Apr 9, 2026 | Management, Small business
The Reserve Bank hands down its next rates decision on 5 May.
The cash rate already sits at 4.10%. Markets and many commentators still expect at least one further rise on May 5, probably followed by at least one more. Against this backdrop, there is a federal budget trying to deliver on the social undertakings made to the electorate, while dealing with a structural deficit, soft consumer confidence, and geopolitical uncertainty, particularly as it relates to energy.
This is a toxic mix for SME’s, which despite being largely ignored by governments, are still the backbone of the economy.
That mix should sound familiar to anyone old enough to remember the 1970s. Growth stops, costs increase, consumers keep their hands in their pockets, and the cycle repeats.
That is when small businesses fail.
Whether the Reserve Bank raises again or pauses, the core message for SMEs stays the same.
Do not wait for certainty: Prepare now.
Tough times do not usually kill a business in one dramatic moment. They kill it by progressively tightening a dozen small screws at the same time. Debtors pay later. Stock turns slower. Quotes sit longer. Margins erode one discount at a time.
The businesses that come through rough periods usually do a few simple things early and do them hard.
- They preserve cash.
- They accelerate every cycle time in the business.
- They protect gross margin like it is oxygen.
- They stay close to good customers.
- They cut vanity spending and keep useful spending.
And they remember an old truth Warren Buffett expressed well: when times get tough, cash gives you options. Opportunity often knocks when nobody feels like opening the door.
The following specific advice has been heard many times, but once more will not hurt.
Know your cash position.
Know your true cash position every week, not intermittently once a month, every week, or better still, every day. Chase debtors hard, but with wit and humanity, as they are probably also suffering as you are.
Run a 13-week rolling cash flow forecast. Update it every week. Assume at least some customers will pay later than promised because they will.
Accelerate cycle times.
Every process has an established cycle time that ‘settles’ into a comfortable rhythm when times are OK. When times get tougher, those that can accelerate their cycle times will win.
This is particularly the case with your cash conversion time. To speed that up, quote faster, invoice the same day, chase deposits sooner, work operational assets harder, and reduce if not eliminate rework. Get jobs finished, signed off, and billed without dead time between steps.
The lessons of John Boyd and his OODA Loop are never so relevant as in a crisis.
Protect gross margin.
Tough markets tempt owners to discount just to close the sale. That usually backfires. The better tactic is to sell on value, drop unprofitable work and reprice where you can.
Complexity creates transaction costs, which are always hard to see. Removing complexity frees up cash to be used productively.
Keep your best customers close.
Your existing customers are cheaper to retain and increase your share of their ‘wallet’ than new ones are to win.
Call them, collaborate to solve their problems, check in before they complain, and ask for referrals and testimonials.
Cut costs carefully.
Across the board cost cutting is a desperate mistake. Do not slash the parts of the business that help you sell, collect cash, or keep customers.
Cut the ‘vanity’ and nice to have costs aggressively, not the activities that generate revenue, margin, and cash.
Tighten inventory management
Stock that does not move is just dead cash.
Reduce slow-moving lines, buy smarter, Increase visibility on lead times and reorder points. Stop over-ordering to ensure ‘safety stock’. Aggressive management of cycle times in your inventory can have a dramatic impact on working capital requirements.
Pareto the pareto
Not all customers, and products deserve to survive. The Pareto rule always applies, not always as 80:20, but it is there.
Identify the customers, products and jobs that produce real margin and reliable cash. Defend those first. and progressively eliminate those that do not contribute. When you have done the first round, do it again, you will always find more that can be productively removed. You are in effect, stress testing the revenue and cost generation base of the business.
This exercise intimidates many SME’s, who tend to form emotional ties to products, customers, and distribution channels. In tough times, emotion must be set aside.
Renegotiate early.
Banks, landlords and suppliers all hate surprises. They will listen more carefully and be more accommodating when they are a part of the process of ensuring bills will be paid, even if a bit late.
