NZ Election and Taxation

Every government consider tax as one of its main source of income, unless like some countries in Middle East they rely on other sources of income like exporting crude oil.  While every one agree about the importance of tax, there are many debates on the amount of payable tax and the collecting process.

Some people believe that getting more tax helps a government to achieve its plans for improving public services and making a better infrastructure for a country. But there is another belief that getting more tax reduces the natural flow of money in society which is the result of doing business. High tax rate may have a bad effect on the motivation of individuals or businesses to increase their revenue by working harder and being more competitive. That is why taxation is always  the subject of argument among political parties before each election.

An OECD report in ten years ago described the New Zealand tax system as  one of the most neutral and efficient within its membership. But it doesn’t mean that we have to keep the same system and policy forever.  Since economic situation is affected by many factors. Those factors come from the local and global economical status and overall policy of the governing party. We are waiting to see what the main parties have to say about their plan for our economy and taxation policy before the following election.

What are financial services?

Financial services are the range of services provided by financial companies who deal with money management. These services include accounting, financial planning, tax management, financial analysis and investment services.  Many financial service providers compromise of groups of expertise each focuses on one of the service. Some services like accounting require to be qualified from registration bodies.

Financial services cover a broad range of services, for example some companies may offer loans for buying cars and at the same time they may provide life insurance.  Many car manufacturing companies provide such a service to promote their sells. Also banks may offer special services for share trading and provide free advice on many financial issues as part of their main services.

A financial service provider can help small business owners by professional advice. For example a financial analyzer  assesses the risk of a new business plan with respect to many factors that may not be considered by a non-expert.

Governments in some countries have some rules and regulation for activities of financials service providers. For example in UK the The Financial Services Authority (FSA) is the regulator of the financial services industry. It monitor the activity of Financial services firms such as:

  • banks and building societies;
  • investment firms;
  • credit unions;
  • mortgage and other home finance providers and brokers;
  • insurers and insurance brokers;
  • stockbrokers, asset managers and financial advisers; and
  • some issuers of electronic money.

What is Business Analysis: 3- HEPTALYSIS

Heptalysis refers to the method of analysing seven factors that should be considered in the early stage of starting a business. It is mostly used in analysing of venture capital funding for a novel idea or product where recognizing the risk is an important factor. In this technique one  reviews a business planning with respect to the current knowledge of the potential market  and also the resources that are needed. The following factors are the subjects of the early stage analysis in this method.

  • Market Opportunity. Business in one word is best explained by the name of  a product, service or solution. If there is no market, even the best idea and product has no economical value. Here we list a few questions that must be answered about the potential market for a product.
  1. Who are the potential customers for this product?
  2. What is the benefit of it for the customers?
  3. Where and how it can be used?
  4. What is our advantage over the competitors who produce the same product?
  5. Is there a sustainable market for the product?
  6. When is the best time to introduce the product to the market?
  • Product/Solution. 
  1. What are we going to bring to market? service, product or a combination of them?
  2. Are there any follow-up products?
  3. Are the follow-up products in the scope of our activity?

  • Execution Plan. Here the main question is “how to do it?”. Making a good and detailed plan for each activity is a main factor in running a business smoothly and with less trouble.  These items must be covered in each planning
  1. Marketing and Promotion
  2. Sales and Distribution
  3. Production and Quality
  4. Compensation
  5. Growth

Each of those items should be studied with respect to the available financial and human resources.  Also to  monitor their progress  one must define proper milestones and measurements.

