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.

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.

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.

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'

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 ?

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? 

Individual, it is much worse than that mate.

I worked for the operating company that ran the properties, mostly hospitality industry. Many of the properties were struggling to show enough profit to return anything like the 20% needed, but capital appreciation of the asset was supposed to make the money.

In that downturn this stopped, just as some large resorts, & up market capital city pubs started loosing money.

When the trusts started using this weeks investments to pay earlier investor returns you would think it would be found. It took 5 years & a number of whistle blowers to finally stop the mess, & send a few people to the clink.

The boats were legitimate, as the trust owned a resort island & a destination island in the area, which required servicing.

However running boats can be hard. Most people think they are selling a boat, an island or a reef, when, just like a cinema, you are selling seats. Fill the same seat twice a day, & you are more likely to profit.

Then you have to realise that the tourist in that seat is not your customer, merely the go between. Your customer is the agent who sold your ticket. The caravan park girl, the holiday flats, motel, or resort person is your customer.

Sure you have to send the tourist back happy, but that's easy. They want to be happy on holidays, you only have to help a little, & they'll love you.

If you can't run because it's too rough, or you have boat problems, change those who want, to another day, but otherwise give the people back their money. Never send them back for a refund, that agent worked for their commission, then take them free to a resort for the day.

The tourist again loves you for saving their day, The island sells them food & drink all day, the agent gets their commission, & you are the preferred cruise supplier.

It's not hard, you just have to understand how it works.

Now, if you can just keep the boats running

HB, $9 million turnover just to pay ones bills is hardly what I would consider to be a small business.

Unfortunately, governments also think this is a small business, meanwhile, the real small business gets left behind.

This sound like a Whitsunday saga and, I can only imagine how many real small businesses lost all due to this operation going bust.

I own a unit in the airlie beach area and I can tell you, that place is a basket case, with no fewer than 70 closed shops at present.

The puzzling part of your thread is how on earth a trust, with some 16 investments, can get into this shape without being picked up by auditors.

Individual how is it, that you make this connection between internet shopping and the Govt ?. Obviously the internet is the internet, and placing restraint's upon that, opens a whole other can of worms.

It is probably accurate to say, that the Govt hasn't done a lot to restraint free trade on the internet, or change that situation up till now, but it is clearly not accurate to say that the Govt is responsible or in some way the cause of the fact that internet shopping creates further opportunity for competition, the actual cause of its popularity.

It just does Indivdual and progress marches on. That is not to say that new jobs and new businesses wont be created from this because they will be.

Businesses will have to adapt just as they will have too, to a cleaner energy future

Dear csteele,

Of course you were right and did the right thing.
But then you did some lateral thinking and
looked at other alternatives, weighing up the
best options rather then doing what was
done under John Howard - and is still being pratised
by many businesses today to their detriment.

Bravo!

Yes Whitsundays rehctub, when Telford owned South Mole & Hook. I established the Corral Sub operation at Hardy Reef over 25 years ago. Are Reef & Capricorn still running? Those alloy hulls were cracking up so badly when new, I doubted they'd get to 10 years.

My situation was a little different csteele. I had no reserves.

The operating company had handled all accounts payable from head office, Sydney. When their payments had drifted out to 90 days all the local people refused to do business with us.

Now a tourist boat, with a failed radio can not run. When it takes a week to send a radio back to the manufacturers to be fixed, that just cost $30,000 in overheads, & upset all your bookings. Just not possible to work that way, when the local bloke will fix it overnight, provided you pay him.

To overcome this I was given my own cheque book & bank account, just the account was empty. I had to fund all expenses, & wages week by week. This was at a time I could only run 9 viable cruises, against the usual 14 a week.

The main cruise required 146 adult fares to break even. I could not run it 7 days, when I was struggling to find 800 passengers a week, not if I was to pay wages. It cost less to leave the boat on the mooring, than put a crew on it, & fuel in it.

There was no prospect of increased productivity when the town & resorts were half empty.

I sent the game boat to Cairns. We hunted everywhere for work for the cargo/fuel barge, as in the down turn we really only had 3 days work for it, & both it's crew had big mortgages.

