Good Morning
Thanks Andrew for those kind words.
I don’t know how many of you we able to attend the last breakfast function here, but I understand that Elton managed to convince Luke Longley to come along to speak. Well, after reading about Luke in the BRW Rich-100 last month, I wish I had taken up basketball rather than wireless comms! What a great story Luke’s got to tell, another fantastic WA success story.
Good Morning. My name is Nathan Buzza and I am the Chief Executive of Commtech Wireless. Now, I am here this morning to try to dispel a couple of rumours. The first is that nothing ever happens in WA. Well, Looking around the audience today, I don’t think it is going to be particularly difficult to dispel that rumour!
When it comes to a global recession, Australia has been rather rudely been left out of it. Australia’s having a boom instead. With lots of cheap money, and plenty of growth and nobody is quite sure why, except for Mr Costello of coarse. If you ask Mr Costello who is responsible for this unreasonable prosperity then he just says, “Thank you very much, your very kind” and starts to hand out autographs. Well, I suspect that everyone here today might have a better idea of why.
There are so many inspirational people here in WA. Last week, I was at the launch of the Business News ‘40 under40’ awards and met Clay & Rachel Cook. What a fantastic business they have. From here in WA, Clay & Rachel run a company called ineedhits.com – one of the global leaders in search engine optimization and submission. Now you think that such a global leader would be located in the heart of Silicon Valley, but here they are in Perth leading the Internet revolution.
Business leaders, such as John Rothwell, who won the Ernst & Young “Master Entrepreneur of the Year” last year and the Chairman of Austel ships. In 1988, John employed 30 staff – today it’s more than 1,800.
These are incredible people, doing incredible things. It’s makes you proud to be from WA. Australians are genetically engineered to take on the world and beat it.
We’re the most physically remote city on the planet with few economies of scale, nothing except our land, our brains and our innate competitiveness. Our history is energised by a creative tension that produces remarkable endpoints. Mavericks who have profoundly affected the rest of the world.
Now, these are not just humble words and I am going to bore you with 101 different examples of Australian inventions, but some are just too incredible to let pass;
Entrepreneurship is synonymous with life, with spirit, with growth, with challenge, with risk and, of course, with leadership. Now, not all entrepreneurs are successful. In fact, statistically, most entrepreneurs aren’t. But, the good that is done by so many who step up and take risks, exercise their leadership, generate commerce, create jobs is what the Australian Dream is all about and has been critical to the growth and the success of the West Australian economy.
Introduce Commtech Wireless (2:00 Minutes)
Today, I would like to share with you my story. From moving from a small country town called “Northam” across to the UK, to having brain surgery, to developing video games and finally setting up Commtech Wireless.
Well let’s start with a quick overview of Commtech Wireless. Commtech commenced it’s operations in June of 1996, and has maintained an average compounded revenue growth of 54% per annum over the past seven years. This growth has earned us a position for the past two years on both the Deloittes Fast 50 and the BRW Fast 100 as one of Australia’s fastest growing companies.
Commtech designs software and electronics for sending text messages to wireless devices. We are involved in a myriad of technologies; from RF and the Internet through to SMS and wireless telephony. I know that is a bit of a mouthful but probably the easiest method to explain what we do is by example. Essentially, if you want to send a text message to a wireless device of some descript then we provide the infrastructure equipment to facilitate this.
We are headquartered in Perth, and have subsidiaries and branch offices in Sydney, Melbourne, Jacksonville and we have recently acquired a company in Shenzhen in China.
The US firm is operated by my long time friend and business partner, Zane Lewis.
The technology that we develop Perth has been installed in 3,500 sites in 48 countries, earning us the Emerging Exporter Award from Ausindustry last year in addition to the CY O’Connor Engineering Excellence award. In fact, the Australian Telecommunications User Group recognized our success and awarded our flagship product, BASEPage2000, the best telecommunications solution produced by a large business – and we were competing against Telstra and Vodaphone.
Well I guess with any good story, it has to have a start, a middle and a finish. In my case, my story starts in the small country town of Northam. In fact, my very first memory was when I was 5 years of age and my father had proudly announced to me that he had purchased two farms in Jenakabine, one for my brother and they other me. As we were driving around on the farms my Father asked which one I wanted? To which I promptly replied with ‘Neither Dad, I’m gonna live city’.
