Jan 8, 2026 | Branding, Customers
Woolies and Coles are actively decreasing the number of proprietary brands on shelf in favour of house brands. The standard explanation for this is that they are intent on capturing the manufacturing and brand margin from proprietary brands.
This is true, however perhaps unwittingly there is a psychological benefit they are tapping into.
British psychologist William Hick observed in the 1950s that ‘ the complexity of a decision increases in proportion to the number of available alternatives’
How often have you stood in front of a supermarket shelf with numerous options to choose from, and felt some level of confusion at the choice to be made, and occasionally walked away empty handed?
While price is always noted as the reason Aldi has been so successful, I speculate that the absence of choice plays a significant and under-recognised role.
Similarly, flicking through the many options offered by Netflix, you end up re watching something you have seen before as an alternative to making a choice of something new.
This is Hicks Law in operation.
A short while ago I dined at a upmarket restaurant with I few close friends. We had a choice. A degustation menu with matched wines, or an a la carte menu requiring choices to be made from an extensive list of delicious sounding dishes. We all chose the degustation menu, it was for us a single choice, that removed the ‘stress’ of making a series of choices, all of which were difficult.
Similarly a workshop intending to identify creative solutions to an ill-defined problem, and lacking clear guidelines will always fail.
Hicks law again. The absence of choice makes decisions simpler.
When designing marketing programmes when you have a very good picture of the outcome you want, it makes sense to provide the target of your programme with clarity which will stand out amongst the chaos of alternative offers.
Why do you think the logos for Apple, Qantas, and Nike work so well?
Their simplicity leads to instant ‘mental availability’ of the brand when a potential customer is considering the type of service provided.
Jan 5, 2026 | Management
It is the new year, the season in which many start-ups are born, often influenced by the time and ‘out of the ordinary’ activities of the holiday season.
Before you jump in and mortgage the house for start-up cash, consider the following sins, all of which I have seen start-ups commit, which can lead down the gurgler on their own. The presence of several is almost always a predictor of disaster unless reversed very quickly.
I speak from hard-won and first-hand experience.
The strategies used to reverse them are many and varied, depending on the circumstances of the business. A tech start-up setting out to disrupt an existing market, or indeed create a new one, is entirely different to a start-up intending to steal market share from incumbents in a mature and stable industry.
Undercapitalisation
Insufficient working capital and absence of longer-term financial depth and resilience are equally deadly. Most start-ups I have seen drastically underestimate all the costs they will face. Failure to recognise all the costs and having the resources to address them leads to the undertaker.
Insufficient capital to make the required investments to create the product and operational infrastructure are equally dangerous. All the expenses must be paid as you find customers and service them.
The working capital requirement is (almost) always underestimated. Good budgeting and rolling performance measurement is essential, so you can anticipate the cash needed in the immediate future necessary to survive, or indeed, adjust expenditure to match the cash.
Not having enough money to get started ensures you will not get started. ‘Bootstrapping’ might be fashionable, lauded in the ‘start-up porn’ that infests the net, but is really challenging. However, it may be slow and tough, but it leaves you in control.
Poor cash management
Seasonality, and all sorts of things impact on the need for cash, and the timing of it coming in and going out.
People always underestimate the costs, and overestimate the cash inflow., and the timing of that cash.
13 week rolling cash flow forecasts are essential, they enable you to manage the peaks and troughs, and take advantage of the things that come up: to be opportunistic.
You must distinguish between fixed and variable costs. Identifying the drivers of costs makes the maths a bit more complex, but still essential. Identifying all the drivers is essential.
Variable costs are variable, but according to what??
Variable costs are driven by customers, as they drive the demand. Therefore, forecasting the flow of customers, and what they will buy is essential, i.e., a sales forecast. The more accurate your forecasts the better ability to manage variable costs and shape fixed costs will be.
Revenue generating activities.
Revenue generation is a mix of sales and marketing activity. Selling prices and customers are important, so do sensitivity analysis of price/customer traffic matrix.
As time moves on, sales forecasts should get better, so the productivity of your cash can be improved.
You must get the variables of sales forecasting as right as possible. Do rolling forecasts of sales
Understanding the dynamics of your break-even is important, it is probably the most underused metric in ‘start-up land’.
