Is your biggest asset (your data) safe ?.

These days our PCs and Servers are much more than just computers, they’re our life – both business and personal.

Most of, if not all, the important information in our life is now stored electronically on a computer.  Whether it’s those precious family photos/videos, that music collection or critical business documents and financial records, everything is digital.

Hardware failure, viruses, fire, theft, a power surge, or even a disgruntled employee and you could be left with all of your data gone forever.

The possibilities of how it can happen are endless (trust me I’ve seen most of them) and there is only one thing you can guarantee when it comes to technology – all hard drives will fail, often without any warning whatsoever.

Here are some of the statistics, and factoids, relating to the topic of data loss/backup/recovery:

• 99% of all businesses out there DO NOT carry out a daily backup (yes … this includes YOU).
• 60% of all data backups taken are incomplete, or have some level of data corruption.
• 1 out of every 10 hard drives fails in the FIRST YEAR.
• Only 3 out of every 100 lost/stolen computers are ever recovered.
• Over 25 Million computers are lost/stolen every year around the world.
• DAT tapes have a restore success rate of UNDER 50% over the life of the tape.
• 50% of all conventional restore processes fail.
• 70% of businesses that suffer a major data loss go out of business within 18 months.
• Onsite backups offer ZERO PROTECTION from FIRE, FLOOD, VIRUS and THEFT.
• A 2009 business survey concluded that every MB of data in your systems is worth $10,000.
• Company directors can go to jail for breaches in data protection/privacy laws.

That’s the bad news.

The good news is that it’s simple to address.  I can tell you what I use for my business – which is Data Vault Security (www.datavaultsecurity.com) – but first why do I use them:

• They use Military grade (256-bit) encryption to keep my data as secure as possible.
• They compress the data before sending it across the wire, minimising storage/bandwidth/time.
• The data is stored at Data Vault Security in encrypted form – so it is totally secure even if somebody managed to hack into their data centres.
• The Backup/Restore client does not lose connection if the line drops out (dynamic resume);
• There is no size limit, so my requirements can grow as my business grows without additional equipment.
• I can create up to 150 different Backup Sets, each of which can have a different backup frequency (eg: Emails daily, Database logs hourly, Picture libraries weekly) at no additional cost.
• They are the only backup/restore providers to offer a A$3M restore guarantee if for some reason I cannot get my data back – NOBODY ELSE OFFERS THIS, they barely give any undertakings when it comes to getting your data back.
• They use a 3-way disk mirror rather than the traditional 2-way disk mirror for additional redundancy, to better protect my data.
• They keep copies of my data in at least 2 separate data centres at once, for additional reliability in restoring my data (WHEN I NEED IT).

This is the link that can be used by a business/individual who wants to request the trial themselves http://www.datavaultsecurity.com/index.php?act=scaleSurvey If you check this out, the relevant Reseller Guest Code is TS8113 which is the code that lets Data Vault Security know the referral came from my business.

This is the link that can be used by a business user who wants to start using the Data Vault Security service straight away http://www.datavaultsecurity.com/index.php?act=viewCat&catId=3 If you check this out, the relevant Reseller Guest Code is TS8113 which is the code that lets Data Vault Security know the referral came from my business.

This is the link that can be used by a home (domestic) user who wants to start using the Data Vault Security service straight away http://www.datavaultsecurity.com/index.php?act=viewCat&catId=4 If you check this out, the relevant Reseller Guest Code is TS8113 which is the code that lets Data Vault Security know the referral came from my business.

What are the “real” growth sectors at the moment ?.

I regularly get this topic tossed at me in meetings … namely “what sectors are the sectors to look at investing in to get the best growth prospects in CY 2010”.

Since I get asked it often enough I’ve created this entry and I can point people to it in future rather than “playing the broken record” again.

Feel free to pick and choose from this list in terms of those sectors you prefer, or are well-versed in.

Growth sectors

RECRUITMENT:  Having been massacred in 2008 and the H1 of 2009, recruiters started making positive inroads during Q4 of 2009 and now into Q1 of 2010.

The smart recruiters got into Outplacement to stop the revenue bleeding in 2008/09 (and service what their clients wanted most often).  Outplacement is still relevant in 2010, but now it is not about shedding staff “that we can’t afford” rather it is about M&A activity and typically 2 people (one from each company) in 1 position (in the merged business) doesn’t go.

The demand for Senior Executives, ICT Specialists and Financial Services specialists is seen as being a strong driver for recruitment growth in 2010.  The growth is being driven by both Contract and Permanent staffing requirements in 2010, whereas it was predominantly from Contract staffing requirements in 2009.

NETBOOKs:  Primarily used for web-browsing and email, Netbooks will see continued strong growth in 2010 and beyond.  The introduction of Intel Atom processor in 2008 spurred the growth of netbooks.  This category is still in a formative stage with size, features and relative performance levels in a state of flux.

However, with the anticipated introduction of the Chrome operating system by Google this category will experience strong demand on the back of Google’s marketing campaign.  For those not familiar … the Chrome o/s promises Netbook users will have an instant TV-like experience for bootup and make web-browsing and emailing far simpler than current PC’s and Mac’s.

SMART PHONEs:  Smart phones grew in 2009 and are expected to grow even further in 2010 as manufacturers and operators seek to drive open platforms into mass market.  The strongest demand is expected to be iPhone, Blackberry and the Android based phones such as one from Motorola.  The smart phone market has entered a period that presents enormous growth opportunities for many key players including semiconductor vendors, platform providers, Telco’s, device manufacturers and software developers.