My father then proceeded, to explain the complexities of negative gearing to his 5 year old son to which I blame for this insane obsession I have in trying to beat the taxman.
Selling American Express forms in Piccadilly Square
My entrepreneurial spirit was installed in me at a very young age. Now my father is, by definition, an entrepreneur. Always wheeling and dealing and moving from one property deal to the next. I am pretty sure, that at the moment of my conception, this was programmed into my DNA.
As the story goes, when we sold the farm in Northam and moved across to London in 1976, we headed straight to the American Express Lounge. Back in those days, frequent flyer and Qantas Lounges didn’t exist – but thank goodness for AMEX, they had lounges in most capital cities.
Now, Apparently, and I say apparently as I deny all knowledge of these events. But as we were leaving the lounge I swiped a handful of American Express Application forms. By the time we had walked from the AMEX lounge to our Hotel (about a 30 minute walk), I had raised some £50 by selling the AMEX application to strangers!
After several years in Europe we arrived in Australia’s most southern state, New Zealand. This was quite an experience, from attending the private school system in London through to primary school in a small country town called Helensville (or as my Dad described it “to hell and back”).
When I was 14 years of age, I was diagnosed with an astrocytoma, a very rare form of brain tumour located on the motor section of my brain. Brain tumours affect approximately 11 in every 100,000 people. In 2000, the 5-year survival rate for Brain Surgery on a tumour was 1 in 4 (23.8%) people. In 1984, when I was operated on for my tumour, the odds were considerably less, at 16%.
So at the risk of being little melodramatic, I was a little more concerned over making my next birthday rather than starting my first company. The tumour had manifested itself into the motor section of my brain, about the size of golf ball. Naturally, the tumour doesn’t just sit in isolation to the rest of your brain; it is intertwined and meshed into your brain tissue – not an easy thing to extract.
I guess I should back track a little bit and explain, how I ended up, at 14 years of age, about to have my brain operated on.
I remember the day so clearly. I was in year 7 at school, playing a game called Kingball. This is where you throw a basketball around and attempt to tag opposing team members. (BTW Luke Longley was terrible at Kingball)
Now, during the game I began to feel a little funny, I got pins and needles down the entire right hand side of my body and began to lose control of my muscular functions. I was very quickly tagged in this state and as I was being tagged, the basketball pushed me to the ground. The teacher quickly came across to me, to ask me if I was okay. To which I replied, “Yes Sir” and tried to jump straight back up.
Unfortunately, my brain disagreed and I came straight back down. I then came to the only logical conclusion and promptly told my teacher that I must broken both my legs!
At that point, in that split second, my life changed. I fell back, fully conscious and my entire body began to convulse uncontrollably. There was only one thought going through my mind – this is what it is like to die. I was convinced, that I was experiencing the last few seconds of life. Well, obviously (and thankfully) I was wrong.
So, back to the surgery. As I mentioned, the tumour was located in the motor section of my brain, and after consultation with numerous neurosurgeons, my parents had to make the hardest decision I think any parent could be faced with. An operation that would involve the opening of my cranium, and the removal of the tumour. But we had more problems. On the bright side, being young and resilient with no other complications, my neurologists estimated my survival at greater than 50%. On the down side however, as the tumour was so intertwined within normal brain tissue and this brain tissue was being used to control my fine motor skills and speech, odds were that if I lived through the surgery I would be left without the fine motor skills for the right hand side of my body.
If the tumour was left un-operated on, and it turned about to be malignant, then I would be left with the uncomfortable position of have a gradually deteriorating brain disease. As the cancer spread, I would gradually lose my fine motor skills, followed by speech, personality, blindness and finally death.
Tough choice. Do nothing, and your child probably will be subject to a deteriorating brain condition followed by death. Do something, and you have a 50/50 chance of survival but a high likelihood of some form of paralysis.
My First PC
My parents made the decision that surgery was the only option. So, after undergoing an eight-hour operation I woke up in Intensive Care, with what could only be described as the worst hangover history – well perhaps the second worst hangover in history!
