life+toilAn advice, news and lifestyle magazine for clients

Client StoryDarren Thomas

Chief Executive Officer Thomas Foods International

Issue 2

Judy Curran CEO, Can:Do Group

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WelcomeWelcome to our second issue of Life + Toil

In this edition we meet Hood Sweeney’s independent investment advisory committee.

The committee is chaired by one of Australia’s most successful fund managers, Erik Metanomski, and includes his co-director of Lanyon Australian Value Fund, David Prescott, and Hood Sweeney senior director Tony Michaels. Find out what our expert advisers think about the drive for income which is leading investors to take greater risks and where to find value in generally overheated asset markets. They explain the deep value approach to investing that seeks to buy stock in undervalued companies, providing a margin of safety or insurance policy against unforeseen bad news.

We learn about the rising fortunes of agriculture and food production which, like the season in the iconic Australian poem Said Hanrahan, have been written off as “rooned” many times before bouncing back. One of South Australia’s most prominent economic development champions, Thomas Foods International CEO, Darren Thomas, says unlike other industries where technology has displaced labour, agriculture and food processing are using high-tech production techniques to create significant jobs growth in Australia. His family-based food processing company is spearheading the mining boom-to-dining boom revolution in South Australia, generating more than $1.5 billion annually. But Mr Thomas warns policy makers will need to tread carefully to ensure premium food production is sustainable. We need to find ways to help young people with a passion for farming into the sector, he says.

This edition of Life and Toil features local retail and hospitality design expert Mike Darvill who, with business partner Mark Addison, has established Adelaide’s first specialist retail and hospitality design firm. While the company has fitted out big names in retail and hospitality including Nandos, Eagle Boys and Westfield, Mr Darvill says design based on the latest marketing research is not reserved for big business.

Increasingly, he says, smaller businesses are coming to understand the importance of designing their space to enhance sales, using design that taps into the five senses.

We meet the award-winning customs and logistics company, South Australian Customs Agency Services, a family-owned enterprise taking on the global titans by combining quality service, high tech solutions and deep global networks. Fresh from winning the coveted Australian International Freight Forwarder of the Year Award last year, the Company is in the running for the Defence Teaming Centre Outstanding SME award in 2015, recognising its increasing capability in servicing Defence industries.

Buoyed by its success over the past 40 years in helping to achieve greater inclusion for people with chromosomal disorders, Down Syndrome South Australia is turning its attention to raising awareness about the need to include people with Down syndrome in the world of work. With the assistance of Hood Sweeney’s Keith Rutherford on the Board and CEO Maureen Lawlor, the organisation is developing a sharper corporate focus to meet the demands of its clients under the new client-focused National Disability Insurance Scheme (NDIS).

We also learn about the importance of succession planning in your business. Hood Sweeney’s Consulting and Performance Coaching team, Chris Stewart and Simon Starr, say while many small businesses leave succession planning to the last minute success lies in structured planning – well ahead of your deadline.

And fresh off the plane from their 7-year stint in Dubai, the new owners of one of the Barossa Valley’s favourite institutions, 1918 Bistro & Grill, are feeling the pressure and the love from the community in equal measure.

While the locals are excited about an injection of international business experience, new owners Tanya Freer and Sid King are taking a gradual approach in their stewardship, careful to uphold the traditions for which the restaurant is famous – particularly its spectacular desserts. In this edition of Life and Toil, they share a Asian inspired prawn recipe. You might just prefer to drive into to Tanunda for the afternoon and let the restaurant do it for you and treat yourself to dessert while you are there.

Matthew Rowe Managing Director

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Thank you to our client, 1918 Bistro and Grill, for

supplying this recipe.

Ingredients16 fresh peeled gulf prawns with tails still attached

1 carrot1/2 a daikon

100gm wakame4 spring onions

A handful coriandertablespoon sesame seeds

MethodJulienne the carrot, daikon and spring onions,

then mix together with the wakame, coriander and sesame seeds. This salad is then dressed with daikon dressing and placed under the prawns.

Daikon Dressing1 tablespoon sesame oil

100ml rice white wine vinegar40ml mirin

50ml light soy sauce30g daikon, peeled and grated1 teaspoon ginger, finely diced

Togarashi (Japanese seven spice powder)

Ingredients1 tablespoon dried mandarin peel, crushed

2 teaspoons white sesame seeds2 teaspoons black sesame seeds

1 sheet nori seaweed, toasted and torn into small pieces

1 teaspoon dried chilli flakes1 teaspoon black poppy seeds

1 tablespoon ground sansho pepper

Muddle all ingredients in a mortar and pestle. Dust the prawns in Togarashi dressing

and pan fry.

Togarashi spiced gulf prawns, daikon & wakame salad,

sesame & ginger dressing

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Salary Sacrificing helps employees to save  

4

More than a pretty face: Faculty Design mixes marketing science and style to design clever spaces for retail and hospitality businesses  

5Cherry pick undervalued stocks or sit on cash but don’t be fooled into chasing yield in an irrational market, say expert investment advisers  

6

South Australia’s Customs Agency Services moves mountains

7

ContentsFront Cover: Darren Thomas Chief Executive Officer Thomas Foods International

Disclaimer This magazine is intended as general information only. It does not purport to be comprehensive advice. Readers should seek professional advice before acting in relation to these matters.

Australian jobs are still riding on sheep’s back says Thomas Foods International CEO  

8

Succession planning , six steps to a smooth transition  

10

1918 Bistro & Grill: From the shopping capital of the desert to the dessert capital of South Australia, adventurous couple takes on iconic Barossa restaurant, 1918 Bistro & Grill  

11Down Syndrome SA gets to work to help its clients find jobs and independence  

12

How to finance the equipment you need for your business

14Cut your technology coat to fit your business cloth

15

Risk insurance becomes the superhero when Adelaide entrepreneur breaks his neck  

16

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Salary Sacrificing helps employees to save

“Salary sacrifice” is a misleading term if there ever were one. For most employees the word ‘sacrifice’ means to give something up, and, when it comes to money, that’s something they never want to do.