You just need to observe the growth in iPhone apps – currently over 195,000 applications and it has grown by 20,000 in just the Feb/Mar months of 2010.

CLEANTECH:  As the global economy pulls out of a deep recession, the job market is changing with information technology and clean technology gaining speed.

I’ve already covered some IT areas above, so now touching in CleanTech there are a couple of really solid growth areas:

• Water;
• Renewable Energy; and
• Waste Processing.

An interesting development at the bigger corporate end of town is the emergence of the “Chief Sustainability Officer” – in effect the new Environmental Chief at big firms.

In Australia the major push for corporations to become more green has been in place since around 2005, with most of the large corporates provide a separate Environment Impact Statement along with their Annual Report.

In the next 5 years the demand for a CSO will dramatically accelerate as companies will need a CSO who is accountable to both the owner and share holders.

SUGAR: While the past 5 years have seen the sugar manufacturing industry buffeted by the highs and lows of global demand, supply trends and world prices, 2010 is shaping up as seeing Australia’s sugar manufacturing industry positioned as the biggest grower for the 2010 calendar year increasing by between 15% to 20% a massive increase.

ORGANIC FARMING: Demand for organic products in Australia and around the world has risen in recent years as consumers increasingly consider the health benefits and environmental impact of their food choices.  The industry is projected to exceed $425 million in 2010, representing better than 10% growth from 2009, and employment is expected to grow by between 2% and 4%.

OIL & GAS PRODUCTION: Although most analysts predict oil production will decline in 2010, this will be more than offset by a rise in natural gas production, seeing the sector post close to 15% growth in 2010 (to nearly $40 billion) – and generating close to a 4% increase in employment.

INSTITUTIONAL BUILDING CONSTRUCTION: Centred on the construction of buildings where Australians learn, work, are healed, socialise, exercise, pray and seek justice, the Institutional Building Construction industry is expected to grow by 12% in 2010 to nearly $10 billion, strongly supported by increased government spending – especially on educational structures.

HEALTH INSURANCE: Despite a rise in Medicare levy surcharge thresholds, many predict 2010 will see an increasing number of Australians take out private heath cover.  This, combined with a rebound in investment income for insurers, will see the industry post growth of 10% to nearly $15 billion 2010, while employment is expected to experience slight growth at 0.6%.

There are several factors leading more Australian’s to take out private health insurance, including rising incomes, tax advantages, an ageing population, plus rising waiting lists for elective surgery and essential surgery in the public health system.

ALTERNATIVE HEALTH THERAPIES: A growing acceptance of alternative therapies and more holistic approaches to health has seen alternative health therapies increase in popularity in recent years, with an estimate seeing the sector experiencing growth of 5% in 2010 to total over $3 billion.  This will be matched by an increase in employment within Australia of between 4% to 5%, which is a significant employment growth for any sector in 2010.

ONLINE SHOPPING: As access to technology improves, and our overall skill in using it grows, many trend watchers are forecasting time-poor bargain hunters will continue to flock to e-tailers to meet their shopping needs.  Improvements in online store usability, efficiency, reliability and security are expected to drive growth of nearly 5% in 2010 to reach $20 billion – with a resulting increase of 3% in employment.

Within Australia, online sales currently represent just 5.5% of all retail sales, well below levels in the US and UK, leaving room for significant growth over the next few years.  Current lower levels are partially due to the fact that Australian retailers have been slow to offer online sales.

WEIGHT LOSS SERVICES: In one of those very funny ironies … losing weight will grow by almost 5% in 2010 to be worth more than $750 million, generating almost a 3% increase in employment. The sector is expected to continue to grow in 2011, as rising obesity rates and growing public awareness of subsequent health issues lead more Australians to invest in weight loss.

The increasing availability of weight loss drugs and supplements, as well as growing acceptance of surgery as a treatment – such as lap-bands – will see more Australians invest in weight loss treatments in the coming years.

BABY PRODUCTS: Over the last 5 years there has been strong growth in high-end baby products, as first-time parents in their late-30s and 40s buy up big for their newborns – seeing the sector forecast to grow by over 3% to more than $4 billion in 2010, generating a 3% increase in employment.

Key areas of growth include premium kids clothing, with celebrated fashion designers such as Collette Dinnigan and Fiona Scanlan launching children’s lines, as well as the continued expansion of ‘mini me’ branding and the booming “cottage industries” being supported by their own version of eBay (eg: Etsy).

“Not Growth” sectors

Since we’re on the topic – how about some of the “others” for 2010, ie: the sectors that are not going to grow, and in fact are most likely to be big losers in 2010.

IMAGE PROCESSING & PRINTING SERVICES: The digital revolution and the advent of digital cameras, home photo printing equipment, digital photo frames, and electronic storage of images has led to the image processing and printing services sector suffering significant losses, with revenue forecast to fall by another 6% in 2010 to under $550 million.  Corresponding to the fall in revenue, the number of jobs is expected to fall by nearly 4%.

MULTI-UNIT APARTMENT & TOWNHOUSE CONSTRUCTION: Whilst this seems a bit counter-intuitive, and despite a shift in lifestyle and residential preferences toward higher density housing, it is expected that multi-unit apartment and townhouse construction will contract sharply in the coming year, falling by over 5% in 2010 to $6.6 billion – with employment dropping by nearly 4%.