I also had, what one could only term, a remarkable recovery. Within two hours of the brain surgery I was walking around and by the end of the week they had got so sick of me that they sent me home. For a kid, who should have been lying there, half paralysed I was pretty lucky.
I had beaten the odds. Not only had I lived through the surgery but I had zero side effects as a result. I remember my first day back at school – I just told everyone that I had had my co-processor removed!
When I arrived home from the hospital, I had what every kid dreamed of – my father had purchased me a brand new, hot off the production line, genuine 1984 IBM PC. Now, this was a state of the art system. Now for all the computer geeks out there, we talking about a 4.77Mhz processor with 64Kb of memory a massive and a single, 160kb Floppy Drive. And at $13,000 dollars an absolute bargain!
Well, that was at least until my Dad said to me “Well Son, $13,000 at 24% per cent interest or 2% per month, over three years works out to $520 a month –you better start earning your keep – payments start next month” (now I have offices in 3 countries, turn over $10M a year and I am still paying the bastard off!)
Actually, I thought 24% interest was a bargain for unsecured minor (especially one who had just had brain surgery) – he should have at least registered a mortgage over the PC!
Well they say that NZ is “the land of the long white cloud”, after brain surgery I guess it was my objective to find the silver lining on that long cloud!
Even after the surgery, I had another challenge. A 12-week course of radiotherapy. Now, if you can ever avoid being exposed to radioactive isotopes, I strongly recommend it. To be straight to the point, it’s not very pleasant. I lost all my hair and just felt sick, every day, and constantly vomiting and feeling squarmish.
But there was a silver lining to all this, it meant that I spent about 16 hours a day, for weeks on end playing with my new PC, teaching myself how to write computer software. Over my weeks and months off school I managed to write half a dozen computer programs.
By the time I returned to School, I had a suite of computer programs developed. Now keep in mind that the PC has only just been released, so the industry was desperate for applications – in fact any application that would run on MS DOS v1.00.
So I had all these applications written, but still had a $13,000 debt hanging over my head (or $20k by now). So, during my lunch breaks at school I would arrange meetings every Friday afternoon with various computer companies in Auckland. After about 20 rejections with the occasional CEO throwing me out of their office, once they released they were meeting with a 14-year kid, I got lucky.
I called up Philips International, as in the electronics giant, Philips and arranged a meeting with the CEO of Philips NZ. Mum & Dad picked me up from School and I quickly changed into my of my father suits and headed off for my meeting.
Well, I think the secretary must have thought that I was guys kid, because she just handed me a Pepsi and pointed towards his office. I sat down, in front of his Desk, introduced myself and said “Hi my name is Nathan Buzza, the Managing Director of Data World, I have written this video game and would like for Philips to sell it for me!”.
The guy was absolutely stunned, he looked somewhat bewildered at the me and said “excuse me?”. I repeated myself and elaborated a little more on my video game.
Well, somehow, it just happened to be the right sequence of events. Philips was in the process of developing a PC but their PC had sixteen colours, rather than the traditional 4 colours. And even better than that, they needed to bundle some software with their PC in order to compete against IBM.
So, after a few weeks, we struck a deal. I would receive $11 per copy of the video game being distributed to a maximum of $15,000. Well let’s just say that I managed to pay off my $13,000 loan from my parents in the first week of it’s launch.
If I had have just accepted $1 per copy then I probably would have been sipping pina colada’s in the Bahamas by now.
When I returned to Australia, I attended Scotch College, to complete the final two years of my schooling. Upon leaving school, I received a scholarship to attend “Bond University” – Australia’s first private University. It sounded like a great idea at the time, until about December that year when Alan suffered that terrible brain trauma and completely forgot were he placed that $1.2b dollars from Bell resources. It’s so nice to see that Alan has made such a wonderful recovery.
Q-zar
So I put the scholarship on ice for a few months and accepted a position with Omnitronics. Now when we were talking before about Australian companies, leading the future, here is another fantastic WA success story. Omnitronics have developed some of world’s best communication systems – and export their products around the globe.