In reality, though, salary sacrificing is a powerful way for employees to save money because the income tax that would have gone to the Australian Taxation Office (ATO) is redirected into their back pocket.

It is not just for big earners either – anyone who earns a salary can keep a little bit more for themselves by salary sacrificing.

However, not all employers allow you to salary sacrifice – so you have to ask them and hope they are nice about it.

What is salary sacrifice?The ATO defines a salary sacrifice arrangement (also known as salary packaging) as an arrangement where an employee agrees to forego some of the wages that will be due to them in the future, in exchange for something else of similar value.

These costs are then deducted from the employee’s gross salary before tax is deducted, which means an employee pays less tax on their income.

It is important to note that this arrangement (usually in writing), must be entered into prior to the income being earned otherwise the arrangement is deemed ineffective.

What can I salary sacrifice as an employee?Many employees are not aware of what they are able to salary sacrifice and the list is quite exhaustive.

The items you can package depends on the organisation you work for, however as a general guide the items that the ATO allows employees to package fall into three main categories:

Superannuation

This has benefits for both employer and employee.

The employee is able to contribute more into his or her superannuation account while the employer can claim a deduction for the amount of salary sacrificed contributions they contribute to the employee’s superannuation fund on their behalf.

The amount you can sacrifice is subject to an employee’s superannuation contribution limits.

Fringe Benefits

These items attract fringe benefits tax (FBT) for the employer when packaged by an employee. However, an employee will not have to pay income tax (including Medicare) on this amount.

› cars › health insurance › loans (usually for a car)

› school fees › childcare fees

Exempt Benefits

These items do not attract FBT for the employer when packaged by an employee, as they are considered work-related items.

› portable electronic devices › computer software › protective clothing

› tools of the trade › briefcases

It is important to note that although salary sacrificed benefits reduce your gross wage, benefits are added when assessing an employee’s HELP debt repayment, or, assessing entitlement to means tested income payments e.g. child support.

Who can salary sacrifice?Almost anyone with a wage can salary sacrifice – even if that wage is from their own business.

However, the biggest winners from salary sacrifice are people who work for public hospitals or not-for-profit organisations.

These employers will not be liable to pay FBT unless the benefits provided to an individual employee exceeds the relevant threshold – and as a result they are more likely to allow their employees to sacrifice most items on the allowable list.

They are also able to offer higher limits, which means their employees can sacrifice more than the average employee.

Example of benefits of salary sacrifice

Without salary packaging With salary packaging

Jane earns $60,000 each year Peter earns $60,000 each year

Jane’s taxable income is $60,000 and she gets taxed $11,847 including Medicare

Peter salary packages $8,101 towards his rent

Jane then pays $8,101 towards her rent using her after tax pay

Peter’s taxable income is reduced to $51,899 and he pays $8,971 in tax and Medicare

Jane’s take home pay (after rent) is $40,052

Peter’s take home pay (after rent) is $42,928

So while Jane and Peter earn the same gross wages, Peter pays $2,876 less in tax than Jane because he salary sacrifices his pre-tax salary towards his rent.

The information provided in this article is of a general nature and should not be relied upon as formal tax advice. Please consult us if you have any further queries so we can provide advice tailored to your specific circumstances.

Priya ChadhaAssociate,

Accounting & Business

Advisory

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There’s more to effective design in retail and

hospitality than simply producing a beautiful

shop or restaurant – the secret is in

developing a concept that encapsulates your

brand and enhances the customer experience, says Adelaide design expert Mike Darvill.

More than a pretty face:Faculty Design mixes marketing

science and style to design clever spaces for retail and hospitality

businesses

In the 15 months since Faculty was established, the company has attracted a strong following, working with some big names in retail and hospitality both interstate and in Adelaide including Westfield, Nandos, Eagle Boys, Diamonds Camera and Parlour Hair.

“We are seeing more and more of those companies with a design edge such as Jamie’s Italian and Tiffany’s coming to South Australia and that is starting to drive competition and awareness of brand design,” Mike says.

Incorporating design principles to enhance brand identity is becoming an essential part of business, with a strong evidence base attesting to its influence on sales and customer loyalty.

Increasingly, it is not about the big names; even the corner café is realising the benefits of brand design.

“It’s knowledge for everyone and highly beneficial – particularly if you engage designers at the early concept stage. You just need to

start with the fundamentals and the correct principles,” Mike says

Using this approach early in the project development is more cost effective – especially for small businesses, Mike says.

“The challenge in South Australia is to encourage business owners to spend on the concept design stage of the development, the drawing stage and the planning — this then flows to reduced costs on the building and fit out stage,” he says.

It’s about using the space and materials well and having a strong brand theme that you use to tie the project together.

“I’m not a big believer in design trends – I think it is important to have a branding theme and to carry that through your design. It’s about authenticity. Whatever you do, if you are using the industrial, retro look for example, it’s important that there is a basis of authenticity —it can’t be fake,” Mike says.

The joint principal of the specialist retail and hospitality design outfit, Faculty Design, Mike says increasingly businesses are coming to understand the importance of designing their space with a marketing and sales edge.

“It’s not just about having a design or fit-out that appeals to the eye. It is also about the journey of the consumer, encapsulating the five senses, placing consumables in strategic paths before you get to the visuals,” Mike says

Having worked as national designers and keeping a keen eye on international trends, Mike and his business partner, Mark Addison, decided that there was an opportunity to bring this marketing focus to design in Adelaide.

“We definitely felt that there was a market opportunity here in South Australia although we are still very much a national firm, based in Adelaide,” Mike says.

With a 15 year design background, the business partners have a strong understanding of retail and hospitality development, including the cost structure and timeframes for builds.

“We have tried to create something vibrant and creative where people can come and hang out, have fun and share ideas – we always have the music playing,” Mike says.

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In a world of record low interest rates and continually rising stock prices running against fundamentals, it can be tempting

to join the herd. In an international economy where central banks are printing money and economic indicators are weak, the canny investor needs to stick to a strategy of picking undervalued stocks and hold cash where necessary, a Hood Sweeney investment briefing has been told.