  • Financial Engine. From the first day of running a business there are expenses that consume constantly the resources, such as salaries, lease,  maintenance fees and marketing expenses. They may be paid by internal resources like current cash flow or from external resources. If there is a bright horizon in front of the business then the required funding may be taken from an external source, say loan. As another option we have to mention  factoring
  • Human Capital. Human are a very important source for a business. Finding a good team and keeping them together to achieve the business goal is very vital. Also having a knowledgeable group of employees is a very important factor if the growth and sustainability of a company. With respect to the level of the activity and the technology that is uses,  employee needs constant training. Also for changing the roles and promotion to a higher rank need not only experience but also knowledge. Accounts receivable factoring is an alternative solution for managing cash flow problem in a business.
  • Potential Return. Having a realistic idea of the market situation is the first step in forecasting the potential revenue. There are some question that must be answered for a better understanding of the expected revenue of a business.
  1. What is the expected share of market?
  2. What is the pricing strategy?
  3. Is  the price affordable by the majority of potential customers?
  4. How long does it take to achieve profits?
  • Margin of Safety.  To prevent a catastrophe one need to have a realistic assessment of risks that involved in a business planning.  There are two class of risks that involved in each activity. The internal risks that generally result from bad planning or mismanagement. The external risk refers to events that are out of ones control, like global recession or changes in laws or policies. From those risks the external risk is the hardest to anticipate and mange. Since with a deep and thorough study one can prevent the planning risk. Also the mismanagement risk is avoidable in human resources.  No matter what is the source of a risk,  it is vital for a business to have a good risk management plan for different scenarios.

What is Business Analysis: 2- PESTLE Technique

download PESTLE short tutorial and pay with a tweet!

In the second part of our introduction to business analysis, we discuss PESTLE analysis technique in more details. As we mentioned earlier this technique is used for initial stages and market evaluation. Note that with respect to the type of business activity, some of these factors should be studied more deeply that others.

Political: Policy is the set of  principles or rules that guide societies. Policy has effect on all aspects of life. A new policy of recently;y elected government may have a big effect in economy.  Small or large, all companies are affected by political changes. Taxation generally is the subject of debates in elections. Export and import also depends on foreign policy.  The way a yearly budget is distributed is another factor that may have positive or negative effects on economy.

A business analyst should be aware of local and global policies. It is very important to have a realistic anticipation of the future changes in political trends. Any business plan should have some degree of flexibility with respect to further changes in policies. The amount of flexibility depends on  stability of the society.

Economic:  Any economic activity is linked to others with an invisible chain, where a change in one ring affects others.  A good business analysis  should consider all different scenarios for economic changes. For example, a small change in currency rates, may have a big effect on the export or import capability of a company. Unemployment may reduce the number of potential consumers for a product.

Sociological: Cultural and social trends governed the consumer behavior in a market. For example, a  change in a fashion trend may change the demand for some products. Religious and ethnic factors are other issues that should be considered. Young generations are influenced by social media that may be used as a marketing opportunity. For choosing a brand name on must consider many sociological factors.

Technological: Technology has opened new gates to us and has made a lot of changes in our lives. Using the current technology to achieve an organization goal or to improve productivity should be part of any business analysis. Having an eye to new technologies is a big factor that distinguishes a company from its competitors. Here there are many unexplored opportunities  that need to be discovered.

Legal:  Legal and political factors are closely related, so some parts of our discussion on political factors apply here, too. Legal issues should be considered in any business analysis.  For example, current status or future changes in employment or business law affect organization relation with its employees or business partners.  So they should be considered in all analysis. In some cases it is necessary to get professional advice from a lawyer.

Environmental:  Environmental factors are major parts of business analysis for activities that are in connection with environment. Any travel and tour agency who provide outdoor activities, should consider the weather change as a business risk. The same is true for farming industries and insurance companies.  In last few years the volcanic eruptions imposed a lot of unexpected cost to airline companies.

Well-Balanced Cash Flow via Factoring

Factoring is the process in which a business sells its invoice to a company, generally referred to as the factor. A factoring company generally operates as both  financing and  debt collecting company.  Factoring has its own advantages and disadvantage. The main advantage is that it brings a fast cash flow. Since some factoring company provide ledger management services, you may have more focus on your business. There are many factoring companies, so prices are usually competitive and you may have many choice. But remember the reliability and reputation are also important factors in choosing a factoring company.

If you have a seasonal peak in you business and the payment of your costumers takes long time. You may prefer factorizing as a way to distribute your cash flow to be able to pay you cost. Here you had better to estimate your cost so you may choose to sell just part of your invoices to the factoring company. Factoring is different form loan in the sense that you don’t have to sorry about the pay back, but in general it may be more costly than a short loan.