Poor record keeping and control
It is essential to make sure records are in order. Even for small businesses, it usually makes sense to contract a bookkeeper. While it is an expense, it frees up time, and more importantly, head space.
Keeping the books is a pain in the arse, but proper record keeping and internal controls are essential for managing operations, improvement, and regulatory governance, both public and private. If you must borrow money, sell the business, or raise equity capital, you will need good records.
Controls are the procedures that ensure that the records are accurate, timely, and available.
Documentation is essential: inventory, employees’ hours, sales, debtors, creditors, customer lists, price lists, and so on. You need systems to protect and manage the information.
Finally, safeguard your cash, control the receipt and payment of bills, you need to ensure there are controls in place to mitigate the potential of fraud, and to ensure assets and liabilities are handled properly.
This is the shit part of starting a business.
Records are a necessary evil. It will not guarantee you succeed, but failure to manage the information will ensure you fail.
Pricing is left to the last minute
Remember the old sales demand curve from economics 101. Too low, leave money on the table, too high. You miss out on sales.
Pricing is a complex process; it must play a key role in the strategic thinking of the business and must be done from the perspective of the customer. Too often I see businesses calculating their costs (usually wrongly) and just adding a margin, without any reference to the customer and volume matrix.
Not understanding their business model
This might seem a bit obscure, but I see constant mistakes made by SME’s because they do not understand the drivers of their business model. For example, the Senate enquiry into the Franchising industry that reported in mid-march 2025 slammed a number of the major franchise groups, especially the Retail Food Group, owners of Gloria jeans coffee, Crust Pizza, and a number of other franchise retailers. The report contains a number of emotional stories about the poor governance and management practises of franchisors, but when the emotion is removed, many of the failed individual businesses that signed up did not understand what they were signing up for. A franchisor makes their money selling franchises to franchisees, then clipping the ticket on all purchases and revenue, while charging for services such as accounting and advertising, on which they take a margin. Buying a franchise and not understanding the business model of the franchisor is just dumb.
Similarly, relying on supermarkets for your sales requires that you understand the way the supermarkets make their money, and the hidden and transaction costs involved in dealing with them.
Misdirected or lack of marketing.
Peter Drucker said the sole purpose of a business was to create a customer, and he was right. To create a customer, you need marketing, of some sort. It will rarely happen by osmosis.
You must know who your primary customer is, and how to reach them, engage them, sell to them, and have them coming back for more. Every interaction is an opportunity for a further one, building to a repeat customer who advocates for you, the very best form of marketing there is.
Unmanaged growth
You cannot outgrow your problems; you must fix them first. Cash flow and profitability problems are never solved by growth. Watching a business grow too fast is like watching a little kid trying to run, they trip over their feet. Their brain wants them to run, they know how to do it, but the foundations are not sufficiently in place to allow it to happen.
Processes need to be optimised, subjected to continuous improvement, documented so they can be scaled,
Everyone wants growth, but running out of cash is the cause of many successful businesses to fail. They fail being successful.
Growth is a huge consumer of cash, most often necessary before the results of the growth are reflected in the cash coming in. I have seen many seemingly successful businesses fail by trying to run before they walk reliably.
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Dec 15, 2025 | Analytics, Governance, Marketing
Marketers must understand the jargon of the boardroom if they are to contribute meaningfully to the critical strategic conversation. Too often they are sidelined by lack of this understanding, resulting in dumb choices being made by those who think strategy development and the deployment of these strategies is some form of hocus pocus.
Return on Assets (ROA) and Return on Equity (ROE) tell different stories about the quality of the management choices being made.
ROA is a measure of how effectively the enterprise is using the assets it has to generate a profit. It is the ratio of net income divided by total assets.
ROE is a measure of how effectively the enterprise is leveraging the use of the equity, capital supplied by the owners, to generate profits. It is the ratio of profits divided by equity.
Together they measure how well a management is doing at managing the enterprise on behalf of the owners. The major difference is the financial leverage delivered by the debt the enterprise uses to generate profits. The greater the distance between these two ratios the greater is the reliance on debt to fund activities. Conversely the closer they are, the less debt is on the balance sheet. In the absence of debt, the ROA and the ROE would be the same.
Every enterprise faces the choice of funding sources: debt or equity. If they choose to take on debt, or ‘financial leverage’ its ROE would be higher than its ROA only if the company earns more on the borrowed funds than the cost of borrowing.