Reduced access to credit for developers, rising interest rates and a reduction in the first home buyers grant will be the main contributors to the downturn.

WIRED TELECOMMUNICATIONS CARRIERS: In 2010 the number of consumers switching from wired to unwired services is expected to increase and accelerate, resulting in a fall of nearly 5% in 2010 to $12 billion for wired telecommunications carriers.

Consumers are increasingly opting for un-wired options as they allow cost saving benefits such as removing line rental expenses, resulting in a decrease in revenue and drop of over 3% in employment.

VIDEO HIRE OUTLETS: Increasing electronic distribution of video content and a greater volume of both pay and free-to-air television programming has resulted in a long-term downward trend for video hire outlets.  In 2010, the industry’s revenue is expected to decrease by nearly 4% down to around $520 million, and the number of jobs in the sector is expected to fall by between 1% and 2%.

TRAVEL AGENCY SERVICES: Most analysts predict another poor year for travel agents following a further decline in international tourism and the rapid growth in online booking sites.  Revenue is tipped to contract by about 2% in 2010 to $2.7 billion, while employment will fall between 1% and 2%.

Receivables Management for managing Business Cashflow.

I’ve talked with many businesses over the years about the benefits of Receivables Management as a tool to leverage cashflows.  Receivables Management is also known as “Debtor Finance” and more commonly as “Factoring”, which is a particular form of Receivables Management.

You can learn a little bit more about the basics of Debtor Financing at http://en.wikipedia.org/wiki/Debtor_finance which may answer some basic questions that I don’t address here.

Please feel free to contact me if you want more information on this topic, or want help accessing Debtor Financing as an option for your business.

As I mentioned, a term used to mean Debtor Financing or Receivables Management is Factoring.  This still has a dirty name for many people who remember the ridiculous interest rates businesses were being charged to access this type of facility back in the 1980’s and 1990’s.

Rest assured that in todays financial markets Debtor Financing is much more cost effective for businesses.  Typically the cost to a business is 200-250 basis points (2.0%-2.5%) above the benchmark lending rates.

So, why would you use Debtor Financing ?.  Well, the most obvious answers are:

• You’ve issued an invoice to a customer and now have to wait 30/45/60/90 days until you get those funds.
• If your customers are late paying, or go delinquent, you will wait even longer.
• If you could get 70% of the money due in 30 days today, and only pay 6.5% for the privilege what sort of a return to the business can you make ?.  If it is less than 6.5% then you shouldn’t be in business … it should be more like 20% to 50%.

PLEASE NOTE: The banks don’t just give this away for nothing.  They will do an assessment of the Invoices you are proposing to use and will decide which ones they will accept (or not accept).

In the Australian marketplace there used to be a number of financial institutions offering Debtor Financing, with ANZ and NAB being the top 2 with very attractive offerings.

Unfortunately as at the end of 2009, ANZ withdrew from this market for new business customers.  However, NAB are still in this market and have over a 50% market share.

This means that:

• They’re committed to Debtor Financing as a tool for their business customers;
• The NAB Business Bankers understand how this tool can be made to work for their customers; and
• When they approve of an Invoice you want to use for Debtor Financing that means they’re willing to work with you in risk-managing those Accounts Receivable.

Here is a link to the NAB Debtor Financing facility in case you would like to know more http://www.nab.com.au/wps/wcm/connect/nab/nab/home/business_solutions/3/1/2

I’ve provided a small précis below.

NAB Debtor Financing:

Suited to businesses that need a capital injection to fund business growth, or cash flow requirements, but want to fund this purely on the strength of their business sales.

What are the Benefits:

• Funds access: borrow money based on the strength of your business sales
• Flexibility: helping you manage seasonal and day-to-day fluctuations in cash flow
• Convenience: ability to gain access to funds when you need it against issued invoices.
• Limit: as your business grows and your debtors grow so does your facility
• Accessibility:   transfer funds from your NAB Debtor Finance account into your working account via NAB Online Business and NAB Online Corporate, or by written instruction

What are the Features:

• Credit limit based on business sales, not mortgage based fixed asset lending like all the other options available to businesses
• Withdrawals can be made from your NAB Debtor Finance account up to your daily available limit (which automatically increases/decreases depending on the level of your sales and debtor collections).
• No account keeping fee
• No line service fee

Is Project Management dead, or just on life-support ?.

This is a topic of personal interest to me, firstly because I’ve been a project manager in the past (for many years) and hold international accreditation as a project manager (called PMP … Project Management Professional).

The reason for this blog entry is that there has been a steady rise over the past 2 years of the “be all” project manager … partly due to the GFC (ie: cut back on staff numbers be still have the same amount of work to do).

If you look on the job websites (Seek, MyCareer ..etc) you will commonly see something along the lines of “Seeking Project Manager, with 5 years experience plus experience in Agile and must be able to write C# code”.   A few years ago this would have been derided as being (rightly) ridiculous – how can you expect a PM to also be doing “the doing” at the same time and not drop the ball in being the project manager ?.

Part of the reason – or blame – for this is the Project Management Institute which has for many years been trying to establish the validity of Project Management as a profession in its own right, not just a type of job and a role on projects.

Sadly, PMI has been singularly unsuccessful in convincing senior business executives about it’s cause and due to GFC that cause has been further undermined by the “do more with less” attitude of business executives in response to a significantly weakened global economy.