Well, here I was 18 years of age, applying for job to create a life sized laser game called “Q-Zar”. Man, what a job! Now, I am not sure how many of you have heard of Q-Zar, but Q-Zar is a laser tag game, where you run around with a gun within a building and attempt to shoot opposing team members. Sort of like an electronic version of paintball – without the paint.
Q-Zar was the brainchild of “Geoff Hazlehurst”, a local Perth schoolteacher who came to Omnis wanting us to design him a shoot em up game for kids. Q-Zar was finally sold to the rock group, U2. Once, again I hope that everyone is picking up a common theme here, West Australian’s innovating some of the leading products throughout the world.
The three owners of Omni’s, David Nicholson, Jim Wilcox and Peter Lowe are some of the smartest people I know. They took on a young kid and introduced him to the world of electronics. David, Peter and Jim taught me a lot of things, both in terms of electronics but more importantly, their business philosophy.
1. Spend money on R&D. If you are not developing world-class products then you are never going to be in the race to be a global player.
2. Treat all your staff & customers as partners in your business.
3. Stick to your area of expertise and leverage your IP.
Now making really cool games for a living sounds like a bit of fun. The reality? Well I assure you that it was a LOT of fun. However, everyone knew that developing Video Games for a living could never to into a real career – I just wish someone told Nintendo.
Austco – The learning days
Following my time at Omnitronics, I joined a company called Austco Communications that are, today, one of the world’s largest manufacturers of electronic emergency call systems. My internship at Austco taught me many things, under the guidance of one Bob Grey. Now, Bob is somewhat of an abrasive character, however he did teach me very early on a few valuable lessons;
1. The first thing was that R&D doesn’t stand for Research & Development it actually stands for Replicate & Duplicate.
2. Be passionate about your business – if you are not passionate you cannot expect your staff, your suppliers or your customers to be as passionate. And goodness knows, when you start a business you need all the passion you can get, because you sure as hell are not going to have anything else.
3. Forego the profit of today and invest it in the company for tomorrow. And when you think that you can’t stand it anymore, take it to the next level and re-invest.
4. Employ on intellect & enthusiasm – everything else can be learnt!
5. And finally, the last lesson. No matter how big your company is, or how many praises people sing you – there is always someone doing exactly what you are doing but better, cheaper and faster. In the words of Andrew Grove, President of Intel – only the paranoid survive.
As a point of interest, Bob’s company, Austco, now have offices in 10 countries, still privately owned and employ around 100 staff.
There was one lesson that Bob didn’t teach me – and that was “be good to your staff”.
So, literally in the shed behind a friend’s house in Mosman Park, Commtech was formed.
Now, when I refer to a shed, I am not exaggerating, our office was a little over 9 square meters, it was the peak of summer, so our little shed would get to 45 degrees by the middle of the day.
I had just resigned from my position as the R&D Manager of Austco and had managed to save up an entire $24,000. Well, I managed to spend about $20,000 in the first couple months, after buying a photocopier, a couple of PC’s and getting brochures printed it certainly went quickly!
Before I knew it, there was just over $5,000 left in the bank. So, I resided myself to drawing $100 per week and moved into my brothers house. I paid my brother, Michael $50 per week for board which left me with $50 a week to live on. Wow – that was hard!
So, after 12 months and 20 kilos lighter, by some miracle in 1995, we launched BASEPage – the worlds first PC based wireless messaging platform.
This was quite a feat; at the time all the competitive solutions were hardware based. What we had done was leverage off the IT world a low cost hardware solution – or commonly known as a PC. It was great. All our competitors were manufacturing these massive hardware boxes and selling them for 10s of $1,000’s of dollars to hospitals and emergency services. He we are, with a CD hand saying its $29.95 – does the same thing. Well not quite, but we were substantially lower cost than our overseas competitors.
In 1995, we managed to receive our first sale – to Telecom NZ – At least, you can always pull the wool over a Kiwi’s eyes! That seems like a lifetime ago, but Commtech Wireless was founded with the right ingredients. Not product or capital, not experience but simply ambition and drive. An unrelenting desire to create the best wireless product that we could. This by the way, is my determining factor when employing staff, you can train staff to perform their job better, train them in new skills but you cannot teach ambition and drive.