Hosted by Hood Sweeney Managing Director Matthew Rowe and Director Adrian Zoppa, the Financial Planning briefing brought together a panel of experts including Hood Sweeney Investment Committee members to discuss structural changes in the national and global economy and its investment implications.

The briefing was chaired by Erik Metanomski, chair of boutique equity funds manager Lanyon, and regarded as one of Australia’s most successful investors. The panel also included David Prescott, a former head of equities at institutional fund manager, CP2 (formerly Capital Partners) and now Lanyon Director and Portfolio Manager, and Hood Sweeney Senior Director and Head of Financial Planning Tony Michaels.

They told the briefing that, for Hood Sweeney, the key to investing in this environment was to handpick a few well-researched companies.

“We take a deep value, absolute return approach to investing. Unless we find the right investment we will hold cash and not follow an index or benchmark,” Mr Michaels said.

“Our point of differentiation is that we are there to preserve your capital as a priority and essentially we are not managing risk against an index… we want to at least keep you in the black,” he said.

Unlike other financial advice providers, Hood Sweeney made a conscious decision five years ago to establish an investment advisory committee with an independent chairman to scrutinise the market for stocks that represent high value and comparatively low risk to investors.

With this approach, Hood Sweeney has become highly selective around which value stocks are purchased each year.

“We don’t need a stock of the week. We have a fairly concentrated portfolio but we remain very close to those businesses,” Mr Michaels said.

Mr Prescott suggested the key was to only buy stocks at a significant discount to fundamental value.

“Companies have a real fundamental value — buying stocks at a significant discount to that fundamental value is your margin of safety. So even if you’re hit with some bad luck, eg if a CEO gets hit by a bus, you are insured against a bad outcome because you are buying stock at a substantial discount to its true value,” he said.

Mr Metansomski noted that while markets tended to retrospectively (over) react to good news or bad news about a stock, the value approach applied a rational lens, looking through the windscreen rather than the rear view mirror to gauge what a company was worth.

“Known news is generally priced into a share price. For example, the health sector is now priced at an outrageous multiple of earnings. The bad news known in the market is priced the other way – a stock is usually under-priced. Markets tend to be very situational and the assumption that markets make, very often to their detriment, is whatever is happening and whatever we experience over the next 2-3 years will continue,” Mr Metanomski said.

In contrast, Hood Sweeney’s investment committee looked for the completely loveless stocks that brokers did not cover and newspapers ignored.

“We look at each business individually and we seek to understand what that business is worth a) as a going concern and b) potentially what it could be worth to an acquirer and then we look at a series of measures that help us determine that valuation,” Mr Metanomski said.

“Those measures will be the competitiveness of that industry, the level of free cash flow that business generates, the level of assets that exists within that individual business and a number of other things and we come up with what we

think is a reasonable valuation for that business. The only time when we are interested in buying shares in a business is when they are trading at a significant discount to our valuation,” he said.

Even in an overheated market there were winners and losers and it was important to analyse these effectively. For example, companies with a high proportion of overseas earnings were benefiting from a lower Australian dollar, while such retailers as JB Hi-Fi and Harvey Norman were struggling with rising manufacturing costs in China and higher import costs.

Hood Sweeney by being founding investors in Magellan Financial Group’s International funds has benefited from the drop in the value of the Australian dollar.

Lanyon is also looking to reposition by closing its Australian fund to new investors and creating a new International fund based on the value investment principles.

“The great thing about markets is that they can be incredibly emotional so even in really frothy markets there are always companies that have been sold off for reasons that maybe lack rationality or common sense,” Mr Metanomski said.

At the individual stock level, the value approach proved its worth when the Committee recommended clients buy Village Roadshow at about $2.80 per share when it was a market pariah which they sold at over $7 when the big investment houses became bullish on the stock. This decision was made by remaining close to the business and seeing the writing on the wall.

The Committee was also successful with investing in printing and distribution stock PMP, which underwent restructuring under a strong CEO, after being the highest cost producer in an overcrowded sector.

Cherry pick undervalued stocks or sit on cash but don’t be fooled into chasing yield in an irrational

market, say expert investment advisers

Adrian ZoppaDirector

Authorised Representative 259128 Hood Sweeney Securities Pty Ltd AFSL No. 220897

Tony MichaelsSenior Director

Authorised Representative 239866 Hood Sweeney Securities Pty Ltd AFSL No. 220897

South Australia’s Customs Agency Services moves mountains

When it comes to moving imports and exports into and out of Australia, family company Customs Agency Services (CAS) has proven that a mix of old

fashioned service, well-trained staff, extensive networks and high technology logistics can place Adelaide at the centre of the globe.

The company, established in 1976 by former customs officer, Phillip Callus and now operated by his son Mark Callus and daughter Louise Rigoni, has built a reputation in transport options. It particularly prides itself on providing bespoke transport solutions to sectors such as defence, manufacturing, mining, aeronautical, communications, construction and agricultural equipment, wine and pharmaceuticals. In an era in which Australian firms have struggled to remain competitive internationally, CAS has come out on top – primarily through its focus on quality of service, Ms Rigoni says.“We have been commended by Australian Customs on our attention to detail and our ability to comply with regulations which we believe is a critical factor in our success,” Ms Rigoni says. CAS was recently awarded the prestigious 2014 International Freight Forwarder of the Year award for its innovation, compliance, customer service and competitiveness. It also is one of three small/medium enterprises (SMEs) short listed to win the Defence Teaming Centre Outstanding SME award.

The company which employs 30 people across logistics, sales, admin and customs brokerage, is one of the increasingly rare companies able to offer university graduate positions in South Australia these days.“We have a great service culture – we always have someone here to answer a customer’s call and we have invested in the quality of staff,” Ms Rigoni says. Yet despite its global reach, CAS retains a family quality in the relationships it builds with customers. “The other way we have been able to maintain competitiveness is to be an early adopter of technology which has made us more efficient – we were one of the first brokers to use electronic lodgement in the 1980s, for example.”The next step, Ms Rigoni says is to build on the company’s reputation and to increase market share. “I think we can do this very successfully from South Australia,” she says. “There’s no need for us to move interstate or offshore… we are very proud of the competitive, high quality service we can offer nationally from Adelaide.”