So, in 2010 the actual nature of project management is being influenced by a few factors (I’ve listed some, but this is not an exhaustive list):

• The significant reduction in large projects being initiated, which are being replaced by a number of smaller (more nimble) projects that deliver results and benefits much quicker.
• The rise of Agile into a viable means of delivering change in a corporate environment, rather than just on the “lunatic fringe”.
• The trend towards business people being generally more aware of their work environments and the actions being taken to change those work environments (be it business process, technology or something else).
• The massive increase in the pervasiveness of technology into the entire business these days, which makes change happen faster and more often (sometimes more easily but not always).
• The active ownership of change projects being driven from the business side rather than the technical side.
• The large-scale adoption of a “matrix model” for reporting lines within organisations, rather than the traditional hierarchies.
• The implementation of “lean processes”, taken from six-sigma and other repeatable process methodologies, which was in vogue for tier 1 and tier 2 businesses from 2004/05 through to the GFC.

Where does that leave project management, and project managers now ?.

Clearly, there is still a need for high-quality very experienced project managers for complicated change initiatives.  That requirement will never disappear, but it will become less of a focus in future.

The sorts of trends I see for project managers are:

[1]  The rise of the Team Leader as not just a de facto Project Manager, but as the preferred choice for overseeing change.

[2]  The rise of the Business Portfolio Manager, who is the coordinating point within the business who pull the strings that drive all the change projects (and their Team Leaders) in whatever direction is appropriate during any given period.

[3]  The continued rise of Agile Methods as a means to quickly deliver organisational change – both technology and business process – such that selecting a “traditional” project management approach becomes an eyebrow-raising event requiring the Business Portfolio Manager to wade in and seek an answer for that choice.

These are just some thoughts and ramblings, some of which I can support with hard evidence but some of which I can only observe the early signs and make my own guesses on.

Back in 2009, my business took an investment stake in a recruitment business, one of the reasons for doing that is I saw 2010 as being the “year of the recruiter” as the economy started to bounce back and businesses had to hire back in skills to take advantage of the economic opportunities that you only get once every upturn/downturn cycle.

So, part of the evidence I can cite is the sorts of requests being placed at the doors of the recruitment firm I’m an investor in.  These requests when it comes to project managers encompasses (in order of priority):

1. Agile.
2. Technology-capable (in some particular technology set).
3. Business-capable (can engage the business people in their language).
4. Strong stakeholder management skills.
5. Good communicator.
6. Able to manage Scope/Budgets/Issues/People/Time.

If I were a “traditional” project manager out there I’d be worried about now that I might soon be a dinosaur.

I’m genuinely interested in other people’s thoughts on this topic, because of my investments into the Recruitment game .  Feel free to comment.

What is a Convertible Note ?.

When I talk with businesses the topic of funding is usually the first-cab-off-the-rank.

One of the most effective ways to raise the funds in the post-GFC world is through Convertible Notes.  When I talk about this, the first reaction from most people is “what is a Convertible Note ?”.

So, to stop that little record being played over and over, I now point people to this Blog entry.

Feel free to contact me if this is a topic of interest to you for your business, or you just want to know more about the topic.

A convertible note (or, if it has a maturity of greater than 10 years, a convertible debenture) is a type of bond that the holder (Investor/Bank) can convert into:

• Shares in the Company they’ve put the money into, at an agreed value (per share); or
• Cash, of equal value to the money they’ve put into the Company.

Either way, the Investor will receive interest payments on the way through at an agreed-upon annual interest rate and at agreed-upon frequencies.

In terms of exercising a choice (Shares, or give me my Cash back), this is the Investor’s choice and the Company must accept that choice whether it is convenient and whether they like it or not.

The types of frequencies I most often see are:

• Quarterly in arrears;
• Half-yearly in arrears;
• 50:50 (50% up-front, and 50% at the agreed end-date);

Each type of frequency has a different risk profile for both the Investor and the Company, and therefore the rate of Interest is expected to be quite different because of the risk spectrum.

A convertible note is a hybrid security with both debt and equity features.

The Investor receives the potential upside of conversion into equity, at an agreed price today for some point in the future, while protecting their downside with cash-flow from the “convertible note” payments.

From the Company’s perspective, the key benefit of raising money by selling convertible notes is (hopefully) a faster approval timeframe than a bank can achieve plus a deferral of dilution of all the other shareholders (though it will be inevitable if the Company does very well).

In the present Australian market, private convertible note arrangements vary from a duration of 6 months to 5 years and vary from an interest rate of 10% to over 20%.  The massive difference in interest rates relates to the frequency of interest payments and the risk-levels that the Investor perceives the Company as being for them to get their entire capital back.

What are the “Jobs of the Future” ?.

My thanks to Rohit Talwar at Fast Future (www.fastfuture.com) for these insights, which he provided to me in February of 2010.

You will notice these jobs are all derived from current/emerging technologies, and every single role would be foreign to business managers from even 20 years ago …. even if they could guess what the role actually entails.

Feel free to contact me, if you want further information.  Also feel free to post comments here.

The shape of jobs to come list of 20 jobs

1.    Body part maker Advances in science will make the creation of body parts possible, requiring body part makers, body part stores and body part repair shops.

2.    Nano-medic Advances in nanotechnology offer the potential for a range of sub-atomic ‘nanoscale’ devices, inserts and procedures that could transform personal healthcare. A new range of nano-medicine specialists will be required to administer these treatments.

