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The Forum > General Discussion > Is Business Fair?

Is Business Fair?

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We have many arguments here about wages, profits, & business, but I find myself thinking that we have people who are coming from a really unbalanced position.

Here is a case history of one little business I was asked to save from bankruptcy some time back.

It was part of one property trust, in a company that had 16 property trusts in its portfolio. As such its investors were mostly retirees, depending on the returns for their base income. This of course should make no difference.

In 2 years the business had accumulated losses of near $3,000,000. People used to managing appreciating assets are often not good at running businesses.

A tourist marine operation its boats were valued at $7,500,000, after I had replaced a couple, with about $1,000,000 other assets, & had around 22 full time staff, plus casuals.

Basic costs were;
Wages $1,700,000
Insurance $1,000,000
Fuel $1,000,000
Maintenance$1,200,000
Overheads $725,000
Head office $2,000,000
Replacement $1,200,000

Head office cost included a 15% return on capital to unit holders.
Replacement was retained capital to fund replacement boats at about 10 years old.

In a downturn I had most staff on a 4 day week, [still about 40 hours], & this was chosen by staff, rather than have 5 or so lose their jobs. The fact that the investors were mostly retirees probably coloured my thinking, but I saw my task was to maintain their return first & foremost.

Was I wrong?

What would you have done?

As you can see the numbers can get reasonably large, even in small businesses.
Posted by Hasbeen, Sunday, 6 November 2011 2:49:36 PM
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Has been,
I haven't an ounce of business sense. What I'm trying to understand is how a company which has the responsibility to look after other peoples' money is allowed to get to a situation where it no longer has the funds to give the money back to people. Why isn't there a law which, when a business goes downhill it has to stop when its resources get close to the red line. Why can businesses continue to lose more & more whilst the people are kept ignorant of the downturn.
On the other hand of course investors apparently do accept the risk but shouldn't they be enlightened before all is gone ? Fair enough not making any money but losing it all ?
In your case I think you did the morally right thing. If only our unions could be so balanced.
Posted by individual, Sunday, 6 November 2011 3:27:22 PM
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I approve of every step you took.
And in smaller firms have helped just that way.
Few care to know but not all trade unionism is about war.
Shorter hours and settlements spread over time, even smaller than owed.
Workers, mostly, want the job.
I do understand just as you say, not every one is a good manager.
Far too many have less understanding than needed and are high maintenance people prone to blaming others for failure.
Posted by Belly, Sunday, 6 November 2011 3:52:29 PM
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look hasbeen..what your saying
is what you needed to do

we cant argue..that it didnt need to be done
nor judge if it was done right or not

going by your words you done good
[the workers got their jobs
they got a say..the investers got a bigger investment
and the oppertuinity for some decent return...[if the tourists come back]

excep they arnt comming back
the world is broke..the dollar is high
the last thing you should do is buy new boats

[even though that does provide jobs]..unless they are cutting say the cost of fuel or allowing the retirnment of some of the smaller or less efficient boats..

mate business is fair
ie the ral economy..but the money economy..thats a sham

you get day traders buying by margin..thus betting weather a stiock today will go up a few points..or even betting it will go down

it does nothing..of itself..except respond to rumours
and speculation [gambling with our compulsory super...or our govt/counciols 'investment funds...]

and the bottum line is even with all them ups..and downs..
it only returned on average the same
as putting it safely in the bank

you did real value adding[that isnt taxable]
but gambling on this or that stock going up[ie thats income]..that should be taxed..at the current income tax

se mate wage isnt income
we got an income tax ..not a wages tax
but the mugs dont know any different

same with these traitrers day trading

they arnt bying share's
only gamling on its price
[those who pay out..or take the proffit
dont own a single share..yet control most of the invested money]

trouble being..they did nothing..real
they are just gambling..no end product..
except a few getting tax free bets paying off

be it on bonds
or product

its gambling
not production
just turning over..[churning money]
or washing it 'clean'
Posted by one under god, Sunday, 6 November 2011 4:18:29 PM
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I'd like to ask another question. I government fair to business ? There are many decent businesses but which get a raw deal from the Government. Govt usually tells us that things are grim in Bundarim but do they adjust the public service pays accordingly ? Of course not yet they're the ones who live off those who pay tax. If a Government can't put up a good economy then they should cop the downturn as much as they're asking businesses to. Is business fair ? Probably not as fair as it could be but a damn side fairer than Government & those representing it. Just look at the retail situation now in comparison to internet shopping. How much fairness is involved there ?
Posted by individual, Sunday, 6 November 2011 5:01:24 PM
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Dear Hasbeen,

If you are asking if you had done the right thing by cutting employee hours before cutting returns to investors I would have to say, on the face of it, it is not the direction I would have normally taken.

Pinching through hard times is standard fare for most businesses but facing bankruptcy is another deal altogether. 

I certainly would have been asking the investors to cop a  cut to a 15% return to ensure the business' survival, SFRs on not. 15% of nothing is nothing.

I have generally found replacing good employees takes time and money, something struggling enterprises need to be very circumspect about.

I faced something similar but on a smaller scale when brought into a business that had just purchased hundreds of thousands of dollars of new machinery but hadn't paid its taxes for nearly a year nor wages to some of its employees dating back nearly six months. 

Used the last cash reserves to fix the wages bill first then negotiated a payment schedule for the Tax Department.

The increased productivity the machines allowed meant the tax bill was cleaned up quickly and the business is now a successful Australian export earner. Keeping the wages and tax bill off the books for a period was the only way the owner managed to get finance for the machines. That was put at risk by addressing these matters first, especially if the Tax Dept had turned belligerent.

Was I right or wrong? 
Posted by csteele, Sunday, 6 November 2011 5:02:12 PM
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