Zenith Finance Blog

Hallelujah! The RBA finally reduces the interest rate to 3.75% May 1 2012

Tue, 01 May 2012 22:06:00 GMT

Well it's only taken until halfway through Autumn, but the Reserve Bank Board today realised what everyone else in the country has known since the start of summer - Australia needs a rate drop.

And they've finally delivered with a drop by 0.5% to 3.75%. Now let's hope lenders pass on the decrease.

If you'd like to find out why the RBA made this decision click here to their media statement.

A good time to chat
This could be an excellent opportunity to review your current financial position, so feel free to contact Zenith Finance any time on 1300 288 874.

April 2012 RBA leaves interest rates at 4.25%

Tue, 03 Apr 2012 22:56:00 GMT

Coooeee! Coooeee! Just as I thought, there's an echo in here.
Let me try another one...

The Reserve Bank Board have today decided to keep the cash rate target at 4.25%. If you would like to find out why click here.

Look on the bright side, at least we know the Easter Bunny will be in a giving mood.

If you'd like to find out how this rate announcement might affect you and your finances please contact our team any time on 1300 288 874.

In the meantime, from all of us here at Zenith Finance,

Have a happy, safe Easter break!

Interest Rates stay at 4.25%...and why I think it should go down

Tue, 06 Mar 2012 22:55:00 GMT

So once again the Reserve Bank Board have waddled out of their ivory tower to tell us the cash rate target will stay 4.25%.

And once again the RBA media release starts off talking about the world economy instead of what's going on here in Australia. This seems crazy for a couple of reasons...

Things are tough for a lot of Australian businesses already

I see a softening from most of the industries that we deal with - in terms of their sales and a general unwillingness of consumers to spend.

Things are about to get tougher for consumers too

Banks are complaining that their funding costs are going up. Plus they have mounting pressure from shareholders to increase their returns. Who's going to have to cover those increases in costs?

You and I, the humble consumer.

5 reasons why interest rates need to come down

I believe that there is still a number of good reasons for the RBA to reduce interest rates to help stimulate the economy:

Banks are increasing interest rates outside the RBA Monetary policy actions
Unemployment rates increasing
CPI inflation has declined
The Australian dollar has risen and remains strong
The housing market remains soft

This last point is really important. Real estate has always been one of the main drivers of the NSW economy. When it's bouyant, our economy remains strong. When it's not, well, time to get to the life rafts.

What do you think about the rate not moving down? We'd love to hear your thoughts.

And if you want to find out how it could affect you and your finances contact our team on 1300 288 874 any time.

Feb 2012 RBA leaves interest rates the same (4.25%)

Tue, 07 Feb 2012 22:31:00 GMT

The Reserve Bank Board have today decided to leave the cash rate target to 4.25%. `

If you'd like to find out why click here to see their media release.

But what are they thinking?!

Personally, I find it outrageous that in a statement by the RBA justifying Australian interest rates staying on hold begins with 2 paragraphs about what's happening in Europe, United states and Asia.

Click here to read my full vent on the topic

Get in touch

And if you want to find out how this affects you and your finances please contact us any time on 1300 288 874.

RBA Fat Cats...what on earth are you thinking???

Tue, 07 Feb 2012 22:47:00 GMT

You've probably heard that the RBA today announced interest rates are not dropping.

Well, I'm annoyed! Not just about the rate news, but the lily-livered reason they've given us in their media release.

Does Australia lead by example or are we just the 'lacky' country?

I find it outrageous that a statement by the RBA justifying Australian interest rates staying on hold begins with two paragraphs all about what's happening in Europe, the United States and Asia.

Obviously, when you're on a nice, big, juicy salary with benefits working in monetary policy for the RBA -making decisions on behalf of the Australian people - things seem pretty good.

However, many customers and businesses that we deal with are telling us what a soft start to the year it's been. Sales have been slow and they were all looking forward to a February fall in interest rates.

Hey RBA, want 6 good reasons you got it wrong?

Easing inflation, commodity prices dropping, record food prices, a soft labour market, weak retail sales and record exchange rates.

Dear Fat Cats, looks like you definitely screwed the pooch this time.

Perhaps when you get a chance over the coming month, squeeze out of that comfy leather chair, take a ride down from the executive floor and see what's happening out in the real world. Then make it up to Australia in March and we might even start liking you again.