Starting the company on a $100 a week, in a little shed behind a friends place in Mosman Park must have had a very defining effect on me – as this approach of running the company on the smell of an oily rag has been installed as our governing philosophy.
Now, don’t get me wrong, we never skimp on spending but it boils my blood when I see people throwing money away. For example; when a staff member rings up a hotel and pays $US220 a night to stay at the Hilton, where if they just had have logged onto hotels.com they could have got another 5 star hotel at ½ the price. It never ceases toamaze me how people can waste money – but only when it is not theirs!
When we were just getting started and Zane and I had been on the road for three weeks, with a very hectic schedule of some 60 meetings over a 6-week period. We had arrived at the airport, absolutely shattered from the events of a frantic day.
We walked into the Airport and there it was – the Qantas lounge attempting to lure us, with promises of a nice hot shower, something to eat and a nice cold larger. But it was $900 each to join! We couldn’t afford that!
And – then we noticed in the fine print, partners receive a 50%. So Zane and I looked at one another and came to the conclusion that our dignity did have a price – $450! So hand in hand we proudly strutted up and demanded our 50% “partner” discount.
Mind you, I don’t think that Zane’s wife was impressed!
So what exactly does the company do ?
Looking around the audience I can see a few puzzled faces, thinking “Okay, okay. So they do a wireless thingy whatsit. What do they do exactly?”.
Commtech Wireless actually produces around about 30 different products, all surrounding the common theme of sending a text message to a wireless device. Now, we don’t particularly care what that wireless device is; typically we send an SMS to a mobile phone or a message to an on site pager. But these devices can equally be large LED signs, email addresses or virtually any device that can display a text message.
The next trick is that we send the message as a result of a “real world” event. That is a very broad description I know, but let me give you a couple of examples;
The applications are many and varied, everything from operating an email to SMS gateway to acting as the security system for Guantanamo Bay, Cuba.
My absolute favourite product is what we provide for casinos. Now, BASEPage2000 is already installed in virtually every casino in Australia and New Zealand. Would anyone like to guess, an average, how much money goes into a slot machine on a daily basis? Well, in the United States, the average revenue per machine, is about $A6,000 per day. It’s a lot of money isn’t it ? $A6,000 per day, every day of the year.
Now, depending on which state you’re in, and the government regulations, the casino gets to keep between 5% and 10% of this. So, your typical casino is making a gross profit of around $450 per day, per slot machine.
If you want to extraplicate this figure out, it means that an average slot machine makes a gross profit of about $165,000 per annum. If you are like any of the casino’s in Vegas and you have at least 1,000 slots, your little casino is generating a tidy profit of about $165M per annum. Not bad money.
It really is just a numbers game. You know, as the manager of a casino, that for every dollar that goes into the slot machine, you will get to keep about 7½ cents. If you want to make more money, it’s simple – you just need to increase your slot machines revenues.
So, how do we fit in? Quite simply really. Every time a slot machine is idle, it means a decrease in casino revenues. So my R&D group came up with a very novel concept – we put push buttons next to every slot machine, so if you want a drink, win a jackpot or anything happens to stop you from spending your money we send a wireless message to a staff member to remedy the situation.
Nett effect. Install BASEPage2000 into your casino and revenues increase by 1-2%, which translates to a 1-2% increase in your profit. Your 1,000 slot machine casino, suddenly makes another $1.65M per annum. For an investment that costs less than $100 grand it’s a pretty good return. And what’s even better, at the end of every month we email a report to the Food & Beverage manager to tell them how long each of their staff takes to service a request.
Now I am not trying just to do John Schaap a favour and increase the Stock Price of Burswood, the point I am trying to make is that innovation can create new markets and innovation should be embraced and capitalised upon.
I’m note sure how many of you have seen a little crappy, homemade looking device being handed out at restaurants lately. It’s a small, little white thing that flashes and vibrates when your meal is ready for collection?
Now, the crappy, homemade looking device is certainly not ours. But it did inspire me to do some additional research on the company that manufactures those little products.
The company that manufactures those little devices, a US firm, has sold more than 500,000 of them. Here is the next amazing statistic – they charge $US99 each for them. So that is over $US50M worth of those little restaurant beepers.