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Furthermore, when Hood Sweeney’s Investment Committee chose to be underweight in banking stocks it sought value in other sectors and stock like Telstra which was benefiting from the low interest rate environment.

Hood Sweeney’s macro view of the world was that there were:

› unprecedented levels of quantitative easing around the world by the central banks

› artificially low interest rates and in some cases negative interest rates around the world

› artificially inflated asset prices across the all sectors.

This policy setting was causing investors to chase income and driving up asset prices. The general feeling worldwide was that climbing asset prices could not continue indefinitely.

At international investment forums held in London and Boston late last year, the world’s leading investors almost unanimously agreed it was a very difficult time to be an investor because central banks were printing money and artificially inflating asset markets.

“There is heightened risk and we see many very experienced investors giving investors’ funds back and sitting on cash notwithstanding the negative interest rates,” Mr Prescott said.

“None of the world’s leading investors are participating in this reach for yield epidemic that has permeated financial markets. There was probably an expectation at the international forums that this extraordinary money printing — a coordinated, unprecedented money experiment — is not going to end well,” he said.

Australia was significantly better off with interest rates at around 2 per cent higher than many other countries in Europe where investors were essentially paying institutions to hold their money.

“You would expect with interest rates coming down and the return we are generating on cash deposits that we would be maintaining very minimum cash in the portfolio and investing in the equity market which is going up and offers the potential for higher return,” Mr Prescott said.

“In fact it is quite the contrary – we have very high cash balances in our portfolio – up around 50 per cent which is not an insignificant amount of cash sitting on the sidelines waiting for opportunity ….. We are not finding sufficient compelling opportunity in the stock market to invest our capital. The potential return does not compensate for the risk,” Mr Prescott said.

Mr Metanomski commented that the banking sector particularly, represented significant risk, with all the conditions present that had caused the sub-prime mortgage disaster in the United States in 2007: low document loans, highly geared borrowers and an inflated real estate market.

Hybrid fund raising instruments – unsecured convertible notes – issued by banks would be the first tier of assets to “go underwater” in a recession, the briefing heard.

“This investment business is not about the big gains you make in certain stocks, what will determine your long term compound rate of return is how many losers you can avoid. It’s all been about avoiding losing in the trouble areas,” Mr Metanomski said.

The key was to be patient and rational through the turbulent times.

The investment forum’s four top tips were:

› Capital preservation is key, holding cash becomes an enabler to move quickly as oppprtunities arise

› Don’t chase yield and put your capital at risk

› Be selective in what you are choosing

› Adjust to a low yield.

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Australian jobsare still riding on sheep’s back

says Thomas Foods International CEO

Unlike some areas of manufacturing where technology replaces labour hire, high tech

farming and food production can produce more agricultural jobs for Australians, says Thomas Foods

International CEO Darren Thomas.

From his vantage point at the helm of South Australian global agri-business Thomas Foods, Mr Thomas says the prospects for premium food production are bright in a world increasingly worried about food security and pollution.

He says agriculture is still playing a big part in Australia’s employment growth – even though it is a far cry from the life on the land the Australian poets romanticised — with large scale operations and high tech machinery.

“The early history of Australia was developed off the back of agriculture and it is still playing a major role. We’ve seen industrial revolutions, we’ve seen mining booms but the one thing that has been consistent in the history of

Australia is the significance of agriculture,” Mr Thomas says. “There are terrific opportunities ahead for agriculture and it is a wonderful lifestyle – there’s no doubt about that.”

Free trade agreements with China and potentially India and the paddock-to-plate marketing story have created renewed interest in Australian agriculture and food production and Thomas Foods International is riding that wave. Like modern day farmers, Thomas Foods has embraced high-technology to give it an edge with economies of scale and quality improvements in a high cost environment.

The business has emerged through droughts, global financial crisis and a high cost trading environment to become one of South Australia’s most exciting success stories with annual revenue in excess of $1.5 billion.

From its roots in 1988 as T&R Pastoral, an agricultural trading company, to being re-branded in 2013 as a fully-fledged, vertically integrated, food processing company, Thomas Foods International now exports to 80 countries, processing 120,000 lambs and sheep and 6,000 cattle per week.

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Based in South Australia with processing and distribution facilities around Australia, it employs 2,500 people across the group.

“We had a fairly strong vision of where we wanted to be although the company over 30 years has changed from a trading, stock buying unit into a fully-fledged food processing company.

“Obviously Australia is a high cost manufacturing environment and we’ve deliberately concentrated on a number of areas. We’ve targeted the premium end of the market in our sales and we’ve invested in our plants to make sure we’ve had the latest technology to make us efficient processors. Obviously we try to extract every little bit of revenue we can out of our products through new product and market development,” he says.

The business has become almost synonymous with the mining-to-dining boom revolution over the past five years, the champion of South Australia’s high quality food industry and a key player in economic development planning in the state.

“I think I’ve been on record too many times about my beliefs about South Australia but I think one thing I’m proud of is that we can be seen as an example of a business that has the majority of its business in South Australia and still has a global presence.

“We have some challenges in terms of our cost base – our prices for water and electricity tend to be on the dearer scale but at the same time if you look at our employment – we are not having to match some of the wage rates of the

eastern states because the cost of living and land prices are lower,” he says.

Globally, there is a growing appreciation of Australia’s high quality food products but there’s a long way to go before Australia can fully reap the benefits of trade liberalisation in the Asian region, Mr Thomas says.

“I think marketing is important for making people aware of the very high quality product that Australia produces; the sustainable and safe nature of it. We have a competitive advantage against other countries and we need to maintain that quality because our product is expensive on the global stage compared to some of our competitors, be it New Zealand and South America, and it’s about extracting premium prices.”

Yet policy makers and producers will have to play their cards right to ensure sufficient labour supply to the industry to maintain sufficient production, he says.

“We’ve got challenges here in Australia; we need to get more product, more supply and more productivity out of our farms. We’ve got a high cost manufacturing base but equally we have a lot of opportunity; people all need to be fed,” he says.