Ahh, that feels better.

New business ideas - how to market forecast and research - and how not to

Tue, 07 Feb 2012 22:49:00 GMT

If you’re new to business you probably find yourself attracted to lots of different opportunities. And that’s a good thing, because it shows your entrepreneurial side. But when you come up with an idea or across an opportunity - how do you take advantage without burning up cash - and get investors interested? Get a realistic of your potential market share and find out if your target market really want what you're offering.

Why 'top-down' forecasting is dangerous

Firstly, lets talk about what you shouldn't do - ‘top-down’ forecasting. In other words, calculating how much of a market eg “the global market for widgets is $100 billion” you need to be successful.

For example, let’s say you want to open up as an Internet Service Provider for China. Here’s how the top-down model works:

There are 1.4 billion people
20 per cent want Internet access
We will secure 10 per cent of that potential audience
Each account will yield $240 a year
Size of the market is $1.4bil x 10% addressable market x 20% success rate x $240/customer = $67 mil/annum.

Not bad!

But that’s not the way things would pan out

Why? Because no business can aim for those sort of figures without at least having proven that customers will buy from them.

Some investors might swallow this story (and plenty have, just watch A Current Affair), but most experienced investors (especially venture capital managers and angel investors or successful entrepreneurs) know that this is simply hype.

Instead, forecast 'bottom-up'

Bottom-up forecasting models start with real-world variables. For example:

The number of prospecting phone calls a telemarketer can make in one day (30)
The number of prospects that qualify as a potential customer of the business (30%)
There are 240 business days in a year
A salesperson can close sales on 10 percent of qualified prospects
Each sale is worth $240/year
30 calls/day x 30 percent sales prospects x 240 Days/year x $240/customer = $500,000/annum/salesperson

What can we realistically argue from here?

Using the figures in this model shows that a team of 10 sales people can produce $5 mil in revenues. It offers the entrepreneur a real-world projection of cash flow and projection of costs (number of prospects, number of salespeople etc.).

How to do market research when you product or service is new

In the early days of an enterprise there's a lot of uncertainty about exactly what you should create and what customers really want.

In these times, traditional market research is useless because there aren't any surveys or focus groups that can predict customers’ acceptance for a product or service that you can barely describe.

Would you buy a new computer with no software, no hard discs, and no colour that simulates the real world?

Use a "get going" prototype

One answer is to take a prototype to market and get customer feedback (good and bad!) quickly. If you spend time planning, waiting, pondering and looking for ideal environment with all right information (will never happen anyway), the market opportunity will pass you by.

What you are after is a first release of product or service. It won't be perfect. However, the revisions you make based on customer feedback means:

you'll have a better idea if your product/service is going to be a winner or not
you have some real-life research to show to investors
the next round of customers will have a better experience than the first.

Speak to any successful entrepreneurs and they will almost all tell that that their biggest mistakes were not getting product or service into customers’ hands sooner.

How to prepare a business for sale - and how to value it

Tue, 07 Feb 2012 22:46:00 GMT

These days it’s not uncommon for a home owners to spend $5000 or more to ‘dress up” a house that’s for sale to extract a premium price – but how do you dress up a business that you wish to sell?

Be prepared for due diligence

Once a business is put up for sale a buyer will investigate it from all angles – this is called doing “due diligence”. Your solicitor and accountant can help you with this side of the preparation.

The buyer will look into every aspect of the business to determine whether the your stated reasons for selling are legitimate – there may well be suspicion that that the business has been in decline, or that the product is outdated, or that competition has increased.

Balance the books (and everything inside)

The question in the buyer’s mind is: “Why would the owner want to sell a good, healthy business?” So be aware of their desire – and need – for scrutiny of every detail for accuracy.

One furniture retailer in Sydney had her business up for sale and thought that a prepared set of accounts as well as a detailed 6-year sales and profit history would suffice. She said “The prospective buyers had their accountant request matching invoices against the sales records.

“It made sense when I thought about it, but I was shocked that they would spend money to do such a forensic check of the figures.”

Maximise the value to your buyer

Ahead of time, make sure you have these immaculate and detailed records with hard evidence to back up the sales. You'll save buyers (and yourself) time and make them feel much more confident about doing business with you.

