done I do see that being even smaller than Exetel has certainly disadvantaged the small communications companies I referenced at the startof these meandering thoughts and Exetel's current small size definitiely disadvantages us (and therefore our customers) in our abilities to deal with at least some of our suppliers - it obviously also prevents us from getting 90 day payment terms which in turn obviously restricts us from doing what such fortunate wholesale customers are able to spend - they use their wholesale supplier's money rather than their own! I guess that's why so many of them go broke? So much food for thought....not very tasty food - it certainly has a bitter taste....but food never the less. Trackbacks
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to the small companies looking for a buyer, let them go broke and you'll pick up a percentage of those customers for free anyway so why pay money to get them
to the wholesaler that tells you their other client does 20 times more connects than you do, what story do they spin to that customer about you, I think business ethics isn't a strong point of any supplier that wants to volunteer that kind of information about their other customers, if it is actually true at all Comment (1)
John
Your blogs are always interesting. Perhaps the NBN will be like the rail construction of the 19th century - lots of constructors going bust but ultimately underpinning the next economic surge. I also note that electrification was initially used to replace steam power. It took a generation for the control aspects of electricity to be utilised. Perhaps the internet is similar Cheers Rusty Comment (1)
Likening building a communications network to enhance an existing network that is already in the process of being enhanced to some 19th or early 20th century technology change is not apposite.
While I agre that any investent in long term inrastructure by any country is, in most cases, useful, we don't need this particular Krudd failure attempted cover up. Apart from the fact that modern government investments in infrastrucutre have been universal failures this particular 'overnment' is so impossibly bad that it is a sheer nonsense for the Australian electorate to think that an unplanned, uncosted piece of Kruddian chicanery can be taken seriously. But apparently you, and many other people do so I will just have to come to the realisation that my own thinking and knowledge is faulty and that I've become too old and stupid ot coment on what I thought was blindingly obvious. Also, and I apologise for being an immigrant that has a realistic knowledge of Australian history, please don't fall for Krudd's sound bite history re-writing. Australia's railways were built by the different colonial governments, at different times (either directly or by underwriting private companies) and didn't have any co-ordinated national plan and did no consulting between them selves. Similarly the first location where electricity was elivered in Australia was another private initiative in Brisbane and, again, the development of electricity was a completely unco-ordinated private/public process from the eraly 1880s right up today and ongoing in to the future. So please don't let the current bunch of uneducated muppets in Canberra further dumb down Australia by getting you or anyone else to repeat their mindless lies to support their outrageous political scamming. Comments (2)
"The conventional answer is of course - no. The only reason you operate a small company is that it is just a step on the way to becoming much bigger and then even bigger and then......so is there any point in continuing to operate a company that has plans to meet that criterion?"
Hmmm, as a sole trader I'm happy just to look after the customers I have. I am surrounded by larger firms like Computer Nerds, Armidale Computers, AMAC computers, Northern Technical Services, Roberts and Morrow IT, etc. I am happy to both work with and compete against these companies and don't have any aspirations to grow beyond a point where I can manage the workload by myself. I know that I keep most of my customers happy, and that to me is more important than trying to grow beyond my own manageable size. I won't get rich for sure - I don't make too much more than the minimum wage all told; but I enjoy it and can survive happily Sure, sometimes seeing their flashy advertising, brand new cars, etc can make me envious - just as I imagine you being told 'nerr nerr someone else does 20 times your volume' can be upsetting; but unless our goals are world domination; does it really matter? I'd say be happy with what you do now - as you normally are - and concentrate on doing it well (or better in areas that currently need attention) rather than being distracted on how to get more The growth will likely happen by itself anyway. Cheers, Mike. Comment (1)
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