Future success will require a persistent approach to developing new products and markets, being frugal in the use of the animals to ensure nothing is wasted and ensuring that their treatment and processing are first class, Mr Thomas says.

And more needs to be done to make agriculture more accessible to young people and to encourage capital expenditure in the sector, he says.

“It’s not a get rich quick scheme – farming is a lifestyle and a good honest living can be earned from it —but the biggest constraint at the moment is for people getting into it. If you are a young person from the city who has a passion for agriculture, trying to get funding and getting into the industry is extremely difficult. Capital is a barrier.”

That’s why it is important to strike a balance between attracting much-needed foreign capital into the sector and maintaining some local ownership, he says.

“We need foreign direct investment into the agricultural industry in Australia where there have been more people leaving than going into it. It is certainly welcome because they are able to put capital into Australian agriculture where traditionally, farmers haven’t been able to. Foreign investors have been able to improve processes,” Mr Thomas says.

“But at the same time there is a national interest to make sure we, like any country, are not completely selling off the family farm. It requires a balance. The best way to do that is to have as much disclosure as possible but we certainly shouldn’t discourage any foreign investment.”

Farming, like business, is about balance and that’s where Thomas Foods International has been particularly successful, he says. While there’s no doubt it has become a big, high tech business with a global focus, it retains its family values and connections to home.

It’s a characteristic the company shares with Hood Sweeney, which has many longstanding professional relationships with its clients and builds strong links to the broader community by actively encouraging pro bono work and fundraising for good causes.

A long-time client of Hood Sweeney Senior Director Eddie Taylor before the merger with Shearer + Elliss in 2013, Mr Thomas says the culture of the two firms is aligned.

“Although our company has grown significantly, we are still a family privately owned company…we are corporate by size but a lot of our values and ethics are based around family and that’s something I feel with Hood Sweeney…. Many of our clients around the state – the farmers — are also clients of Hood Sweeney so there is a natural connection there,” Mr Thomas says.

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If the future is something that happens while you are busy making other plans, it’s no wonder that succession planning

sits on the back burner for many businesses.

When you have built the business and are cruising in business-as-usual, it can be difficult to start to hand over the steering wheel or to consider how the business would survive without its current leaders if it had to.

Yet, gradual and thoughtful succession planning should be an important part of business planning – and it should happen before it becomes urgent, says Hood Sweeney Consulting and Performance Coaching Director, Chris Stewart.

It’s a real issue in SMEs and particularly in the health sector. A recent Hood Sweeney survey of 130 South Australian health practices, found most (77 per cent) expected that managing the retirement of the practice owner would present a significant challenge over the next two years.

Mr Stewart said that while many SMEs understood that they needed to act early to plan for succession, they found it difficult to find appropriate people to take over.

“Many SMEs we talk to state that succession planning is one of the most important challenges facing their business but also the most difficult to confront,” Mr Stewart said. 

Consulting and Performance Coaching Associate Director Simon Starr said the key to successful succession planning was taking a structured approach.

“It’s not something that can be done overnight – succession planning really requires at least 12 months to think and talk it through and start implementing. In this case the journey is as important as the destination,” Mr Starr said.

For example, Hood Sweeney recently worked with a sole owner of a 15-person SME who planned to sell the business to some managers in the team.

“The first step was to develop a clear strategy and vision. Only then could we work through the logistical steps of transforming the business, including the required accounting, finance and legal requirements,” Mr Starr said.

Hood Sweeney’s six-part framework involves working through these key steps:

Communication –Talking with leadership and staff to outline an appropriate timetable and transition plan.

Business structure – Establishing whether the current business structure is appropriate for the transition and whether it will be tax-effective for both sellers and buyers.

Legal structure – Asking whether the current legal agreements accurately reflect what is happening in the business. Have the new owners sought independent advice? Are there formal agreements in place with key suppliers and staff? How will the transaction be structured? Does the shareholder agreement need to be updated?

Finance arrangements – Considering how the new owners will fund the purchase of the business. Will the business require a line of credit/working capital to support the business in the short term? Is it insured in case one of the new owners gets sick and is unable to work?

Business valuation – Examining the drivers of value in the business. How is the business going to be valued? What is and is not included in the purchase? Will there be a deferred payment structure to mitigate risk? How will the buyers conduct their own due diligence?

Clarifying individual goals – Ensuring the goals and objectives are clear. Has the current owner obtained advice to optimise tax of sale proceeds? Has the new owner obtained advice about the appropriate structures to maximise their future wealth creation and protection? Does the business need to review the business plan and strategy under new ownership? Do the new owners need coaching and mentoring or independent advice to ensure success?

Succession planningsix steps to a smooth transition

Chris StewartDirector

Simon Starr Associate Director

Coming almost straight off the plane from a 7-year stint in Dubai to take over one of the

Barossa Valley’s most iconic restaurants, 1918 Bistro & Grill, Tanya and Sid King might

be forgiven for feeling a little daunted

But just 14 days into the project and supported by the Tanunda community, they are excited about the prospect of living up to local and international expectations.

“As well as being one of South Australia’s most popular restaurants, it is also the favourite restaurant of many locals so there is definitely a sense of ‘Don’t wreck it!”, Tanya says.

Having worked in South Australia, Darwin, Cairns, the UK, Europe and Dubai, Tanya and Sid are keenly aware of the complexities of blending cultural influences with the old and the new and they are adopting a staged approach to injecting their own influence over the much-loved 1918.

“Having been here for just three weeks, we are just getting things up and running smoothly as the first step. We won’t be embarking on any grand schemes for the moment. There’ll be a sense of continuity,” Sid says.

1918 will undergo a gradual facelift with new decor and menus but the essence will remain the same, with the same faces and the same emphasis on fresh, flavoursome food.

“It’s about fresh local produce – it blends grass roots Barossa cuisine with an Asian influence. We have lovely Gulf prawns with a Korean Kimchi salad for example. It’s the type of food we love to eat,” she says.