Analyse your financial records

Are profits still healthy or has there been a recent or gradual downturn? Has your customer base changed? Are distribution channels still operating efficiently? Has the business developed a reputation for shoddy product or service? It's important to know and be prepared to answer these sort of questions from potential buyers.

In order to properly value the business, you need past and present financial records to see outgoings, sales and profits. Do a physical inspection of the business resources - this means staff, equipment, any stock, any property or other assets just as you would if you were selling your house.

Ask clients and suppliers for feedback

Get out and about and ask clients and suppliers how they feel about you and your business. Not to alert them of an impending sale, but to be sure that you are in tune with any issues. If a buyer is keen they may well call in to a supplier and check out your business and get a different picture from that which you are projecting.

Benchmark your business

In preparing a business for sale, a buyer will want to know how your business ranks against others in the same sector. This is known as benchmarking. Does yours achieve the same level of profit? There may be other issues. Fixing the issues could turn around the business and its valuation.

Manage your stock levels

If you have too much stock you could hold a sale and clear it, then bring in fresh stock.

Debtor issues

If you find too many overdue accounts, you could tighten up on credit terms, and debt collection

Number of clients

If the business derives most of its income from only one client or project buyers may be wary. Look to bring others on board before you look to sell.

Financial ratios are poor and worsening

Does it charge a competitive rate for its product or service?

Answers to these and other questions can help you identify the strengths and weaknesses in the business and highlight opportunities where the business could be more competitive.

But what's my business worth?

The price a buyer will pay for your business should reflect the value of its assets and level of profits. This includes:

tangible assets, such as office furniture or machinery.
intangible assets, such as trademarks, ‘reputation’, experienced staff and business know-how.

Valuing tangible business assets can be straightforward, but it can be harder to put a value on the intangible assets such as goodwill.

To determine the value and profit level of the business that you wish to sell, you should get advice from a business valuer with specialist knowledge about this particular type of business.

Earnings Multiple

One method you can apply to determine the value of a business is multiple earnings. A business not listed on the stock exchange is usually valued at between five and 10 times its annual post-tax profit. But be sure to check industry benchmarks to determine the multiple for your business sector.

Dec 6, 2011 - Reserve Bank drops interest rates to 4.25%

Wed, 07 Dec 2011 00:47:00 GMT

Great news mortgage holders...you got your Christmas wish!

The Reserve Bank board slipped on their Santa suits today, bellowed, "Low, Low, Low Merry Christmas everybody!" and reduced the cash rate target to 4.25%.

Ok, they actually said a bit more than that. The full story is here on the RBA site.

If you'd like to find out how this rate change affects you and your finances, please contact the Zenith Finance team any time on 1300 288 874.

Nov 1 2011 - Reserve Bank lowers interest rates to 4.50%

Wed, 07 Dec 2011 00:42:00 GMT

As if we need another good reason to have a bet on the Cup!

The Reserve Bank Board have reduced the cash rate target to 4.50%. You can read more about their decision on the RBA website.

To find out how this affects you and your finances please contact us here at Zenith Finance any time on 1300 288 874.

4 October 2011 RBA keeps interest rates at 4.75%

Tue, 04 Oct 2011 12:50:00 GMT

Something for the crowd to cheer about today no matter which team you supported over the weekend...the referees at the Reserve Bank are sticking with their decision and keeping interest rates at 4.75% today.

Once again, the unsettled global financial markets are the main reason.

You can get the whole story on the RBA website here.

Or if you'd like to know how this might affect you and your finances, contact us on 1300 288 874.

6 September 2011 RBA keeps interest rates at 4.75%

Tue, 06 Sep 2011 10:03:00 GMT

Spring's traditionally the season for change - but it's also the season of hope! So we're delighted to let you know the Reserve Bank has kept interest rates at 4.75% today.

The main reason being the very wobbly conditions in global financial markets over recent weeks.

You can get the whole story on the RBA website here.

Or if you'd like to know how this might affect you and your finances, contact us on 1300 288 874.

Income protection - If you were ill for months or years how could you pay the bills?

Fri, 12 Aug 2011 06:20:00 GMT

More than likely you've heard of income protection insurance. A lot of Australians have, but feel that if they're going to spend money on insurance, they'd rather protect their car, house, life and health.