The cost of factoring results in a reduction in your profit margin, and it may reduce the scope for other borrowing, since  your book debts will not be available as security anymore. Building trust between you and your old consumer takes a long time. It is a good idea to treat them personally and  exempt  them from factoring process since they may prefer to deal with you directly rather than a factoring company. The way a factor deals with your customers will affect your relationships with your customers. So choose a reputable factoring company.

follow these links to learn more about factoring:

What is Business Analysis: 1-First Stage Analysis

There are many factors that involve in success or failure of a business. It is very risky to start a business without a good understanding of capacity and limitation of market. Even an established  business, needs to review wits process and objectives with respect to the changes of market.

A business analyst is a person who is  responsible for studying a business system to find weakness and strength of the system.  The task of a business analyst  is to understand the structure and operations of an organization and to recommend solutions that enable the organization to achieve its goals.  An business analyst may work  alongside IT professionals to build a software solution for the business needs. In such a case they make a bridge between the user of the software and the developers.

In this first part we talk about the main factors that should be studied for starting a business. PESTLE is a technique that is used to study the impact of factors by external environment.  “PESTLE” comes from the first letters of the following words:

  • Political
  • Economical
  • Socialogical
  • Technological
  • Legal
  • Environmental

You may get a better understanding of PESTLE  analysis  by studying an example for a Pub.

HEPTALYSIS is another technique which is used on early stage of starting a business. Here the goal is to have a detailed and in depth analysis of seven issues:

  • Market Opportunity
  • Product/Solution
  • Execution Plan
  • Financial Engine
  • Human Capital
  • Potential Return
  • Margin of Safety

We will  present some case studies to clarify all these techniques in the following blogs.

Start Your Business Plan for Rugby World Cup 2011

In old days, big international sports events were considered as just social venues that brought proud to their hosting countries. But in the last few decades they are seen as  great business opportunities to boost the economical growth of their hosts.

Andrew K. Rose and Mark Spiegel in their research paper (see Center for Economic Policy Research) stated that

“Economists are skeptical about the economic benefits of hosting “mega-events” such as the Olympic Games or the World Cup,  … but  hosting a mega-event like the Olympics has a positive impact on national exports.”

They also provide evidences that these effects last for a long time. The other amazing result was that  even “unsuccessful bids” to host the Olympics have a similar positive impact on exports.

That is not the only supportive view, according to a report  by NSW Treasury – on the benefit of the Sydney Olympic game- a significant net economic benefits resulted from the Olympic to  New South Wale. In this report it was expressed that   “the extent of the economic benefits from the Olympics can be influenced by government policies, and considerable efforts will be required by both governments and the business community to maximize the longer term gains.”

Note that getting a good result needs  a plan and  effort.  Otherwise this big opportunity may turn to a big failure. As an example we have to mention   that 2010 Winter Olympics cost Vancouver (and Canada) as much as $6 billion and the result was just more debts rather than any profit.

Within the next few months we will host the 2011 Rugby World Cup (RWC 2011), though this game is not at the scale of Olympic games but it is a big test for us to see if we are smart enough to grab this opportunity to push our economy a few steps  further or not.

In what follows we bring a short list of economical impact of this game, borrowed from  Rugby New Zealand 2011 Fact Sheet.

•  Hosting RWC 2011 would generate more than $1.15 billion in total economic activity, and pump
more than half a billion dollars into the New Zealand economy, according to an updated economic impact report prepared by Horwath Asia Pacific Ltd.

•  According to the updated report, RWC 2011 will add $507 million to New Zealand’s gross domestic product, 23 per cent more than original forecasts prepared at the time of the bid to host the Cup.

•  RWC 2011 will also provide the New Zealand Government an additional $112 million in tax revenue.

•  Auckland, as host of the RWC 2011 Final, stands to gain around $240 million in additional gross domestic product and $262 million of total direct additional expenditure in the Auckland economy.