“1918 Bistro & Grill is a brand that we are extremely passionate about and we have been looking to move to the region for a number of years. We needed to find the right venue to share our passion and our vision for food and wine and we are extremely confident that 1918 Bistro & Grill is the right venue.”

“From that first phone call 5 months ago with Jim Pinkney, who came recommended through my brother, the Hood Sweeney team have helped us realise our dream. We needed a team who could manage this for us on the ground in Adelaide because we were still living in Dubai, so it’s without a doubt they have been an integral part of our journey and we can’t thank them all enough” Tanya says.

Nestling into the Barossa community with their two little daughters, Tanya and Sid are relishing the opportunity to plunge into all aspects of the business. It’s a lifetime away from working in giant hotel chains and casinos although the marketing and strategic management skills honed in these pressure-cooker environments will be useful in the maelstrom of running their own business.

“We have had a lot of good feedback about how nice it is to have people bring a fresh perspective from overseas to the Barossa, some new ideas. There’s pressure in taking this on, but there’s also support from the community and it’s really wonderful. They want us to be successful,” she says.

Sid says the couple is keen to retain the quality that made them fall in love with the restaurant.

“Our restaurant is very much focused on the quality offering of our food and wine and the high-level of customer service we offer to our guests. We first dined in 1918 15 years ago as a young couple on our first holiday together, as the years went by we continued to frequent it on holidays from Cairns and Dubai... We are going to make sure that visitors all over the Barossa Valley have access to the very best food and wine flavours,” he says.

www.1918.com.au www.facebook.com/1918BistroandGrill enquiries@1918.com.au

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1918 Bistro & GrillFrom the shopping capital of the desert to the dessert capital of South Australia, adventurous couple takes

on iconic Barossa restaurant, 1918 Bistro & Grill

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Like many of the people it helps, Down Syndrome South Australia is rolling up its sleeves to do a new job – paving the way for employment and independence

for people with Down syndrome, says CEO Maureen Lawlor.

Buoyed by the success of inclusion programs in schools where many children with Down syndrome have participated in mainstream education over the past few decades, the association is gearing up for its next challenge: achieving genuine inclusion for its clients in the world of paid work.

And while there is a financial imperative, with the first generation of children with Down syndrome to outlive their parents, there is an even greater social imperative, Ms Lawlor said.

“It’s not just about financial independence, although that is important, but having employment is important for building self-confidence, a social network and a sense of independence,” she said.

Much has changed for people with Down syndrome since the association was established by parents as the first of its type in the nation 40 years ago, providing early intervention and support to families with children with Down syndrome.

Although it was once the norm for parents to physically care for their children with Down syndrome throughout their lives, increasingly it is expected that these young people will grow up to live independent lives.

“Medical and social advances create a greater need to ensure that people with Down syndrome are supported to live independent lives though improved education and post school options ,” Ms Lawlor said.

While increasingly children with Down syndrome are successfully integrated into mainstream education, Ms Lawlor says, they are still to find the same acceptance in the world of work.

Simple things, such as being included in the weekly staff meeting, having your name on the in-out board, being included in staff social activities are important symbols for staff with disabilities who aspire to being genuinely included, Ms Lawlor said.

“Part of the success in schools was that it was driven by discrimination legislation – there were policies and procedures that facilitated integration and inclusion. With business, it is very different – it’s a big task for us all - some of it is about education, understanding legislation and corporate social responsibility,” she said.

Down Syndrome SA gets to work to help its clients find jobs and independence

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Down Syndrome South Australia is focused on providing early intervention for families, helping them get access to counselling, therapies such as physiotherapy, occupational and speech therapy and providing professional development for teachers working with these young people.

The organisation, which employs 14 people, also plays a strong role in providing recreation such as dance, camps and sporting activities for people with chromosomal disorders and other intellectual disabilities.

Promoting employment for people with Down syndrome though is an increasingly important part of the association’s agenda because as Ms Lawlor is keenly aware, having come from the corporate sector to head the association two years ago, making jobs available and providing jobs for people with disabilities is not on the radar for most employers.

“I think most companies just don’t have any experience of working with people with disabilities or exposure to the issues and they just don’t have any awareness about where they could provide opportunities for or what it means to them to do it,” she said.

“I know, myself, having come from a business background, you are not aware of the issues… it wasn’t a consideration for me. Families of people with Down syndrome have a greater awareness of their capabilities and the need for companies to provide opportunities.”

And whereas employers have complained that the recent era of full employment has generated an easy come, easy go attitude to work among many workers, having a job

tends to be highly prized by people with Down syndrome, Ms Lawlor said.

With many and varied capabilities, people with Down syndrome have been employed across a range of sectors including the retail sector, administration and personnel, she said. This range of opportunities could be expected to increase over time though as employers adapt work places to become more flexible.

“Employees with Down syndrome are often very task focused. Like recruiting in any area, though, employing people with Down syndrome is about finding the right people with the right skill set for the position,” Ms Lawlor said.

Just as its clientele is adapting to a new environment, Down Syndrome South Australia is evolving to become more responsive to clients and financially flexible under the new National Disability Insurance Scheme (NDIS) funding.

“The NDIS is about the person with a disability – they get to choose where to go to get the services they require whereas under the old system, they were told which providers they could use … what it means to us as an organisation is that we have to have a greater understanding of what our customer wants and have more of an emphasis on marketing our services,” Ms Lawlor said.

“In the new environment we are looking at customer engagement and seeking their feedback to develop future services – for example, our funding limitations mean that we can offer many of our programs in only one location but many of our clients would like us to offer services closer to home.

“We would like to be able to take services to regional areas more regularly under the NDIS funding model,” Ms Lawlor said.

Down Syndrome South Australia is working to become more financially independent with a range of cost recovery and partnership strategies — these days government funding accounts for only 20-25 per cent of its funding.

“It’s a delicate balance though because we are in the people business and we will continue to do a lot of things for people that we don’t get paid for, just because it is socially just and part of our vision and mission, and that won’t change,” Ms Lawlor said.

Hood Sweeney is playing its part in this process with director Keith Rutherford on the board, tasked with overseeing the adaptation to the new funding environment.