You will often hear the term ‘financial engineering’. In its simplest form, it is the management of the balance between debt and equity, usually in response to interest rates, and expectations of those rates, and the expectations of dividends to be returned to shareholders out of profits.
I found the following example contained in an explanation of the ‘DuPont Identity’
Imagine a fictional company ABC with the following financials:
- Net Income = $1,000,000
- Average Total Assets = $4,000,000
- Average Shareholders’ Equity = $2,000,000
ROA = Net Income / Average Total Assets = $1,000,000 / $4,000,000 = 25%
ROE = Net Income / Average Shareholders’ Equity = $1,000,000 / $2,000,000 = 50%
In this example, ABC generates $0.25 in profit for each dollar of assets and $0.50 in profit for each dollar of shareholders’ equity. ROE is higher than ROA in this example, as it does not account for all assets, including debt. If total assets were equal to shareholder equity, then ROA and ROE would provide the same result.
As noted, while it may sound like accounting jargon, marketers simply must understand the terminology if they are to avoid being sidelined when it really counts.
Dec 11, 2025 | Change, Governance, Strategy
Federal and state governments now face a steady queue of large, tax advantaged Multinational corporations with a simple message: “Subsidise us, or we shut the gates.”
Jamie Dimon, CEO of JP Morgan recently said at an earnings call: “When you see one cockroach, there are probably more.”
We now see the same thing with corporate subsidies.
Once one bailout appears, a small army of “essential” projects scuttles out from behind the skirting board.
Think about a few recent examples.
Whyalla Liberty Steel receives a multi‑billion dollar rescue package.
Glencore secures support for its Mount Isa zinc smelter and Townsville refinery.
Nyrstar’s lead‑zinc smelter attracts funding.
Arnott’s receives a 45 million grant to ‘shore up their balance sheet’
On top of that you have the fuel tax credit scheme running at around ten billion a year, and a series of Petroleum Resource Rent Tax concessions.
Not every one of these choices fails a hard‑headed test. Some, probably many, will stack up when you count jobs, regional impact, supply chain risks and national sovereignty. However, that does not diminish the simple fact that the only ‘policy’ we have is to be selectively tactical in our response. Little integrated, coherent policy aligned with the long term best interests of the country, that has bi-partisan support.
The problem sits with the ongoing failure of the adversarial nature of our political system, and successive governments to provide a stable and reliable long term investment environment.
Taken together the tactical responses do not look like strategy, but they do look like frantic pest control in a kitchen nobody bothered to design properly.
The cockroaches are running wild, demanding sustenance.
There is a common thread.
Most calls for subsidies exploit the absence of a coherent energy policy, and restrictive, time consuming approval processes, combined with a small domestic market.
Governments then reach for subsidies to keep often extremely wealthy, tax‑advantaged multinationals from walking away with their capital, seeking the best risk adjusted returns elsewhere.
It pits national governments against one another in a global options game, that filters down to regional governments.
In contrast to our ad hoc playbook, China has played a long and highly strategic game with subsidies. For example, they have spent years locking down global supply of rare earth minerals, and Chinese firms now dominate large parts of the EV supply chain. The same playbook has been applied to batteries, solar panels, and increasingly AI.
It is a giant international poker game, and we are a minor player with a few good cards if played well.
We supply resources, are stable politically and economically (despite the problems) and have an educated workforce. However, we have shallow and short term oriented capital markets, so need investment to leverage our natural assets, while rabbiting on about sovereign capability.
For Australian governments to attract mobile capital on sensible terms, we need a different offer.
Subsidies and favourable tax treatment can play a role, but they do not carry the game when they are subject to management by press release, and the loading of investment in marginal seats.
Serious investors look for something more valuable: reliable educated workers, technical capabilities, and reliable institutions, all of which contribute to the certainty that encourages investment.
The strategic dilemma is that competitive countries have a different set of foundational assumptions that deliver competitive advantage.
On one side sit the cheques written to keep multinational operations in place.
On the other side sit the losses in productive capacity, skilled jobs, capability building, and tax revenue if those operations close.
Do our governments, bureaucracies, and political culture have the capability and courage to wrestle with that complexity?
Because until they do, the cockroach subsidies will keep multiplying under the fridge.