Secure facilities early. Reset terms where needed. Ask for flexibility while you still look like a good risk.
Keep hustling for sales
A weak market is not a good excuse for sloppy selling.
Tighten follow-up. Improve conversion rates. Shorten the path from enquiry to proposal to close. Make it painfully easy for the right customer to buy.
Stay visible
Marketing investments are often the first savings made in any downturn. Resist the temptation, as history clearly demonstrates that those that keep investing during the tough times come out way stronger when the worm turns. Besides, when others pull their marketing, you become more visible for no extra cost.
Be aware of bargains.
Downturns create bargains. Competitors stumble. Good staff become available. Assets get cheaper. Market share can move. Cash lets you act while others freeze.
Lift your prices.
This is sure to give some the ‘wobbles’ and is always difficult, but if you have done all the above, you will be delivering real value to customers. An extra dollar added to the revenue line drops straight through the P&L onto the profit line. There is no quicker way to increase financial resilience than to lift prices while holding volume. Even if you drop a bit of volume, do the maths, and 9 times in 10 you will be better off after the price rise.
Header credit: Scott Adams and Dilbert
Jan 19, 2026 | Management
The most important to do list is not the one you try and discipline yourself to do every day as a means to organise your life, set priorities, and be more productive.
It is the one you write that lists the ‘to do’ that others owe you.
We exist in communities, co-dependencies and interdependencies abound. When all those varied business and personal networks are considered as a separate list, shared with the ‘information debtor’ your productivity will increase.
In my work as a business coach, I find myself constantly reminding people that it is necessary to chase the money owed to you. Reluctance to do so is a red flag for failure. This is an example everyone understands, but many do not embrace, as the power of the negative response when you ask for what is owed overwhelms many.
Why is it any different for any other factor in our lives?
That expected response to an email requesting information by Friday. Has it come in? why not? To what extent is the slipping of deadlines impacting on your productivity, and commitments to meet the undertakings you have made to others?
A boss of mine years ago used to keep a little notebook.
In it he would record undertakings and deadlines I agreed to in the conversations we regularly had relating to the actions and outputs of the functions I managed in the enterprise we both worked for. He never had to highlight the fact that I had agreed to something, I knew it, and I knew his little book would ensure he did not let it fall through the cracks.
It worked. You should try it.
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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Aug 27, 2025 | Demand chains, Management
Have you ever thought creatively about inventory, beyond how to physically manage it?
Logically inventory is held to ensure smooth process flow, and to ensure you do not run out of finished goods to meet customer demand when it emerges.
However, inventory is a rabid consumer of resources. Cash, time, space, management attention, added complexity, and warehouses full of stuff retained because the ‘Boss’ is reluctant to write it off and take the loss in the accounts.
Tough problem.
Inventory has two dimensions:
- Its legitimate place in a smooth operational chain.
- The purpose for which it is held.
Often, the same item of inventory serves both purposes.
Finished goods. Ready for immediate sale.
Raw materials. Ready to be fed into the production processes.
Work in progress. Part way through transformation.
Buffer stock. Better called ‘Just in case’ stock. Sometimes confused and used interchangeably with the term Safety stock. The former is to enable the peaks and troughs in a production cycle to be smoothed out, the latter is in case of a screw up.
Understanding the volume and purpose of each type of inventory is the first step in addressing the challenge of freeing up the cash. I speculate that the purpose is never to tie up cash, and add to costs, complication, and workload.
Figuring out how to reduce inventory without compromising operational flow and customer service is a huge challenge for many of the manufacturing businesses I see. Getting their hands on the cash to leverage for success, rather than having it tied up in non-productive inventory is a key driver of success.
Inventory is an ‘opportunity killer’ as it consumes the cash that would enable you to chase opportunities for greater profit.
The supreme irony is that in traditional accounting, inventory is an asset, so accountants are often content to leave sleeping dogs asleep.
Aug 11, 2025 | Governance, Management
Opportunity cost is everything you could have done with the money, time, and focus you’re about to expend on a different course.