Well, despite it’s appearance, I actually thought that it was quite a good idea. In principle, rather having your name being blasted over the Public Address System your little beeper flashes and vibrates. Once again, like the casino example before; it all about making money. In this situation, the little coaster increases the restaurant’s ability to churn through customers. I am sure you can do the math – if you can get another 10% of customers through your restaurant, imagine what effect it would have on your bottom line.
You know the best thing about running my your own electronics company – if you see a product and you like it then you can always go out and create your own!
So at the start of the year, I sat down with the R&D Group and we came up with a UFO looking device. Same principle, but cheaper, better and faster. Remember what Andrew Grove said ‘Only the paranoid survive’.
I thought I would share with you for a moment a story from a couple of years ago when I was out to dinner in Manhattan with our New York dealer. Over the coarse of the evening (and a couple of bottles of wine) we were discussing marketing and distribution strategies and we moved onto the subject of comparing our costs structures. I was explaining that my most expensive software engineer cost about $US40K. To my amazement he told me his graduate software guys were all on at least $US60K with his R&D Manager on $US170K to put that in perspective that’s well over $A300K or about 4 times as much as my R&D Manager! He then coined the phase (in a very NY accent) “Hey, you Aussies your just like Mexicans with Cell Phones!”
This disparity provides Australian companies with a very exciting prospect – we can develop niche market products cheaper, better and faster than our US and UK cousins.
This does raise some very interesting points. Twenty-four months ago, if you had have asked me what our competitive advantage was then it would have been a resounding, “we are the Mexicans”. But, with the strengthening of the Australian dollar over the past twelve months by some 30% this will place additional strains on Australian exporters, coupled with SARS and globally terrorism – I believe that have an upward battle over coming months.
But Australians were a resilient bunch. Despite the strengthening of the Australian dollar, we still enjoy a relatively low cost base and a level of innovation second to none.
In 2001, the International Monetary Fund ranked Australia’s technology spending – as a proportion of GDP – as the second highest in the world, ahead of countries such as USA, the UK, Singapore and Japan. With 72 per cent of Australian adults and 75 per cent of small businesses connected to the Internet, we have one of the highest levels of PC literacy in world. We are well position to take on the world.
Conclusion
I started this speech by saying that every story has a start, a middle and a finish. Well the Commtech story is still being written. As more people adopt wireless as part of their lives, Commtech is proving itself uniquely capable of seizing opportunities in this global market.
Bill Gates, in his recent book, “Business at the speed of thought” discussed what he termed the “digital nervous system”. In essence he was referring to the distribution of information electronically. At Commtech we want to take this to the next level – straight to your hip pocket.
Now, before I finish, I have one last thought I would like to share. I would like to take a look at the Australian Taxation system through the analogy of a restaurant.
Suppose that every day, 10 men go out for dinner. The bill comes out to $100. Now, if they paid their bill, the way we pay our taxes, it would go something like this. The first four men well, they would eat for free; the 5th would pay $1, the 6th would pay $3 and so forth until we get to the 10th man who would pay $48.50.
So, that’s what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement – until one day, the owner, Lui came out.
“Since you are all such a good customers,” he said, “Today, you eata for free”.
Therefore, the first four men were unaffected. They would still eat free. But, what about the other six – the paying customers? How could they divvy up the $100 windfall so that everyone would get his “fair share?”. So they decided to divvy up the amount by the same amount of money they all originally chipped in.
However, once outside the restaurant, the men began to compare their refunds. “Wait a minute,” yelled the first four men, “How come we didn’t receive any cash back? The system exploits the poor!”.
How come, he got $48.50 back, when clearly the meals costs a $100 dollars –we all should get $10 back each. “It’s not fair. The wealthy get all the breaks”
So, the nine men surrounded the tenth and beat him up. The next night he didn’t show up for dinner, so the nine sat down and ate without him. Nevertheless, when it came time to pay the bill, they discovered, a little late what was very important. They were $48.50 short! And the 10th man? He decided that eating in Hong Kong was a better idea, where everyone pays a flat $15 for their meal.
For Australia’s sake, I hope that not too many of our entrepreneurs develop a taste for Hong Kong cuisine.
Thank you.
