In light of the recent global financial meltdown and the ongoing uncertainty which surrounds it - with politicians, economists and all market commentators contradicting each other, this is what you can do to maintain your sanity and get ahead:

1. Protect Your Job – Stay put with your current job. A new job is a lot harder to find during unstable times like this. Give your boss more than you are required to do on a daily basis; volunteer on a new project, volunteer to stay on some extra hours when required, etc.

1. Establish an Emergency Fund – set aside at least six months expenses in a separate account. You should never touch this account unless you lose your regular job or your regular monthly income stops flowing in. This is something you need to do only once in your lifetime.  Alternatively, have access to money in times of emergency – like a line of credit on your home.

1. Reduce Your Debt – Focus on the debt which is non deductible first – like your home loan, credit cards or personal loans.  When you have debt, you are no longer in control of your life. You are instead working hard to pay interests to your financial institutions. If you lose your job, you will be in a more high-risk position than someone who does not have any debt. Stop borrowing more money and concentrate on paying off your existing debts.

1. Reduce Your Expenses – Are you really on the cheapest phone plan or do you really need Foxtel with all its channels?  Is there a way you can go down a package? When was the last time you visited your gym? Although your gym membership fees are still appearing every month on your bill, do you go? You buy your lunch how often and have how many coffees everyday?  You smoke how many cigarettes a day?  If you can reduce you expenses here and there for small amounts, it will all add up and turn into a large amount at the end of each month.

1. Have An Additional Income Flow – look into generating a second income. You can earn additional money on top of your regular nine-to-five job by starting an e-business, writing a book, doing a part-time job, starting a home business, etc.

1. Learn To Invest – If you are not familiar with investments, learn how to invest. This may sound like contradictory guidance in a financial crisis, but a lot of sanity returns to stock markets and property markets – to the point where you can find ‘deals of the decade’ during these times.  Speak to experts in the industry – study and learn.  It’s fun and useful – possibly applicable now, but definitely for the future.

1. Live A Simple and ‘real’ Life –  Do you really need that latest iPhone, HD Plasma TV, BMW, and gigantic house? Does your child really need the latest Bratz dolls, Pandora bracelet or would they want more time to play with you?  We spend our precious life energy on the weekdays to earn money so we can spend it on the weekends. We work to pay our daily expenses, but we end up spending more than we make on things we do not need. So we go back to work to get money to pay interest on money we’ve already overspent.

1. Diversify, Diversify, Diversify – The old adage “Don’t put all your eggs in one basket” is still true to this day. Regardless of market conditions, some sectors will always go up and some will always go down. Try to spread out your investments across different sectors investing across a variety of businesses, cash, real estate, bonds, natural resources, and so on.  No matter how sure a bet is, there is always a risk in ‘betting the house’ on something. Speak to your financial advisor on how best to achieve this.

1. Relax: Don’t Panic - this is not the end of the world. Avoid unnecessary risks by not making panic-filled emotional decisions. Life will go on, things will change as always so just relax and be in a good position to maximise any potential gains and minimise any potential risks.

1. Make it personal – Take time to get to know your advisors – your accountant, finance broker, lawyer and manager at work.  Invite them over for a bbq and to meet your family.  These are people who can influence your life, give you warnings about unexpected issues and give you a leg up in times of crisis – only if you make it personal.

The Global Downturn is very real and has various repercussions for different businesses and industries.  There are many things we, (in the building industry) can do to mitigate risks and capitalise on opportunities which come up during these topsy - turvy times.  Please find some areas to focus on in the coming year.

Harry Pontikis – Director

Financial Services

Master Builders Association

N.B.  This article and its content is general in nature and is not meant to constitute Financial Advice. 

STRATEGY:

1.             Focus on new opportunities which exist in times of uncertainty.

2.             Keep an eye out for ‘deals of the century’ – e.g. Forced property sales, deceased estates or semi completed projects in distress.

3.             Look for properties needing quick settlements – if you have your funding organised, you can negotiate harder on the price.

4.             Focus on the profitability of your business and business activities.

5.             Manage costs conservatively – even if you are busy, tighten your belt!

CUSTOMERS:

1.             Know who is a ‘preferred customer’ and why they are preferred. 

2.             Reward and recognise your current ‘preferred customers with cards, gifts or thoughtful actions.

3.             Seek to understand your ‘preferred customers’ by asking them about areas you could improve in your business.