In a small business it’s never theoretical: it’s overtime you can’t afford, stock you can’t reorder, family weekends you skip, fancy software that never delivers what was promised. The list seems endless.
Opportunity cost is tough to calculate. It assumes that future benefit from something you did or did not do can be calculated. However, it is often obvious in hindsight, so learning from past misjudgements will assist future choices.
Opportunity cost steals from three of your pockets:
- Cash. Dollars used on ‘X’ would have been better spent on ‘Y’
- Time. The time spent Learning how to use ‘X’ would have been better spent deploying ‘Y’.
- Focus. Our Mental bandwidth is finite. More than one priority at any given time dilutes the return on the time we invest, as well as the quality of the output from that time. Nobody ever went into a ‘flow state’ thinking about two tasks.
For example, deploying a CRM is one of the great hidden generators of opportunity cost, particularly for SME’s. Customers will never thank you for not responding quickly to their enquiry. Failure to do so will erode hard won leads and brand credibility, while the lead evaporates.
Those hits don’t show up in the accounts this month, or quarter. Usually, they do not show up at all, but they quietly compound.
A responsible management asks themselves two seemingly simple yet very complex questions when considering the deployment of any of its limited resources.
- Where else could we spend this resource?
- What are the financial, cultural, and operational consequences of the choice we are making?
Opportunity cost never sends an invoice. It quietly drains the financial accounts, bleeds stakeholder trust, and erodes the energy and commitment of employees. These are significant hidden costs that the best enterprises minimise.
Stop chasing that new shiny object by counting what it will steal.
image by Sora
Jun 30, 2025 | Leadership, Management
As a consultant, I am often faced with managing the fragmented attention of my clients. The grass is always greener, and the new shiny thing syndromes are hard at work, particularly in the minds of the stressed owners of an SME, looking hard for an easier way.
Somehow, they must manage their limited resources of time, money, capability, operational capacity, and expertise, insulating themselves against the pull of the siren song of the silver bullet.
There is no substitute for the focussed application of all available resources on a market niche of some sort where there is a competitive advantage that can be defended. The niche may be as local as the best plumber close to your home, or as broad as a revolutionary application of technology to the world market, the logic remains consistent.
The late Charlie Munger had as part of his wardrobe of mental models one he called ‘The circle of competence.’ He credits this idea with much of the success he and Warren Buffett have had in Berkshire Hathaway.
In summary, he assesses all opportunities presented by determining if Berkshire Hathaway has a greater level of competence in the domain within which the opportunity lives than anyone else. The closer to the edge of the circle of competence, the less interesting it is, simply because there are others who know more about the drivers of long-term profitability than he does, and therefore in the long run, he is unlikely to win.
Many years ago, while working for Cerebos, I launched a breakfast cereal into test market in South Australia. It was a bridge between muesli, where Cerebos was a major brand in a small segment with Cerola (now disappeared from shelves) and the standard breakfast cereals, Wheat Bix, corn flakes and rice bubbles. It was a genuinely different product, offering a ‘bridge’ between the ‘tree hugger’ image of muesli, and the sugar laden three products that at that time stood alone in the market.
The launch was extremely successful, at first. Three months after our launch Kelloggs countered with a look-a-like product, ‘Just right’ and blew us away with the weight of advertising, power of the Kelloggs brand, and in store merchandising resources.
While it seemed that our new product, ‘Light and Crunchy’ was a logical and consumer centric expression of the trends in the marketplace, it was a step outside the ‘circle of competence’ of Cerebos. We did not have any competitive advantage in the general cereal market that could be leveraged after Kelloggs rubbed out the modest first mover advantage. It fell right in the middle of the ‘what you think you know’ circle of competence.
We did everything right, the longevity of ‘Just Right’ is evidence of that, but we did not sufficiently understand the drivers of our new competitor, Kelloggs, and the determination they brought to wiping out an interloper in what they saw as ‘their’ market. We were not sufficiently competent to be successful.
That insight came at considerable cost.