3.    ‘Pharmer’ of genetically engineered crops and livestock New-age farmers could be raising crops and livestock that have been genetically engineered to improve yields and produce therapeutic proteins. Possibilities include a vaccine-carrying tomato and therapeutic milk from cows, sheep and goats.

4.    Old age wellness manager/consultant Specialists will draw on a range of medical, pharmaceutical, prosthetic, psychiatric, natural and fitness solutions to help manage the various health and personal needs of the ageing population.

5.    Memory augmentation surgeon Surgeons will add extra memory capacity to people who want to increase their memory capacity. They will also help those who have been over-exposed to information in the course of their life and simply can no longer take on any more information thus leading to sensory shutdown.

6.    ‘New science’ ethicist As scientific advances accelerate in new and emerging fields such as cloning, proteomics and nanotechnology, a new breed of ethicist may be required, who understands a range of underlying scientific fields and helps society make consistent choices about what developments to allow. Much of science will not be a question of can we, but should we.

7.    Space pilots, tour guides and architects With Virgin Galactic and others pioneering space tourism, space trained pilots and tour guides will be needed, as well as designers to enable the habitation of space and other planets. Current projects at SICSA (University of Houston) include a greenhouse on Mars, lunar outposts and space exploration vehicles.

8.    Vertical farmers There is growing interest in the concept of city-based vertical farms, with hydroponically-fed food being grown in multi-storey buildings. These offer the potential to dramatically increase farm yield and reduce environmental degradation. The managers of such entities will require expertise in a range of scientific disciplines, as well as engineering and commerce.

9.    Climate change reversal specialist As the threats and impacts of climate change increase, a new breed of engineer-scientists will be required to help reduce or reverse the effects of climate change on particular locations. They will need to apply multi-disciplinary solutions ranging from filling the oceans with iron filings, to erecting giant umbrellas that deflect the sun’s rays.

10.  Quarantine enforcer If a deadly virus starts spreading rapidly, few countries, and few people, will be prepared. Nurses will be in short supply. Moreover, as mortality rates rise, and neighbourhoods are shut down, someone will have to guard the gates.

11.  Weather modification police The act of seeding clouds to create rain is already happening in some parts of the world, and is altering weather patterns thousands of miles away. Weather modification police will need to control and monitor who is allowed to shoot rockets containing silver iodine into the air – a way to provoke rainfall from passing clouds.

12.  Virtual lawyer As more and more of our daily life goes online, specialists will be required to resolve legal disputes which could involve citizens resident in different legal jurisdictions.

13.  Avatar manager / Devotees Virtual teacher Avatars could be used to support or even replace teachers in the elementary classroom, for instance, as computer personas that serve as personal interactive guides. The Devotee is the human that makes sure that the Avatar and the student are properly matched and engaged, etc.

14.  Alternative vehicle developers Designers and builders will create the next generation of vehicle transport using alternative materials and fuels. Could the dream of underwater and flying cars become a reality within the next two decades?

15.  Narrowcasters As broadcasting media becomes increasingly personalised, roles will emerge for specialists working with content providers and advertisers to create content tailored to individual needs. While mass market customisation solutions may be automated, premium rate narrowcasting could be performed by humans.

16.  Waste data handler Specialists will provide a secure data disposal service for those who do not want to be tracked, electronically or otherwise.

17.  Virtual clutter organiser Specialists will help us organise our electronic lives. Clutter management would include effective handling of email, ensuring orderly storage of data, management of electronic IDs and rationalising the applications we use.

18.  Time broker / Time bank trader Alternative currencies will evolve their own markets – for example time banking already exists.

19.  Social ‘networking’ worker Social workers will help those in some way traumatised or marginalised by social networking.

20.  Personal branders An extension of the role played by executive coaches giving advice on how to create a personal ‘brand’ using social and other media. What personality are you projecting via your blog, Twitter, etc? What personal values do you want to build into your image – and is your image consistent with your real life persona and your goals?

What is your Business Idea worth ?.

I get approached by inventors, and other people with interesting ideas, and the one question I get asked in these situations is “what is my idea worth ?”.

There are so many ways to say “Zero” as the immediate response, but let’s delve into why your business idea is – or is not – worth anything.

Why your business idea is not worth anything.

[1]        Is it a better, faster, toaster ??.

Because if it is – yes it probably has some value, but the next (even) better, faster, toaster is just around the corner.

Therefore, your window of opportunity to leverage value from your idea is very small, and sophisticated investors know this.  These investors would rather chew their own arm off if that’s what it takes to get away from you when you accost them at some function and start trying to convince them about your idea.

[2]        Have you tried to patent it ??.

If you have, at least you will soon know that answer as to whether your idea is original or derivative of an already existing patent.

If you haven’t … the first question an investor is going to ask is “why not ?”.  The implication being that if you don’t believe in your idea enough to spend the $$$’s to get a patent application then why should they spend the $$$’s.

[3]        This could be worth MILLIONS !!.

Yes it could be, but using Amazon/Google/Facebook/Skype/…etc as an example for your business idea just will not cut it.  Only 1 out of every 200,000 ideas will get even remotely close to something like this …. And why is your idea that 1 ?.

An investor would be better buying a lottery ticket than investing in your business idea with those sorts of odds.

Why your business idea MIGHT be worth something.

[1]        It is a BIG Idea.

This may seem obvious, but bear with me.

Why start a company that you want to turn into an emerging growth company if it is not based on a big idea?