If anyone has any questions I would be only to happy to answer them.
Tax Jokes to be inserted throughout the speech
Far East – Sydney
The rest of Australia enjoys a rather unhealthily proximity to New Zealand.
Gambling. Preferential voting in elections. Other countries vote for government, we vote for a win and a place.
A 35 year old Chartered Accountant died of a heart attack and challenged St Peter “why now?” “Well” said St Peter, “we looked at the bills you have sent your clients and reckoned you must have been at least 90 to have charged that many billable hours.”
Nothing makes a person more modest about their income than to fill out a tax form.
733. The Devil’s number (including GST).
Behind every successful man stands a woman and the ATO. One takes the credit, and the other takes the cash.
A “slight tax increase” costs you about $300, while a “substantial tax cut” lowers your taxes by about $30.
(Cease the day – Carpe Diem)
Commitment & the events of 911
Commitment and dedication are words that are thrown around a lot in business circles – you always hear corporate executives saying “they are committed” or “they are dedicated”.
Without a doubt, exporting of products and services will lead the long term economic future of Western Australia. Ensuring the support of your staff is critical to the success of your export initiatives.
It will require them to go well above and beyond their call of duty. A good example of this was two years ago when we shipped a system out to Saudi Arabia. Our dealer in Saudi Arabia had sold our equipment to a hospital in Riyadh but unfortunately he sold the system on features that didn’t actually exist.
In order to resolve this issue, I bribed my R&D Manager $10,000 to work a 100 hour work week for the next three weeks to develop the non existent features and shortly after September 11, our Middle East Account Manager, Mr Jamie Falzon jumped on a place to present the solution to the end user.
This is what I term “beyond the call of duty”. I would like to highlight however, that 12 months after this we secured a $0.5M dollar contract to supply the same equipment to all the hospitals in Riyadh!
My Views on Tax and the Tall Poppy Syndrome The other day, I was working out how much I cost the company for every dollar I take home (and how much goes to the taxman for every dollar I earn). Now this might seem obvious, but lets re-cap.
48.50% Income Tax
9% Superannuation
6% Payroll Tax
1.5% Medicare Levy
65% Effective Tax Rate
Leaves 35%. So this translates that for every dollar I see, it costs the company $2.85. This is not some trick or playing with numbers – it’s real.
We must at least touch on a couple of points. Compared with the rest of the developed nations, our tax regime is extraordinarily high but this is the sacrifice we make for one of the highest standards of living in the world. I would like however, like to make the following points;
In Ireland a company pays 12.5% up to the first €250K and then a flat 16%.
We need to address our taxation system to make it internationally competitive and nurture small business, but I think would take a little longer than the xx minutes allocated for this presentation to solve Australia’s tax problems. Needless to say, it represents a genuine issue for Australia as a nation.
Earlier this year, I gave a presentation for Ausindustry, to assist those companies who were on the brink of beginning to export their products. Now, Exporting, abides by what I call the 2-2 rule. It costs you twice as much as take twice along than you think it will. But you will be pleased to learn that these variables are interchangeable, you can have the process cost 4 times as much but get it done in half the time!
Market Research
Before you launch into a new market, gather as much information about the market as you can in terms of competitors, pricing and of coarse local customs. Genie Story in Saudi Arabia. Another great story was “Data FM story”. When we first entered the United States market, we had performed insufficient market search on competitors and our pricing structure was drastically below that of what the market was prepared to pay. This had a double negative; first it created the perception that our products were cheap and therefore not as advanced as our competitors and secondly we left money on the table. Now, our software products sell for twice that compared to our Australian price.
Everyone knows that you should listen to your customers – everyone knows this, but at times we can’t see the forest through the trees.
Probably the best example I can think of is from our own exploits in the United States. When we first attempted to enter the US market, we came in with guns blazing. We had been successful in our Australian market having developed the first software solution to what had been traditionally an electronic based solution.
After 24 months of trying to convince the Americans that our software solution was the right approach, we gave up and decided to develop some electronics to do what they wanted. Now, the software solution was better – in fact it was a lot better. But we failed to listen to our customers – as soon as we launched the electronics solution our sales went gangbusters! We should have listened to our American cousins a lot earlier!!