Mr Rutherford said adapting to the new client-focused funding model had required a total turnaround in the association’s thinking and the introduction of new policies on cost recovery, service offerings, pricing and cash flow.

“Given that the clients are now funded to select the services they think will be of benefit and they can select the service provider, it is particularly important that the association has people with the right skill sets who can build the relationship with the client,” Mr Rutherford said.

“When individuals are putting their hand in their pocket to pay for a service, they are going to be very particular about those they select… I think that having worked through all these issues, Down Syndrome South Australia is in a very good position to adapt to the new environment,” he said.

“Medical and social advances create a greater need to ensure that people with Down syndrome are supported to live independent lives though improved education and post school options ,”

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With interest rates at their lowest in decades, it’s a great time to get the equipment you need for your business – or even start a new business.

Talk to us and you could find that our range of equipment financing options offer exactly what you need to make the most of your opportunities.

Why use equipment finance in your business?Many businesses simply do not have enough cash saved to purchase income-generating equipment outright. Buying equipment with financing allows it to be paid for over a number of years, rather than in one payment, which makes it much more affordable.

Equipment financing is also a popular alternative to a standard business loan. That’s because the financing may often be arranged with the new equipment as collateral, reducing your overall financial risk. It also allows you to preserve your savings in case you need to use them for other areas of your business. 

Equipment financing typically allows you to finance 80 -100 per cent of the cost of the equipment you need, so it can potentially save you money on a deposit. Many lenders also offer flexible payment terms to help you maximise your cash flow. There may also be substantial tax benefits and you should check with your accountant to see how they may apply to you.

What equipment financing options are available?The type of business you have and your equipment needs will determine what kind of equipment finance is right for you. Here are some typical options.

Chattel Mortgage: This is a straightforward loan where you own the equipment and the equipment is used as security for the loan. Once the mortgage is paid out, you have clear title to the equipment. Most commercial asset finance is done as a chattel mortgage. 

Asset Lease: An asset lease is an option in which the lender owns the equipment and the lessee pays a fixed monthly lease rental for the term of the lease. At the end of the

lease, the lessee has the option of paying the residual and taking ownership of the equipment, selling the equipment to pay out the residual, or refinancing the residual to continue the lease.

Commercial Hire Purchase: The lender purchases the equipment and hires it back to you for a set period of time. At the end of the contract term and when it has been completely paid out in full, you take ownership of the equipment.

Every business is different and it is important to consider each of these financing options carefully before choosing the one that will best suit your business objectives.  

What kind of equipment can you buy?Almost any kind of equipment can be purchased using one of these asset financing options, provided it is being used for legitimate business purposes.

Some types of equipment commonly purchased with asset financing are:

› computers and IT equipment

› trucks, buses and heavy commercial vehicles

› company fleet vehicles like cars and delivery vans

› earthmoving and excavation equipment

› industrial plant equipment like printing presses, factory and production line machinery

› agricultural and farming equipment

› healthcare, scientific and medical equipment

› hospitality equipment such as restaurant and kitchen fit outs, ovens, fryers and more.

If the equipment you need is not on this list, don’t be deterred. Tell us about your requirements and we’ll help you to get the best deal available for your circumstances and financial situation. As with mortgages, we can source financing from a wide variety of lenders which helps to ensure that you get the right deal for your purposes at a great rate.

If you’re in the market for some new business equipment, it pays to talk to us beforehand. With your financing pre-approved, you’ll have better bargaining power with your suppliers. To find out more about our asset financing services, call the Hood Sweeney Finance team on 1300 764 200.

How to finance the equipment you need for your business

Malcolm AndersonSenior Manager,

Finance

Nicole SqueoManager, Finance

Hood Sweeney Finance Pty Ltd ACL No. 391396

It’s tempting to spend up on business technology to show that you are tech savvy and keeping up with the Joneses...

...but is buying the latest interactive whiteboard, moving to the paperless office, having a bring-your-own-device policy or embracing cloud computing the best way of using your budget? Often it’s jumping on the latest bandwagon.

Some ICT initiatives are implemented purely for their marketing value (“everyone else is doing it, and we can’t be seen to be lagging”). Often, in these instances, the actual value stakeholders realise is debateable.

Experience shows that, in many cases, there is no real case (business case, that is) to justify spending on the next big thing in technology.

Adopting new business technology is often done without considering the organisation’s current processes and strategic thinking about how and why these should change.

Sometimes the questions: “why are we doing this?”, or “are we sure this will save us money or improve our business?” are just not asked. Yet often, the answer should be “don’t buy it”.

While business planners need to know what technology is available, they should deeply think about the real business need, and the business value that will be realised, before spending.

The important consideration must be the benefit received for the investment in dollars, time and process change – the business benefit vs the outlay. Sometimes “old school” is still effective, and the costs of shifting to a high tech solution aren’t justified.

Stakeholder communicationWithout a strategic discussion with key stakeholders about the business benefits of new technology opportunities, implementing new technology can have a negative connotation for the people performing the business tasks. Many people are averse to change at the best of times and are not prepared to vary from the secure path: “the way I normally do it”. Sometimes, too, there are unforeseen negative consequences attached to adopting new technology – particularly if you are an early adopter.

It is critical that you communicate and engage with stakeholders early and that you seek customer buy-in whenever a planned technology change is likely to impact on the way you do things. Once you identify the need for a process change, communicating expectations and effectively managing cultural change is critical to implementing new technology successfully.

Explaining the perceived issue, clarifying the changes and how they will resolve issues, increase productivity, or benefit staff goes a long way to alleviating potential rejection of the change. Explaining what the “new” business process is going to entail and the responsibility of everyone to adjust to the new process will give those affected a chance to engage, feel that they are part of the process and to express their views. This can often improve the outcome.

Only after this has happened should you implement the changes, provide quality training, give the opportunity for feedback and “tweak” the final system.

Dropping a new system on those who have to use it with insufficient stakeholder engagement is not recommended. It has the potential to increase stress levels or even result in staff rejecting new systems and processes. Clothing the discussion in terms of its business benefits rather than its technological improvements will go a long way to delivering an effective outcome for your business.