In spite of this almost every day aspiring entrepreneurs are out there pitching ideas that are just obviously not big.  At best it might be a great feature for another product (and that has tangible value for an investor).

Maybe it is a niche product that people would pay for, but there aren’t that many people in the niche.

For serious investors who deal in early-stage businesses they need businesses with BIG IDEAS and HUGE POTENTIAL.

…

Why ?.

…

Because they need to see returns of not 3x or even 10x, but 30x or more-like 50x.

This is because out of every 10 early-stage investments, these investors anticipate that only 1 to 3 will be successful.

If your idea is just a feature or a niche product, I’m guessing it is worth whatever you can license it to somebody else (who can do it much better than you) for – it is probably not a truly investable proposition.

Don’t get too down in the mouth though, many worthy ideas make good money for their creators in just this fashion – in the software/hardware game OEM’s, Plug-In’s and other types of “features” are regularly licensed from one company to another and the company licensing it can make very good annuity income.

[2]        You Have Prove That You’re Not Just Making it Up.

Having a business idea is all fine and dandy, but can you prove that it works?

Investors in 2010 are just not investing in 2 people with an idea sketched out on the back-of-an-envelope.  They need objective data that points to how this idea can – and will – make money.

Now, this doesn’t mean that they need to see profitability or even revenues (not right now anyway).  But it does mean that they want to see that you have something that people are interested in using.

Some examples of this objective data:

• Can you show adoption rates ?
• Can you show a nice upward trend in hits to the website ?
• Can you show a sustained upward trend in new users/subscribers ?
• What are your retention rates for users/subscribers ?
• Do you already have your patent approved ?

[3]        You Can Justify A Valuation That Has No Rational Relationship To Your Earnings Power.

This is related to the “big idea” requirement, but is more subtle.

In essence … “what is your secret ingredient”:

• Is it a hot new technology?
• Is it a rock star team?
• Is it a revolutionary new business model?
• Is it a ground-breaking mathematical algorithm ?
• Is it a new way of solving a commonly-experienced problem ?

Basically, it is about how you can justify to a buyer that they should pay 12x or 18x EBITDA, but your competitors are selling for 6x or 7x EBITDA.  This is particularly crucial in those instances when you’re claiming an EBITDA that doesn’t exist yet (ie: purely forecasts, because you haven’t even earned a single dollar).

Feel free to contact me if you’re facing these sorts of challenges.

Boards, Director’s Liabilities and Advisory Boards

I’ve already covered the topic of Corporate Governance …. refer to https://investoritis.wordpress.com/2010/03/27/what-does-good-governance-look-like/ for further details on Good Corporate Governance.

I thought it useful to expand into some other areas:

[1]   Directors and Officers Liability insurance.

[2]   What about Advisory Boards, which are typically non-statutory (except in medicine/pharmaceuticals) ?.

Directors and Officers Liability insurance.

So, you’re a Director and you don’t have D&O Liability insurance …. ARE YOU MAD ???.

I strongly suggest you go to http://www.companydirectors.com.au/About+Directorship/Director+role/Director+Liability/?LM to understand your personal liabilities as a Director.

I also suggest you go here http://www.companydirectors.com.au/Membership/Member+services/DandOInsurance/Forms+of+DandO+Insurance/ to see what options are available to you for D&O Liability insurance.

Advisory Boards.

The Role of Strategic Advisory Boards

Business advisory boards fill a unique role in strategy and implementation, whether a company is crafting a new product line, identifying cost-cutting measures, pursuing mergers and partnerships, or changing the mix of staff skill-sets.

PE & VC firms especially recognise the ROI of applying specialized executive talent to rev-up progress at an operating company, typically through a 100-day plan at the commencement of their acquisition.

Growing (and struggling…) businesses, investment firms, lawyers, consultants and individual executives suggest that advisory boards are powerful, long-term strategic tools if you invest in managing them well.

However, many firms don’t know where to find outstanding board members or relegate them to 2-to-4 meetings a year and a few phone calls.

Advisory Boards Are Not Your Usual “Boards” or “Consultants”

Strategic advisory boards are unique business support system, best-defined as:

1. Non-employee teams tasked explicitly with serving senior management;
2. Having extensive experience and special expertise in sectors/functions that affect a business;
3. Meeting together over the year, but they can and should focus on urgent business decisions over the course of several months for the best impact;
4. Well compensated for the value they bring to a business, ensuring they’re in commercial alignment.

They differ from:

• Boards of Directors, or fiduciary boards, which take on the responsibility and liability of being responsible for the financial well-being of a company’s shareholders and for evaluating the chief executive.  Boards of Directors are required for public companies, but they’re often populated with influential individuals with powerful connections or access to investors, rather than industry specialists.  BoDs also are expensive to staff, costing five-to six-figures per member per year, to offset the increasing amounts of time and risk fiduciary board members take on.  For public companies with divisions that need strategic help, or private companies that need broader business input without being evaluated on a management hire/fire criterion, strategic advisory boards are more valuable.

• Consultancies, whose pyramid-like team structure and billing rates make them suitable for critical projects of 1-to-6 months requiring deep analysis, but less so for ongoing guidance about growth opportunities and trouble spots.