I must have been leading a good life, because January which can generate huge losses, with an early cyclone, was a fantastic month, & got us back on our feet. By the end of June, we had done so well, we covered the resorts losses.

Hasbeen as you know our gardening interests unite us .
Just about every thing else we squabble over.
Bought 10 more day Lilly's in two March's on market stalls Sat and Sunday.
This is the most interesting subject/thread I have seen from you.
You and I, my past work mates and friends still.
Have done the job, from opposite sides.
Yet at such times, the blood on our hands, for we are the slaughter men or the saviors, we are wrong for some.
Csteele knows we are fire and water, I remain PROUD of that.
Lexi I forgive, her heart is for the under dog.
I have stood out side those closed gates,with no warning closed job and wages owed too.
Seen fear pain horror on my mates face, watched the only woman employee left.
One of 35,who had 23 years there, know she had no income.
CRY.
Ideologues can cry justice! workers first!
My task your task was to craft a life boat, and save all.
one eyed views haves no place in such.
And no support.
I have seen big hairy chested men offer to work with out pay to save a firm.
Never was much good at maths but if one cake exists and many mouths.
I think we would have got on well in the workplace.
Last, SOCIALISM a word heaved at me like a brick aimed at my head.
Then some ask for it every time a small business fails and blame?
Apparently some need a mirror.

Is this fair.

You buy a business, then, as part of the process you sign a lease.

Now this usually involves pledging your assetts, which is a huge risk in most people's eyes.

Then, half way through you lease the turnover drops due to circumstances beyond your control and you go broke.

Now if your rent is say $150,000 per year And you have teo years left, chances are you will loose your house.

Is that fair?

I'm in Cairns now & I tell you that place is on the brink of disaster. Hardly any tourists. Govt must do away with all these extra charges which hamper this industry. Everyone's trying to pu on a brave face but the reality is that 2 out of three shops are closed. The rest sell cheap crappy souveniers made God knows where. Cairns now lives off Govt spending than the other way round.

Yes indi, I know a guy who recently closed a rest up there.

Went to the LL, emplty restaurant, put a lease in place, then the crash.

He now faces the prospect of being sued for $600,000 for reneging on his lease.

The place was empty until he came along.

BTW, one of the main causes of his closure was the changes to IR which made trading Sundays not viable.

$6000 trading gone, 16 shifts lost, all in a place that can't afford it.

How smart is this government. And to think they were warned.

A simple surcharge could have prevented this, but it is illegal in QLD.

You did the right thing Hasbeen.On a shrinking market ,it was poor selection of business.Only really small operators can survive that type of industry.The areas of growth will be security,food,debt collecting,shelter etc.It is back to basics and the recovery will be long and hard.

I am afraid that the tourism business is in for a long drought.
All governments, except China are saying the same thing;
Growth is very low or is reducing rapidly.
Without growth in the economy nothing new can get off the ground.
Tourism being an optional spend will always be one of the first to
feel the cold wind.
All that businesses in similar fields can do is reduce overheads
and put their activity into maintaining the status quo.
They do this in the hope of a recovery, but until we successfully
transition to a new energy regime their plant, buildings and equipment
will deteriorate until the business simply dies of old age.

This is what happens when energy costs eat your GDP.

Well has been we certainly can relate to this, as I was employed at south Mole in t mid 80's just when th island was changing from Telford to Ansett.

We had to place our order for meats, pay for it, then wait for it to be delivered, usually 3 to 5 days min.

Accounting was not as advanced as today, so I can understand how this mess could have been covered up.

As for. Boats, they ran as Fantsea for quite some time, however, I think they have gone as well.

The fact of the matter is that this is an industry that has been over run by regulation and fees and, it has simply folded and there is little hope it willl recover in any real capacity, especially in the near future.

Even the large back packer business up ther has folded simply because back packers no longer come here to travel, they only come here to top up thier banks, then travel OS, because we have the highest wages on offer, at the expense of our torisum and hospitality industries. But hey, governments know best.