Technology solution Business benefit

Mobility Enables the freedom to visit customers with ready and available information and to communicate effectively with the organisation’s systems from anywhere

Big data Provides personally relevant client connections, insights into opportunities for improvement

Online collaboration Potentially improves productivity through creative sharing of ideas

BYO device Potentially improves employee relations, provides possible cost savings

Video conferencing Enables face-to-face engagement with clients and colleagues

Cut your technology coat to fit your business cloth

Keith Rutherford Senior Director

Technology Services

Alex BrockbankConsultant,

Technology Services

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Risk insurance becomes the superhero when

Adelaide entrepreneur breaks his neckWhen Adelaide anaesthetist Dr Bob Singh tripped while running in 2011 and suffered the same neck

fracture that paralysed superman actor Christopher Reeve, his professional life as well as his future

health could have hung in the balance.

As a senior anaesthetist in one of Australia’s largest private practices with three kids in private school and two fledgling companies in critical stages of development, Dr Singh admits it was not the time to spend a month in the Royal Adelaide Hospital’s spinal unit and another three months at home with a supportive halo screwed into his skull.

The injury, which effectively took the best part of nine months out of his working life, could not have come at a worse time, just as he was about to launch a new software product for anaesthetic practices and his wife was preparing to establish a gourmet spice enterprise.

“I was fit as anything prior to that – easily able to cycle 100kms and do all kinds of things but that injury massively and suddenly put a stop to all that. And then obviously, it put a stop to work – I had three kids at private school, a house and I was the sole bread winner at that stage,” Dr Singh said.

Yet fast forward two-and a half years and his practice management Vaper Software has been successfully implemented in a number of Adelaide practices and his business is expanding sales into the eastern seaboard.

Meanwhile Dr Singh’s wife, Jackie, has put her training as a Master of Gastronomy to good

use and launched the exotic online spice retailer, Rubyspice, with a range of barbecue marinades just in time for the Christmas trade. Rubyspice, too, is forging ahead with plans to expand sales into restaurants and develop its international linkages.

The key to riding out the almost catastrophic storm, Dr Singh says, was being appropriately insured, thanks to a lucky conversation with Hood Sweeney a few years ago.

“Prior to being with Hood Sweeney, I didn’t have very much insurance at all – one of the first things we did when I became a client was to sort out life insurance, income protection and all those types of risk insurance.

“Thankfully it meant we were able to continue with sending the kids to school and paying at least the interest part of the mortgage until I was able to get back to full capacity,” he said.

“We were right in the middle of developing the software – we were close to securing the first client and so development had to continue. Without insurance the software product would never have been developed… we had significant investment in the product already.

“My wife was also just about to launch the spice business – without that it would have all just come to a grinding halt,” Dr Singh said.

With the support of some programmers at Alcidion Corporation who provided a home visit service, and a strong dose of tenacity, Dr Singh was able to keep the wheels in motion.

“I really couldn’t get out of the house – because the halo meant that I couldn’t sit in the car… so what happened was that one of the programmers would come to my house on a regular basis and we would discuss how things needed to go forward – that’s how we continued.”

They were finally able to develop the fully integrated Vaper Software practice package which is designed to replace the multitude of software packages to schedule specialists, book appointments, manage diagnostic reports and issue bills.

The Vaper Software package enables specialists to log into the system via any browser from anywhere in the world to see their schedule, patients and patient diagnostic material and it reduces duplication for the office staff who only have to enter the data once into the Office software.

Now up and running in a couple of South Australian practices, Vaper Software is attracting attention in the eastern states – enough to justify a new team of salespeople to sell the product.

“It is great to see it coming together, great to see it in the practices and just to see how much money and energy and effort they’ve saved by having an integrated system… It is really nice to see things humming along,” Dr Singh said.

“I was very lucky - thankfully everything works and I didn’t have any lasting paralysis but at the time it was quite daunting.”

The next step, he says, is to steadily build the businesses nationally.

“I just want to concentrate on the local market that I know best – which is anaesthesia - and try to establish footholds in the eastern states where the large practices are,” he said.

For more information on life insurance, income protection or other types of risk insurance, please contact our Life Risk Specialist Mark Mullins on 1300 764 200.

Mark MullinsLife Risk Specialist

Authorised Representative 323919 Hood Sweeney Securities Pty Ltd AFSL No. 220897

Priya ChadhaAssociate, Accounting & Business Advisorypriya.chadha@hoodsweeney.com.au

Meet the contributors

Nicole SqueoManager, Financenicole.squeo@hoodsweeney.com.au

Tony MichaelsSenior Director, Financial Planningtony.michaels@hoodsweeney.com.au

Keith RutherfordSenior Director, Technology Serviceskeith.rutherford@hoodsweeney.com.au

Alex BrockbankConsultant, Technology Servicesalex.brockbank@hoodsweeney.com.au

Matthew Rowe Managing Directormatthew.rowe@hoodsweeney.com.au

Adrian ZoppaDirector, Financial Planningadrian.zoppa@hoodsweeney.com.au

Mark MullinsLife Risk Specialistmark.mullins@hoodsweeney.com.au

Malcolm AndersonSenior Manager, Financemalcolm.anderson@hoodsweeney.com.au

Chris StewartDirector, Consulting & Performance Coachingchris.stewart@hoodsweeney.com.au

T 1300 764 200 F 08 8232 1968 www.hoodsweeney.com.au

11–16 South Terrace Adelaide SA 5000 PO Box 10516 Adelaide BC SA 5000

Suite 13, Level 1 City Plaza Building 15–15a Darling Terrace Whyalla SA 5600

6a Graves Street Kadina SA 5554

Simon StarrAssociate Director, Consulting & Performance Coachingsimon.starr@hoodsweeney.com.au

1918 Bistro & Grillwww.1918.com.au

Faculty Designwww.facultydesign.com.au

Customs Agency Serviceswww.caspl.com.au

Thomas Foods Internationalwww.thomasfoods.com

Down Syndrome South Australiawww.downssa.asn.au