• “Friends of the firm”, a category which includes advisors who aren’t compensated for their input. Usually these relationships are developed ad hoc, based on chance meetings or existing relationships, where the company’s leader/evangelist convinces the businessperson to lend their name and be on a few phone calls in exchange for light cache.  Though these individuals may receive an Advisor title on the web site, without careful selection of a group of complementary skill sets and a commitment to exploring issues at length with the firm, they usually have limited impact.

Achieving an Effective Strategic Advisory Board

High level considerations when building an effective and worthwhile strategic advisory board include:

• Compensation model. A modest amount of cash goes a long way in getting the attention of potential advisors, and a little equity on top (a fraction of a percent) keeps their minds engaged even when not attending meetings.  The total cost of many advisory boards, meeting regularly, helping with multiple decisions in detail, can be less than that of a single senior employee and less than 1-2% of equity for a start-up.

• Information sharing. Too many advisory boards meet semi-annually, and beyond that are contacted individually by phone.  That’s because the company’s management team has a lot on their plate and lose track of the time investment needed to support the board.

  Anyone who has been in a consulting field realises how critical an understanding of a business’s culture, it’s operating metrics, and competitive context is to making effective decisions.

  Therefore, advisory boards can benefit from a light “information portal” where they can read a summary of relevant news and data, post ideas for discussion online immediately or in-person at the next meeting, and track results of programs.

• Evolution.  For strategic advisory boards, some members will prove useful advisors over years, while others will be a best fit for specific projects.  Both members and the company should explicitly discuss how their needs change and set 6 to 12 month reviews of their relationship.  This makes it easier to switch to a looser “stay in touch” commitment with existing board members, while introducing new talent to reflect the changes in the business.

• Facilitation.  Good advisory boards are comprised of a range of personalities and experiences that interact with management to come up with new solutions.  But this isn’t easy.  Think about staffing a consulting team where each member worked at a different firm, in a different location, put in an “all members are equal” starting situation.Instead, effective boards explicitly establish and regularly refine their rules of engagement, including scope of responsibility (for example, is management open to the board proposing new programs or highlighting company problems that management hasn’t put on the agenda), conflict resolution (including the acceptance of vigorous debate and approaches to recognize and address personality conflicts), meeting agendas and between-meeting time commitments.

  This facilitation itself takes a special skill set and experience base.

• Commitment.  All of the above point to a shared commitment to exchanging information, researching opportunities, and improvement processes that have to occur during and between meetings.The board needs to be thought of as a strategic weapon, focused on top-of-mind questions, rather than a “nice to have on the website” marketing tool to be worth creating.

  In turn, some members will want to contribute even more time to your business, for example, editing an investment plan or QA’ing a major implementation plan.

VC/PE Links I find really useful

I have lots of sites I regularly visit, for information/trends/research.  Here are just some of the ones that I highly recommend:

http://privateequityblogger.com/2009/04/private-equity-australia.html | Private Equity in Australia

http://raisingcapitalaustralia.com.au/ | Resources For Australian Companies Looking To Raise Capital

http://thomsonreuters.com/ | News and Investment Information

http://vcjournal.com.au/ | Private Equity Media

http://venturebeatprofiles.com/ | Used to be called Tradevibes, a great source of information on emerging companies

http://www.aaai.net.au/ | Australian Association of Angel Investors Limited

http://www.altassets.com/private-equity-fund-links.html?start=100 | Private Equity and Venture Capital Fund Links Directory

http://www.assob.com.au/ | Australian Small-Scale Offerings Board

http://www.ausinvent.com/content/innovation-technology-links | NSW Innovation Advisory Service

http://www.australiananthill.com/ | Australian Anthill, where Ideas and Business meet

http://www.avcal.com.au/ | Australian Private Equity and Venture Capital Association Limited

http://www.balnave.com.au/ | Balnave Capital Group

http://www.businessincubation.com.au/ | Business Innovation & Incubation Australia

http://www.bvp.com/ | Bessemer Venture Partners

http://www.equityassist.net/ | Online Funding and Investment Matching Service

http://www.fastcompany.com/ | Great source of Business/Societal/Technological trends

http://www.kennedyneedham.com/ | Kennedy Needham Corporate Advisory

http://www.mckinsey.com/ | McKinsey and Co

http://www.ozventurecapital.com/ | Find Venture Capital & Angel Investors in Australia

http://www.vcdirectory.net/stats/Australia/all.cfm | Australian Venture Capital and Private Equity Directory

http://www.vcsa.com.au/ | Venture Capital SA

http://www.wholesaleinvestor.com.au/ | Wholesale Investor

http://www.wholesaleinvestor.com.au/public_panel/capital_raising.php?gclid=CPP80bXg8KACFYQtpAodyC77GQ | Pre-IPO Capital Raising & Venture Capital Solution

What does Good Governance look like ?.

I get asked this question occasionally, most often in the context of “why didn’t XXX want to invest in us”.  The sad truth is that nearly 50% of all Australian businesses are not “investable” for various reasons … but one of the key reasons is a lack of Governance/Controls that makes potential investors nervous about the company.

Feel free to contact me if you want further information, or are looking for assistance in improving your business Governance.

I’m providing the following high level guidelines for businesses that meet the following criteria:

• Revenues of over $20M;
• EBIT of over $5M; or
• Seeking to raise over $2M in capital for acquisitions, expansion or other growth.

All Australian private companies looking to raise capital, or looking to sell, should review and where possible comply with the ASX Corporate Governance Council’s “Principles of Good Corporate Governance and Best Practice Recommendations” refer to http://www.asx.com.au/ListingRules/guidance/gn09a_corporate_governance_principles.pdf for details.