•  Based on Australia’s experience of hosting RWC 2003, New Zealand can expect to attract as many as 66,000 international supporters, 2,500 international media, and up to 2,500 corporate and VIP guests
throughout the Tournament.

•  RWC 2007 brought in 350,000 additional visitors to France in September to October 2007 delivering a total economic impact estimated at up to £2.1 billion (NZ$5.7 billion).

It is now our turn to ask ourselves what we have done to take our share from such an opportunity.  You may wish to discuss it with your friend or business partner to see what you can get from this game. Here there are  a few general suggestions:

  1. Join   Rugby World Cup 2011 Business Club  . You can get mush more information by subscribing there.
  2. Make your business visible. Many people rely on internet when they are seeking any service. Make a homepage of your own and add yourself to online business directories. Many of them list your business for free. You just need to spend a few minutes to fill some online forms. You can start by adding your business to Gopher. Use both their national and  local sites.
  3. Build  a network with other businesses in your area. Let them know that you can cover  and complement each other services.

Do we need anti-spam law anymore?

The New Zealand Anti-spam law passed by parliament in 2007, four years after  the US CAN-SPAM Act that has been  in effect since 2003.  As it was explained in the official NZ Government website,  the goal was  “to prevent New Zealand from becoming a haven for spammers by prohibiting unsolicited commercial electronic messages and requiring senders of commercial electronic messages to include accurate sender information and a functional unsubscribe facility.”

  After four years it is time to take  a look back and see if the law is still needed and whether it’s effective or not. First of all, we have to mention a study by Alex C. Kigerl which implies that anti spam law has almost no effect in spamming behavior (see, “CAN SPAM Act: An Empirical Analysis”, International Journal of Cyber Criminology 3 (2): 566–589).

  The main reason  for passing such a law was to prevent internet traffic from being blocked by a huge amount of unwanted emails.Perhaps in that time it was plausible, but these days our internet bandwidth accommodates use for online gaming and streaming video. Maybe it’s time to rethink about this law again. Even if you look at the problem from a user’s point-of-view, there is no difference between getting spam in your e-mail inbox and getting physical spam in your mail box.

  Another important issue is that many big companies break this law and easily escape from punishment. For example, Telecom NZ broke the law by sending unsolicited txt messages to its customers and received no punishment (read the whole story at the National Business Review; for a similiar story see this article:  “Judge Dismisses Anti-Spam Lawsuit Against ValueClick“). The lesson that we get from both stories is that even officials do not take the law very seriously.

  But what is the effect to our small local businesses who recently started to gain more visibility by making an internet homepage; with the hope to expand their market a little further from their own area. How can they advertise where they’re hardly seen among the first few pages of search engine results?

  One solution is to rely on their local online business directories, but unfortunately here we face the same problem as before. When the number of businesses is getting larger it is hard to be noticed in the directories unless they have opted for paid advertisements. For example, we ran a search via Gopher Local Business Directory for plumbers in the Waikato region. Our search resulted in 84 entries which means many entries on the last pages are easily ignored. If one lives in a larger city the situation gets worse. We suggest you search a business in an online directory for Auckland (for example “restaurant” in Auckland ) and see what luck you get.

  Our argument should not be considered as a support for blind spammers. What we are trying to say is the need to review the law in such a way that all of us can benefit from e-marketing.

where can you get good financial advice?

I was wondering around in the web and I found some good articles on choosing  a proper financial adviser, so I decided to share some of them with you. If you wish to read any article in detail you may follow the links.

Liz Weston is her article “8 things your financial planner won’t tell you” describes a bad financial adviser by his or her mentality that you have  to be aware of. Which are:
“1. I have no qualifications for this job
2. I have no obligation to put your interests ahead of my own
3. I’m not being paid the way you think.
4. I’m looking at only one small portion of your overall finances.
5. The only products I understand are the ones I’m selling.
6. I can’t beat the market.
7. I won’t save you from yourself.
8. I have a checkered past.”

Another readable article is the New York Times article entitled :
Some Advice on Getting Good Advice.

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