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Welcome to the April newsletter.
What is your Advantage?
A common tool to assess the ability of your business to sustain threats from your competitors is the Five Forces Model.
The Five Forces are the rivalry amongst current competitors, the threat of new entrants, the threat of new substitutes, the power of suppliers and the power of buyers.
You should consider the following factors about your business.
Competitive Rivalry
Consider the degree of rivalry amongst the existing industry players. Rivalry is most intense where there are direct competitors of roughly equal size, when industry growth is slow and where the product/service cannot be differentiated.
Threat of Entry
How easy is it for newcomers to enter the industry and compete for a customer’s business? To what extent is there barriers to entry e.g. amount of capital, economies of scale. Access to distribution channels and brand loyalty may also create significant barriers.
Power of Buyers
If buyers are few in numbers and have alternative sources of supply they are in a powerful position. In some industries, such as fuel, just a few large firms dominate and the other, much smaller suppliers are obliged to follow the leader(s).
Power of Suppliers
The factors determining supplier power largely mirror those of buyers. A supplier is powerful if buyers have few other sources of supply or if the supplier has many buyers. Another factor affecting supplier power is the level of “switching” costs. These are the fixed costs incurred by customers of they change supplier e.g. the training costs that would exist if a large computer user moved from Microsoft products to an alternative. Generally, high switching costs mean greater power of suppliers.
Threat of Substitutes
How strong is the threat? Are new products being developed that will displace existing ones. Technological developments will often give rise to substitutes.
What changes are likely in the future? How will mergers or acquisitions affect the industry? Will technical advances make the product absolute? The development of the ipod is a substitute for CD’s which had replaced records and cassettes.
Resourcing for Growth
16% of SME’s rate finding enough good people as their number 1 business challenge
13% say finding enough work is their largest challenge
These two statistics are opposite to each other – on the one hand, many SME’s have a business that is constrained by having more business than people to look after it whilst another group is struggling to win business.
Which are you? Proper resourcing of staff with talents complimentary to your own (be smart enough to hire people that know more than you!) is so fundamental to business success. As this financial year draws to a close it is time to set budgets for next financial year (did I hear a reader say “what are budgets?”!) so that you have clear measurable targets for business success. A part of the budgeting process is determining what resources (staff, facilities, infrastructure, IT, marketing, etc) you will need to achieve a targeted profit.
Let us help you in these key areas of business and financial success.
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Owning a home is still a great Australian Dream
But for many, buying that home, whether it’s your first home or a subsequent one, feels just out of reach. For others, managing home loan repayments can sometimes become a struggle or simply just prevent you from doing some of the things you want to do.
There is a new loan product available that can help you reduce your home loan repayments or even purchase the home which otherwise you may not have been able to afford. An Equity Finance Mortgage (EFM) woks in conjunction with a traditional home loan. Together they let you move some of the expense of a traditional home loan to later when you eventually sell your property. Here’s how:
An EFM allows you to borrow up to 20% of a property’s value. No interest is charged on an EFM loan unless you are in default. You are not required to make any interest or principal repayments throughout the term of the EFM loan.
Instead, when you sell the property or repay the EFM for some other reason, you repay the EFM amount you originally borrowed plus up to a 40% share of any increase in the value of the property.
And while nobody likes to talk about property values decreasing, if this does happen when you have an EFM loan and you are selling your property, you may not have to repay the full EFM amount – a feature unique to an EFM.
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