Finalists will have many things in common, writes Christine Christian, CEO of Dun & Bradstreet Australia
This article appeared in The Age on 22 November, 2008
The Age | Dun & Bradstreet Business of the Year award provides a timely opportunity to reflect on the attributes of successful businesses following one of the most turbulent financial periods of the last century. It also allows us to consider the implications of this for business success in 2009.
In the last year there has been enormous volatility in financial and credit markets with the impact now flowing through to the world economy, including in Australia.
The major economies of Europe and Japan have recently slipped into recession and the US is probably not far off, if it isn't there already.
This has and will continue to affect the Australian economy. Global demand for commodities has weakened and domestically businesses are reporting their worst expectations for profit and sales in two decades while employment expectations are at their lowest since the 1991 recession.
At the same time the Australian dollar has dropped significantly against the US dollar, reducing the benefit to business and consumers of lower world oil prices while putting upward pressure on the cost of many consumer items, particularly imported products such as electrical goods.
The credit market turmoil and tightening domestic conditions are now flowing through to individual businesses. About 70 per cent of Australian executives report that credit market conditions are having a negative impact on their business, primarily related to the difficulties in obtaining credit for business investment.
We also know that businesses are taking longer to pay their bills, with the latest D&B trade payments analysis showing that business-to-business payment terms have blown out to about 57 days on average.
Furthermore the number of debts being referred for collection is rising. Interestingly, the average value of each debt being referred is declining, pointing to the fact that businesses are focusing on even small outstanding debts in this new environment.
How then does a business emerge as The Age | D&B Business of the Year or even a finalist? It comes down to a focus on fundamentals.
The winner and each of the finalists have common characteristics essential to any successful business. Strong cash flow, low debt ratios and strong year-on-year growth in sales, revenue and profit are all key attributes. The absence of any collections activity and a strong history of paying bills on time are also signs that each of these businesses has a commitment to management of working capital.
In addition each has a unique story. Their success is built on managing the fundamentals while developing a unique advantage in the marketplace. And finally, each has a passion for their business and their industry. In 2009 these characteristics will be even more important. The old days of rising assets prices and the easy flow of credit are gone. This means Australian businesses will need to work harder to ensure they differentiate themselves from their competitors, have an absolute commitment to quality and work the fundamentals. They will also need to be smart.
Smart businesses have a constant focus on the use of information to target new opportunities, identify risk and quickly respond to emerging problems like a slowdown in cash flow. By focusing on these elements, smart businesses can increase their market share while their competitors retreat, avoid nasty surprises and use their balance sheets to finance their growth rather than relying on difficult to access, and potentially expensive, credit.
Over the next year we will see further fallout from the world financial crisis. Already several companies that once seemed unassailable have disappeared and many more look decidedly shakier than they once did. Assets will continue to be revalued and risk
repriced as policymakers, lenders, corporates and consumers come to terms with a new world in which cash is king and trust is the rarest of commodities.
This does not mean business success is unattainable. Indeed, many new stories will emerge over the next year that are a testament to the innovation, focus and determination of Australian entrepreneurs. Passion and drive will see new businesses step up even in the most difficult circumstances.
However, each of these successes, like the ones this year, will be underpinned by an undying focus on the fundamentals. Strong cash flow, low debt, disciplined management of working capital, rigorous risk assessment and the ability to identify new markets and customers will return as the key attributes of successful businesses.
For further information please contact:
Danielle Woods
D&B PR Manager Australia & New Zealand
(02) 8270 2926
About D&B
D&B is the world's leading provider of business-to-business credit, marketing and purchasing information and receivables management services. D&B manages the world's most valuable commercial database with information on more than 130 million companies.
Information is gathered in 193 countries, in 95 languages or dialects, covering 186 monetary currencies. The database is refreshed more than one million times daily as part of D&B's commitment to provide accurate, comprehensive information for its more than 150,000 customers.
The Australasian operations were bought out by the senior management group in August 2001. It was the first MBO of a wholly owned subsidiary in D&B's history worldwide.
Today Lazard Carnegie Wylie owns an approximate 90% stake in DBA and the local management team a 10% stake.
Strategies for future growth include developing DBA's commercial and consumer credit referencing business; expanding its receivables management outsourcing business; maintaining its lead in the development of unique credit and risk scoring products; and developing new products specifically tailored to the Australasian market. DBA currently employs over 500 people in Australia and New Zealand.
