August 2023 Issue

Business Plus+ Newsletter

Index

Having a “Burning Ambition” Helps with Raising Venture Capital

“Scaling Up” – The Seven Steps

Strategic Reviews Do Help!

$219M now raised from Crowd Sourced Funding Equity Raising

Business Entities – Companies

What Does It Mean?

Having a “Burning Ambition” Helps with Raising Venture Capital

2021 was a stellar year for start-ups in Australia, where $7billion was raised in new capital. This is a significant growth from the $500million that was raised in 2016 when the then Australian Prime Minister Malcolm Turnbull launched the Australian Government’s “Innovation Agenda”, which included the legislation for Crowd Sourced Funding Equity Raising and Early Stage Innovation Company Capital Raising – both of which are playing an important part in the initial capital raising for a growing number of Australian companies.

It has been reported that many Australian companies are looking at the venture capital market to raise capital when they wish to significantly “scale up their company”. It is worth considering the criteria to raise capital from venture capitalists which was described in a recent article in the “Australian Financial Review” as follows:

The business needs a strong leadership team.
It helps to have a track record of successfully founding companies, failing that, a “burning ambition” to solve really big problems that will measurably improve the lives of customers.
Create a globally significant business in good or bad times – aka “GRIT”.
Having high-quality customers and high-quality revenue.
Having a large addressable market that can generate strong revenue with sustainable growth.
Having a strong competitive differentiation in the product.
A strong value proposition.
Increasing importance in a tighter funding market – strong unit economics, or the ability to acquire customers cheaply and quickly, helps to increase the value of the purchases and get to “pay back” that is very important for venture capitalists.

If you are interested in examining “scaling up” your company, Towers Business Development can assist you with the preparation of the Business Plan, Budgets, Cash Flow Forecasts and Projected Balance Sheets that are important components of the capital raising process.

Please give us a call on 1800 232 088 or send an email to or visit our website www.towersbusiness.com.au.

“Scaling Up” – The Seven Steps

These are the 7 Steps that can launch your business into the “scaling up” process.

Business Development Direction/Vision

What you want your business to look like in three/five years’ time?
Business activities and locations?
Business value?
Debt?
Will you need to raise capital?
Do you understand the capital raising opportunities available for private companies?

Business Purpose

Why do you do what you do?
Are you happy with these purposes?
Would you like to make changes?

Business Focus

What outcomes do your stakeholders want? (Customers, team members and their families, suppliers, community, shareholders, Board of Advice Members, Board of Directors)

Business Values

What behaviour is acceptable in the organisation and what behaviour is not acceptable?

Business Strategies

Have strategies been implemented?
- Business Plan;
- Predictive Accounting Reports comprising Budgets for each operational business unit, Cash Flow Forecast, Projected Balance Sheet;
- Weekly Report on each business operation, including profitability and Key Performance Indicators;
- Monthly Financial Accounts with Budget Variance Report and Key Performance Indicators Analysis;
- Monthly Business Review Meeting to Consider the Monthly Performance.
What three things do we have to “nail this quarter”?

Functional Responsibilities

Who, what and when?
- Leadership team
- Board of Advice
- Board of Directors
- Team recruitment and training
- Research and Development
- Intellectual Property development and protection?

Action Implementation

What “pattern of meetings” and structure will ensure what we plan to do?
- Daily stand-up meetings
- Weekly team meetings
- Weekly leadership meeting
- Monthly business review meeting
- Board of Advice Meetings
- Board Of Directors Meetings

“Scaling up” is a planned process. Towers Business Development can assist entrepreneurial companies to plan your “scaling up strategies” and assist in the implementation of those strategies.

We invite you to visit www.towersbusiness.com.au. Alternatively, we can arrange a complimentary zoom meeting by calling us on 1800 232 088 or sending us an email - .

Strategic Reviews Do Help!

A “Strategic Review” enables a business to have a set of strategies prepared for implementation during the next financial year.

The process includes:

Where is the business now?
What do you want your business to look like – in 12 months’ time – in 3 years’ time?

The best way to undertake a strategic review is to start with a TOWS Analysis:

T: is for “Trends” that are coming at your business – what do you need to do?

O: is for “Opportunities” – have you identified opportunities? This process will assist in that.

W: is for “Weaknesses” – the purpose of the Strategic Review is to identify any weaknesses that your business has, to ensure that strategies are developed to protect your business from these identified weaknesses.

S: is for “Strengths” – your strengths are the foundation for promoting the business, so that it can exploit the opportunities that are evident from the “trends”.