Rechtub says govt; is root of all evil. There is still the same amount of money in the community, People have closed down, paying off mortgage and credit card, no luxuries like restaurants, or high priced meat. Get snaggs by the truckload and freeze them. Consumer spending is in recession. No govt; is going to fix that. Not after the last helping hand, that got condemned by the business community.

Small world rehctub, we've probably met on a boat ride.

For those thinking about that 15% return to unit holders as being high, you must remember the interest rates of the time. I think it was those interest rates that were somewhat responsible for the down turn.

I had a couple of interest bearing deposits with Westpac while this was going on. For a 6 month term, I was getting 17%. Good for retirees, but not too good for business.

Hasbeen, its a tricky call to make and the decisions made can well differ in different cases. One thing that stood out to me was the phrase "this was chosen by the staff" - good communication and engagement is the key to keeping any business going during lean times (and growing appropriately during good times as well).

If we want government to give a freer rein to business, we need to accept that there may very well be a higher welfare cost to pay for this. After all, I dont think any of us want to end up like the US, where there is only 2 weeks leave a year, and $5/hr minimum wage. I fully agree that with less regulation businesses can be more proactive and cost-efficient and can react faster to challenges that it meets. But there is a social cost to this too that needs to be weighed up.

579, I was not opposed to the government hand outs that they did, more so, I was appalled a the way they allowed all those dollars, millions upon millions, to be pissed away, much like they still allow welfare dollars to be wasted today.

STOP T HE CASH! Problem solved.

This government has meant well at times, it's just that they are to incompitent to implement anything without stuffing it up.

Now as for people Saving, well, start rewarding them fo saving and they may well do just that.

Take two people on say $100K per year.

One invests and end up with tidy nest egg after 40 years, while the other buys new cars, boats, holidays etc.

The wise one if left to defend for themselves, while the wasteful one gets th pension. Go figure!

Now on the other hand, if you received a percentage of your taxes back as a pension, this would be an incentive to be both honest and save.

The system is totally arse about.

579

You need to understand how torisum works to get the full picture and yes, governments have created this maize of regulation for operators to weave their a through and quite frankly, most just say, it's to hard.

Take one example, a fishing guide.

You need an investment of around $150K for a smaller operation.

You then need permits from up to five different government bodies, some of which ar annual and renewal is not automatic.

So, the choices are, you invest your $100K,, borrow the funds over five years, yet, you face the likelihood of being without one or more of the five permits so your business has to close. Then what!

You see, many businesses, who are also job providers, have to tie up thier family home as security and, the one thing they need more than anything is certainty.

This is what they don't have anymore.

Now while the circumstances change and they can no longer service their debt, the wolves move in and, once the assetts of The business are sold, usually at fire sale, the balance, if large enough can mean you loose your house.

Now these fairies that has been is referring to cost tens of millions and, if there is that uncertainty, through governmen regulation, many today just sit on their hands.

Now if the governments actions result in enough people sitting on thier hands, the jobs are gone.

Up there we have South Mole, Day Dream" Hayman, Hamilton, Hook, Long Island, Linderman , then there is Dunk and Bedara bay a bit further north.

SM, hook, Dunk, Bedara are all shut and may never open again, while DDream is on it's knees, Hayman has just reopened but may fail, Lind foreign owned and Hamilton is ok.

Most closures are from the cyclone, however, most owners have decided to pocket the insurance money, lick their wounds and move on.

That's in the heart of our national treasure, the great barrier reef.

Ask anyone in that industry and they will tell you, government regulation and IR are to hard.

It just to hard now!

Yes....if business was fair.

What an interesting point of view and concept.

Rehctub......You know human nature, it has no standards. (greed, greed, greed) If a human can exploit what ever, they will......that's just the common ground of thought with the ME...MYSELF...& I....that's always in control. ( It comes from way-back....in our past evaluations of what is considered as profit and trade, something must be sacrificed ) but at what cost?

7 billion people now on the earth, I just hope you leaders know what are your doing.

Its the world wide engine that cant survive with out them (people), so many things of nature will pay the price for our growth, as we are starting to see.

If one was to screw around with this planet, well....who do we blame when it all goes horribly wrong?

Again! This century will be the one to watch above all the others:)

As you were.

CACTUS

CACTUS