Thursday, May 15, 2014

Construction to replace mining as Australia's boom sector

From Shortlist
The Federal Government expects to create thousands of jobs over the next six years through its new infrastructure growth package.
Treasurer Joe Hockey announced in last night's budget that the package will take the Government's total infrastructure investment to $50 billion by the end of the decade.
"Mining and resources represent about 10% of our economy but 2% of our employment. It has, however, done much of the heavy lifting over the [past] decade. So now we need to fire up the rest of the economy," he said.
"Over the next six years, the Government will help build new roads, rail, ports and airports. Our growth package will stimulate the construction sector and create thousands of jobs as the economy transitions from resource-led growth to broader-based growth."
In NSW, construction on the $11-billion WestConnex project, which will create 10,000 jobs, will start within 18 months, while in Melbourne, work on the $18-billion East West Link will kick off before Christmas and eventually create 6,000 new jobs, said Hockey.
"Billions of dollars of work will soon start on the Toowoomba Second Range Crossing; the Perth Freight Link; the Midlands Highway upgrade in Tasmania and the North South Road Corridor project in Adelaide. This will create thousands of new jobs across our nation."
The Government will also provide funding over the next six years to create a $155 million growth fund to offset the withdrawal of vehicle manufacturers from SA and Victoria.
The growth fund will support new jobs, investment and economic growth when the vehicle manufacturers withdraw from those states in 2017.

Government targets workforce participation

The Government also unveiled new initiatives to improve workforce participation, including offering employers a wage subsidy of up to $10,000 for hiring full-time mature-age workers.
The scheme announced in last night's budget aims to provide scope for around 32,000 jobseekers to re-enter the workforce each year, and will apply to jobseekers over the age of 50 who have been on unemployment benefits or the Disability Support pension for six months.
Employers will receive $3,000 when they hire a full-time mature-age jobseeker, and an additional $3,000 if they stay at least 12 months, with two additional payments of $2,000 at the 18- and 24-month mark.
The Government also introduced a six-month waiting period for jobseekers under the age of 30 who apply for Newstart or Youth Allowance, in a bid to encourage greater participation in job search and employment service activities.
The six-month period will, however, be reduced for those who have already been working for significant periods. Affected jobseekers are also able to undertake further study and apply for the relevant subsidies.
The Government claims tightening access to unemployment benefits, along with its changes to family tax benefits and the newly-introduced Paid Parental Leave scheme, will encourage higher workforce participation.

Tuesday, May 13, 2014

Funding key to establishing a lucrative temp business

From Short List.
Getting the funding right for a temp recruitment company can make the difference between losing personal assets when a business fails, and getting a larger slice of the $19 billion the local industry is worth annually, while a particular model for calculating charge rates will make rates discussions with clients far easier to manage, experts say.
One of financing specialist David Payne's clients sold a temp business with annual turnover of more than $13 million within five years of starting up with capital of just $15,000 – and there's no reason other recruiters can't achieve the same feat with the right funding and business discipline, he says in industry trainer Sophie Robertson's new book Secrets to Running a Lucrative Temp Desk.
Before approaching a lender, however, recruiters should determine how much funding they need by looking at factors such as how many temps or contractors they'll employ, which will determine the facility limit and whether they use a bank or an alternative lender, says Payne, who is the owner of outsourced financial solutions company, and BRW Fast Starter, Book Builders.
Establishing margins is also important in calculating funding requirements. This can be tricky as competitors are unlikely to share their rates, but recruiters can usually gauge what is appropriate through their own industry experience or by finding a mentor, he says.
"Take into account that as funders generally only fund up to 80% of the invoice value, any difference must be covered by the business owners, so a higher margin will mean finding less funding from personal sources."
Once they have calculated how much funding is required, recruiters should construct a funding requirement proposal to present to potential lenders, says Payne, adding that the facility limit will determine how much work is required on this proposal.
"If the required debt facility is less than $1.5 million you may be able to avoid having to provide detailed forecasts by working with a good account manager who can help you through the process," he says.
"If the facility is more than $1.5 million be prepared to pay an accountant to prepare a 'three-way forecast' (profit and loss, balance sheet and cash flows)."
Identifying funding requirements can be expensive – "expect to pay $20,000 to $30,000 for an expert to help you through the process" – and recruiters should ensure they're working with an accountant who is skilled in this specialist area, he adds.

How to ask a lender for funding

When drafting a funding request, consider what a lender needs to know in order to approve the funding, advises Payne.
"Prepare for any of the lenders' concerns, anticipate their questions and formulate contingency answers before the preliminary meeting. Your accountant can help with this," he says.
"Remember that the bigger the risk you are asking them to take, the more they are exposing themselves to potential fraud or business failure. The higher the risk, the higher the interest."
Recruiters should also speak with their peers and seek connections with sympathetic lenders, says Payne.
"If you are approaching a major bank don't just go to your local branch – they may be hamstrung by restrictive lending criteria. If possible go as high up in the bank as you can, for example to the state lending manager, as he or she may be able to negotiate better terms and rates," he says.
"Compare the offers of various lenders. Never just take the first offer you receive and remember that 'everything is negotiable', no matter what they tell you about bank policy."
In order to set a business up to succeed, recruiters should ideally get a loan that's structured in a "flexible way", says Payne.
"That's why debtor finance (factoring) may be more advantageous than equity finance (where investors contribute finance in return for a share in the business). Equity is limited to the amount of capital that you or other shareholders have available – plus with debtor finance the bank is not going to ask for half your profit when you eventually sell the business."

What to charge for your temps

Once a business is up and running, recruiters can calculate an appropriate temp charge rate by adding on-costs and a markup to the temp's hourly pay rate, says author Sophie Robertson in her book, which will launch this week in Perth.
On-costs vary from state to state, but in NSW, for example, they can include 9.25% superannuation, 5.45% payroll tax, 2% workers compensation, and 1% professional indemnity and public insurances.
"You can round this up to 18% on-costs. If you choose to use a 30% markup, then your charge rate [on an hourly pay rate of $21.76]... would be $33.38 per hour," she says.
"It costs you $21.76 + 18% = $25.68 to have this person out working per hour, as this includes the rate paid to the temp plus all relevant on-costs. Your gross margin per hour would be $33.38 - $25.68 = $7.70."
Robertson says it's better to use a formula like this to develop a charge rate, rather than working to a fixed dollar margin regardless of what type of temp is being supplied.
"The higher-skilled temps are scarcer and therefore harder to find, which means the margin the client pays you for sourcing, attracting, and managing those higher-skilled temps isn't aligned with the amount of work you're investing in filling their assignment," she says.
"If you use the formula with a markup as a percentage component then your dollar margin will be proportional to the level of temp skill required."
Recruiters should always be comfortable discussing rates with clients, and the more specific they are in setting expectations, the fewer problems will appear later on, says Robertson.
"I suspect some clients use requesting a discount as a 'test' to see how willing you are to defend your expertise. Sadly I know that many recruiters automatically say 'yes' when asked to drop their rates, which in turn causes them to feel resentment towards the client. In my view this situation is completely of your own choosing and making," she says.
"If your client insists on having a say in the rate charged then let her decide which temp she wants. Most clients will actually choose the more expensive person when they understand the difference in skill set... The conversation always needs to be about value, and not dollars and cents."

Sophie will share her tips for avoiding seven common temp business mistakes in an upcoming webinar that is free for Shortlist subscribers – click here to find out more or register. The 75-minute session will include roughly 20 minutes of Q&A, so don't miss your chance to get expert advice for free.

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