Your Board of Directors

Ideally your Board should consist of up to 3 Executive Directors (including the CEO and/or Managing Director) and an equal number of Non-Executive Directors, including the Chairman (who has the casting vote).

The role of this Board in relation to nomination and membership is to:

• review the size and composition of the Board;
• review the range of skills available and determine the appropriate balance of skills required for future board membership; and
• review and consider the succession planning of the Managing Director, the Chief Financial Officer, the Company Secretary and succession of Directors generally.

All Directors, with the exception of the Managing Director should be subject to re-election by rotation periodically.

Director Independence

Good governance dictates that the majority of the Board of Directors, including the Chairman must be independent of management and free of any business or other relationship that could “materially interfere with or could reasonably be perceived to materially interfere with the exercise of the Director’s unfettered and independent judgement”.

Conflicts of Interest

In accordance with the Corporations Act 2001 and the Company’s constitution, Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. Where the Board believes a significant conflict exists, the Director concerned does not receive the relevant Board papers and is not present at the Board meeting whilst the item is considered.

Role of the Chairman

The Chairman is appointed by the Board and should be a non-executive director who is demonstrably independent from the business executives and operations.

The Chairman is responsible for:

• leadership and effective performance of the Board;
• setting the agenda for Board meetings, in consultation with the Managing Director and Company Secretary;
• overseeing the provision of information by management to the Board, and ensuring the adequacy of that information; and
• arranging regular evaluation of the performance of the Board, Board Committees, the CEO, COO & CFO as well as all Directors.

Responsibilities and Functions of the Board

The Board considers that the essential responsibilities of the Directors are to oversee the Company’s business operations and its management for the benefit of its shareholders, employees and other stakeholders and to protect and enhance shareholder value.

The primary responsibilities of the Board include the following:

• chart the direction, strategies and financial objectives for the Company and monitor the implementation of those policies, strategies and financial objectives;
• monitor compliance with regulatory requirements and ethical standards;
• oversee the Company’s control and accountability systems;
• appoint the Managing Director, the Company Secretary and ratify the appointment of the CEO, COO and CFO from time to time. To set criteria for, and evaluate at least annually, their performance;
• monitor and assess management’s performance in carrying out any strategies, meeting any objectives and observing any budgets approved by the Board, and to ensure that sufficient resources are available to management for those purposes;
• approve and monitor financial and other reporting;
• ensure that appropriate internal and external audit arrangements are in place and operating effectively;
• issue any shares or other securities of the Company;
• approve the strategic plan, performance objectives and the budget;
• approve the remuneration and conditions of service including financial incentives for any Executive Directors;
• approve significant changes to organisational structure and the appointment of such senior officers as the Board may determine;
• approve the acquisition, establishment, disposal or cessation of any significant business of the Company;
• approve any public statements which reflect significant issues of the Company’s policy or strategy;
• review on a regular and continuing basis the executive succession planning, in particular for the Managing Director and executive development activities.

The Board delegates responsibility for day-to-day management of the Company to the Managing Director.

The Board should also have Committees to assist in the carrying out its responsibilities in an effective and efficient manner.  The Committees typically include: Audit Committee, Finance Committee and Remuneration Committee.

Independent Professional Advice and Access to Company Information

Each Director has the right of access to all relevant Company information and to the Company’s executives and, subject to prior consultation with the Chairman, may seek independent professional advice at the Company’s expense.  A copy of advice received by that Director must be made available to all other members of the Board.

Performance Evaluation

The performance of all Directors, the Board as a whole, the Managing Director and the Executive Team should be reviewed at least annually by the Board.

Remuneration Committee

The role of the Board, or a Committee formed by the Board, in relation to remuneration is to:

• Review and recommend to the Board as appropriate; remuneration policy, including employee share option plans and superannuation;
• review and evaluate recommendations made by the Managing Director concerning remuneration and other conditions of appointment for executives reporting directly to the Managing Director;
• Determine the broad structure and objectives of the remuneration policy and its relationship to Company performance;
• Review prior to implementation any new executive incentive schemes and any proposed changes to existing executive incentive schemes, including the appropriateness of performance hurdles and the total payments proposed; and
• Advise the Board on remuneration of non-executive Directors.

Audit Committee

The Board should establish an Audit Committee.  The Audit Committee assists the Board in fulfilling its overseeing and reviewing responsibilities.  The Audit Committee reviews the financial reporting process, the system of internal control and management of financial risks, and the audit process.

In performing its duties, the committee maintains effective working relationships with the Board of Directors, management and the internal and external auditors.

The Audit Committee reviews the scope and performance of the external audit and makes recommendations regarding reappointment of the external auditors to the Board. The independence of the external auditors is also reviewed, including the range of services provided in the context of all consulting services bought by the Company.

Risk Management

The Board acknowledges that it is responsible for the overall internal control framework but recognises that no cost effective internal control system will eliminate all errors and irregularities.

The Board periodically undertakes a review of business risks using the assistance of outside specialists and internal management to identify the source of the risk and loss, quantify the impact of these sources and control and reduce the risks through practical and effective control mechanisms.

These mechanisms include establishing procedures, guidelines, and organisational structures that provide an appropriate division of responsibility, a program of external audit, and the careful selection and training of qualified personnel.

The Board assigns the responsibilities for the operation and conduct of the business to the Managing Director who is directly accountable to the Board.