4.             Get expert advice on attracting, caring and growing your clients.  (Master Builders Business Advice service)

5.             Ensure you and your staff are focussed on servicing your preferred clients.

FINANCE:

1.             Plan your finance & lending needs for the next 2 years with your Accountant and Lending Consultant.  I.e. if you need to borrow in the near future, have your tax returns in order and consider showing more income in your tax returns.  If you do not need to borrow, ensure your current lending structure will serve your needs for the next few years and continue to minimise your taxable income.

2.             Only deal with finance experts in YOUR industry.  Deal with Accountants who specialise in the Building Industry and with Master Builder Financial Services. www.mbav.com.au  Do not deal with home loan brokers or with the banks directly as there may only be 1 solution in the current environment.  Do not take unnecessary risks with inexperienced people or with banks – focussed on their margins.

3.             Insist on paying a Fee when asking experts to deal with your business’ finances - Applies equally to your Accountant and Lending Broker.  This ensures they focus on your needs rather than making their commissions by selling you products or asking you to change banks. 

Credit Risks:

1.             Choose your customers well. This crisis affects everyone so do some diligence on your clients before undertaking any work for them.  E.g. ask for a copy of their loan approval, ask for a copy of their Credit Report www.mycreditfile.com.au .

2.              ‘Losing’ clients who do not pay are not really clients.  Use a debt collector for well overdue clients or those who avoid you.

Cash flow:

1. Do not be used as an interest free bank by your clients.  Tighten your collection policies – reduce payment to 7 or 14 days.
2. Do not expose yourself to costs your business cannot survive in case of non payment by 3^rd parties.  Have access to emergency funding in case of unforseen circumstances.  E.g. Overdrafts / Lines of Credit.
3. Insist on prompt payment – consider implementing incentives or dis – incentives to encourage payment behaviour.

Minimise Risk:

1.             Take out income protection insurance.

2.             Investigate Mortgage Protection Insurance if you have a lot of debt.

3.             Have a ‘safety net’ established allowing you access to money in times of emergency.

4.             Don’t count on selling a property as your safety net – the time it takes to sell and the value fluctuates wildly in this environment.

5.             Don’t have ‘all your eggs in one basket’.  Have at least 2 banks involved in your finances and ensure you broker manages this relationship well.

STAFF:

1.             Identify and ‘lock in’ your good staff – this can be done with bonus’, career progression or extra responsibilities leading to new career paths.

2.             Have easily measurable goals and objectives and ensure your staff know what you expect from them and manage them to these objectives.

3.             Be constantly on the hunt for good staff.

4.             Provide your good staff with Training opportunities and invest more time and effort during times of uncertainty.

5.             Enrol your self and your key staff to the ‘Surviving the Financial Crisis workshops’ at Master Builders Association.  www.mbav.com.au

MARKETING:

1. Do not spend money on generating enquiries if you do not have the capacity to handle them. 
2. Do not spend money on generating enquiries if the people handling them are not sales people.  Have a ‘conversion target’. 
3. Have a website - ensure it’s up to date and professional.
4. Be part of the ‘Find a Master Builder Service’ where Master Builders provides consumers with your details for jobs.
5. Be part of Master Builder’s ‘Lodge a Job’ service where you get to bid for jobs on the internet, lodged by consumers.
6. Do not spend money on Marketing if you cannot track the money back to enquiries and leads.  Don’t throw away your marketing dollars on gimmicks.
7. Become known to the public for your projects by dealing directly via listing on websites like www.chocolateproperty.com.au

In our capacity as industry leaders, Master Builders is running a series of Workshops designed to assist you during these uncertain times. Enrol in the ‘Surviving the Financial Crisis Workshops’ to get information about the economy, the industry, banks and what support is available to you by accessing  www.mbav.com.au or calling 9411 4555.

N.B.  This article and its content is general in nature and is not meant to constitute Financial Advice. 

The Global Downturn is very real and has various repercussions for different businesses and industries.  There are many things we, (in the building industry) can do to mitigate risks and capitalise on opportunities which come up during these topsy turvy times.  Please find some areas to focus on in the coming year.

Harry Pontikis – Director

Financial Services

Master Builders Association

STRATEGY:

1.             Focus on new opportunities which exist in times of uncertainty.

2.             Keep an eye out for ‘deals of the century’ – e.g. Forced property sales, deceased estates or semi completed projects in distress.

3.             Look for properties needing quick settlements – if you have your funding organised, you can negotiate harder on the price.