We can implement a Strategic Review:

Review of your financial performance for the previous financial year.
Review of your interim financial accounts.
Review of your current business plan and budgets (if any – doesn’t matter if you don’t have them).
Who are your customers – what feedback do you get from them? Could you make additional sales to them?
What products or services do you manufacture/develop/purchase that you value-add and sell to your customers? Could improvements be made in the range of products/services that you have available for your customers?
Who are your competitors? Have you developed strategies to assist in competing against them?

Interested in knowing more about Strategic Reviews

Towers Business Development assists businesses to develop Strategic Reviews. June is a great month to undertake the review process because it will set you up for action in 2023/24 a financial year that is going to have plenty of challenges.

If you would like to have a chat with Peter Towers – an experienced Director, Chief Financial Officer, Company Secretary – give us a call on 1800 232 088 to organise a suitable time for a complimentary zoom meeting. You can also visit our website – www.towersbusiness.com.au – to find out more.

$219M now raised from Crowd Sourced Funding Equity Raising

Crowd Sourced Funding Equity Raising in Australia has now reached $219 million since the amendments to the Corporations Act, which enabled Equity Crowdfunding to be available in Australia from September 2018. In 2022, 91 companies were successful in raising $71million from Australian investors.

Private or non-listed public companies are able to utilise Crowd Sourced Funding Equity Raising to raise capital, if their gross international turnover is less than $25 million, the value of their assets is less than $25 million and the company is not listed on a stock exchange anywhere in the world.

When the previous Liberal government introduced the legislation, it was on the basis that the Australian Securities and Investments Commission (ASIC) would appoint businesses that held Australian Financial Services licenses to perform the role of Crowd Sourced Funding Intermediaries.

The Intermediary’s role is to interview the company directors and leadership team to decide whether the company complies with the law and understands the concept of raising capital from the public. The Intermediary normally assists in guiding the Company’s Directors and Leadership Team through an expression of interest process, to test the market before approving the company’s application to be able to raise capital in this manner.

A pre-requisite to the capital raising process is that the company needs to have prepared:

Business Plan
Budgets, Cash Flow Forecast, Projected Balance Sheets
Crowd Sourced Funding Offer Document

The Directors and Leadership Team Members need to have a clear understanding of the legislation, pertaining to raising capital in this manner, and the role of the Crowd Sourced Funding Intermediary that the Directors appoint.

Most companies require assistance from experienced advisors to successfully complete this process.

Towers Business Development can assist in the preparation of the documentation required and in mentoring the Directors and Leadership Team Members in the Crowd Sourced Funding Equity Raising process and the Intermediary’s role.

Details of our services are available at www.towersbusiness.com.au. Alternatively, if you would like to have a conversation with our Director Peter Towers, please telephone 1800 232 088 to arrange a complimentary zoom meeting, or send us an email: .

Business Entities - Companies

Private Companies

The most popular entity for small business is a private company. A private company needs only to have one Director. A company is a separate legal entity from its Shareholders and Directors and is not subject to a time requirement, relative to being ‘wound up’, such as a Discretionary Trust. Company Shareholders can decide whether the company will have a separate constitution or adopt what is known as the ‘replaceable rules’ that are specified in the Corporation’s Act.

Every company has to have a registered office. A private company’s registered office does not have to be open to the public. A private company only needs one Shareholder and can have a maximum of 50 Shareholders. Shareholders do not play any direct day-to-day role in the administration of the company, unless they are Directors.

Each company has an Australian Company Number (ACN).

A company can be sued, can sue and has the power to operate virtually every type of business, unless prohibited by its own Constitution.

The company is liable for the debts the company incurs and not the Shareholders and Directors, unless the Shareholders and/or Directors have given a personal guarantee to an external party for debts relating to the company. Directors can be liable if they have allowed the company to incur debts, whilst the company has been insolvent, or the company has not met its super guarantee charge liability, in full, by the due date. Directors will automatically become personally responsible for a penalty equal to the unpaid amount.

Directors can also be liable for payment of PAYG withholding tax that has been withheld from employees’ wages, if not paid to the ATO, as well as other company’s tax liabilities in certain circumstances.

If you would like to discuss any aspects of utilising a company within your business, please telephone Peter Towers on 1800 232 088 to arrange a complimentary zoom meeting, or send us an email: .

What Does It Mean?

Assets

Those items acquired by the firm to aid it in accomplishing its business objectives.

Benchmarks

Benchmarking is the comparison of a business' operating key performance indicators and financial ratios with best practice and average performance data relating to similar businesses.

It is very difficult, in small business, to find authentic data against which to compare your performance to that of your peers, as this information is generally not known or released. It makes it very difficult for small/medium enterprises to know where they stand relative to:

revenue generated per employee;
gross profit percentages;
labour to turnover percentages;
net profit percentage to turnover; and
other performance data, as compared to the overall industry performance figures.

However, you can subscribe to benchmarking.com.au to obtain a Benchmarking Report relative to your type of business.