4.             Focus on the profitability of your business and business activities.

5.             Manage costs conservatively – even if you are busy, tighten your belt!

CUSTOMERS:

1.             Know who is a ‘preferred customer’ and why they are preferred. 

2.             Reward and recognise your current ‘preferred customers with cards, gifts or thoughtful actions.

3.             Seek to understand your ‘preferred customers’ by asking them about areas you could improve in your business.

4.             Get expert advice on attracting, caring and growing your clients.  (Master Builders Business Advice service)

5.             Ensure you and your staff are focussed on servicing your preferred clients.

FINANCE:

1.             Plan your finance & lending needs for the next 2 years with your Accountant and Lending Consultant.  I.e. if you need to borrow in the near future, have your tax returns in order and consider showing more income in your tax returns.  If you do not need to borrow, ensure your current lending structure will serve your needs for the next few years and continue to minimise your taxable income.

2.             Only deal with finance experts in YOUR industry.  Deal with Accountants who specialise in the Building Industry and with Master Builder Financial Services. www.mbav.com.au  Do not deal with home loan brokers or with the banks directly as there may only be 1 solution in the current environment.  Do not take unnecessary risks with inexperienced people or with banks – focussed on their margins.

3.             Insist on paying a Fee when asking experts to deal with your business’ finances - Applies equally to your Accountant and Lending Broker.  This ensures they focus on your needs rather than making their commissions by selling you products or asking you to change banks. 

Credit Risks:

1.             Choose your customers well. This crisis affects everyone so do some diligence on your clients before undertaking any work for them.  E.g. ask for a copy of their loan approval, ask for a copy of their Credit Report www.mycreditfile.com.au .

2.              ‘Losing’ clients who do not pay are not really clients.  Use a debt collector for well overdue clients or those who avoid you.

Cash flow:

1. Do not be used as an interest free bank by your clients.  Tighten your collection policies – reduce payment to 7 or 14 days.

http://www.abc.net.au/news/stories/2008/07/08/2297371.htm

By business editor Peter Ryan

Posted Tue Jul 8, 2008 10:23am AEST

The MBA says builders have less room to move thanks to the credit crisis.

Most residential builders are small business operators who live or die on their relationship with a bank.

Many have survived on high interest, low documentation loans, which are now at risky end of banking.

But as the credit crisis morphs into credit rationing, builders - especially small operators - are learning where they stand in a much tighter credit landscape.

Brian Welch, who heads up the Master Builders Association of Victoria, told AM that two years ago credit was freely available but now builders are being told “sorry, we can’t help you”.

He says a third of builders recently surveyed had seen their access to credit deteriorate.

“The way they would use that money would be anything from purchasing the sites which they would build on and develop [to] the cash needed for their business, whether it is for buying materials or simply wages for their employees and subcontractors,” he said.

There has been a lot of talk from some of the big banking chiefs, particularly from the Commonwealth Bank and the National Australia Bank about credit rationing. But are we already seeing that?

“We’ve been seeing credit rationing going on in the building industry for some time. Prior to the turn of the year, we were seeing builder’s credit opportunities slipping,” Mr Welch said.

Until recently, many builders dealt with mortgage brokers who carved out the best deal with banks.

But tighter lending controls have slashed broker commissions and broking houses are thin on the ground.

So, without a negotiator, often unsophisticated small businesses now deal directly with big banks.

Harry Pontikis of the broker Chocolate Money is at the forefront of the credit squeeze.

He says banks are now taking a much greater interest in the building projects they’re being asked to fund.

“This new landscape has allowed lenders and banks specifically to become very negative in everything they look at,” he said.

“Which means that usually they’re lending significantly lower amounts than they would have six months ago and charging a lot more for them, which has the net effect of causing the builders to build less, for example, townhouses or houses.”

Mr Welch says credit rationing is jeopardising construction at a time when the rental shortage is quickly becoming a crisis.

THE financial crisis triggered by the collapse in US sub-prime lending is contributing to Australia’s housing shortage, with builders claiming they are unableto obtain finance for new developments.

Master Builders Australia chief executive Wilhelm Harnisch said many builders were being turned away by lenders, which meant fewer homes were being built.

“Even some of our biggest building members, despite having been major clients of the big banks for many years, are now being told there is just not enough money to go around,” he said. “But the impact will be most pronounced for smaller operators and it means some development will not proceed or will be substantially delayed.”

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