The trouble with this is that people do get seriously ill and find themselves out of work for months, years, even permanently. Unfortunately, life insurance can't help, and even top level health insurance only covers some of the medical bills in the short-term.

Thousands of Australians risk sliding into poverty

In 2008, the Australian Bureau of Statistics records show 7,624 Australians couldn't work (1) and relied on sickness allowance - if they have a partner, that's just $205.75 each per week (2).

With our cost of living now amongst the highest in the world, this can turn into a nightmare for the 69% of Australians who don't have any personal income protection insurance (3).

With no money coming in, they struggle to put food on the table, cloth the family and pay the basic bills - let alone keep up with the car repayments and average mortgage of $367,000 (4).

Should we protect our biggest asset first?

J-Lo's booty ($300 million), Mariah's legs ($1 billion) and The Boss's voice ($31 million) aside, being able to earn a living is the most valuable asset most of us will ever have. If you make $80,000 per annum now, it means you'll earn more than $2.6 million over the next 20 years (allowing for inflation).

And while there seems to be an insurance to cover just about anything these days - including alien abduction - income protection insurance is a smart and inexpensive way to ensure that you and your family don't have to worry about sliding into poverty if you get sick or injured.

How much does income protection insurance cost?

Here's an example of how cost-effective it is for a healthy, 40yo, non-smoking male working in an office:

Earning the average wage of $1,248.20 per week (5)
Cost $62.47 per month (6)

If he gets sick or injured:

Insurer pays him 75% of his income, or $1,014.00 per week
Paid until he is well enough to return to work or age 65.

(The reason the benefit is not 100% is so that there's still an incentive to get well and back into a contributing role in society.)

Ways to pay and tax benefits if buying through an advisor

You can get Income Protection through an industry superannuation fund by purchasing additional units of cover, or via a life insurance adviser.

One of the biggest benefits of buying income protection outside your superannuation, is that it becomes a tax deductible cost , which significantly reduces its impact on your household budget.

Waiting and benefit periods can be adapted to your needs. And premiums can be paid monthly, quarterly or yearly.

The most precious benefit of all

Of course, whichever way you go, the irreplaceable benefit is peace of mind for the rest of your life knowing that if you're unlucky enough to be struck down with illness you and your family can maintain your current lifestyle while you're on the road to recovery. Even months and years after sick leave and health insurance have been exhausted and there's no salary coming in.

Like to find out more about Income Protection?

Here at Zenith, we've recently partnered with MBS Insurance who are Authorised Representatives of Lonsdale Financial Services (ASIC Authorised Representative Number 303212).

Their licensed insurance brokers can help you with:

expert advice on income protection
ongoing protection portfolio management support during claims.

If you'd like to find out more, contact us here at Zenith and we'll put you in touch with the best person.

[1]ABS 1301.0 2008 Year Book” Income and community support. Accessed 28 January 2010.

[2] www.centrelink.gov.au accessed 28 January 2010

[3] WWW.Lifewise.org.au TNS/IFSA Investigating Income Protection Insurance in Australia July 2006 accessed 28 Jan 2010

[4] AFGonline.com.au report dated 3/12/09 accessed 5/1/10

[5] ABS 6302.0 Average weekly earnings Australia. August 2009. Accessed 28/1/01

[6] Quote provided by AIA Australia April 2010

Quotation figures as at 23 April 2010 based the following:

Male, aged 40, non-smoker

White collar duties

Income Protection

Indemnity Value

Benefit Period – to age 65

Waiting period – 60 days

Benefit Indexation not included

Claims Escalation not included

Please consult tax and financial professional to obtain appropriate advice

August 2 2011 - RBA keeps interest rates at 4.75%

Tue, 02 Aug 2011 23:32:00 GMT

Despite the inflation rise at home, the Reserve Bank decided to keep interest rates at 4.75% when they got together yesterday for their August Pow Wow.

The main reason being a slow down in the growth of the global economy due to events such as the Japan earthquake and public finances of the US and Europe.

You can get the whole story on the RBA website here.

Or to find out how this might affect you and your finances contact Zenith Finance any time on 1300 288 874.

From beauty to beasts - what kind of business equipment can Zenith finance for you?

Tue, 02 Aug 2011 23:04:00 GMT

When most people see or hear the words "business equipment financing" or "business equipment brokers", they think about things like trucks, cars, forklifts and construction equipment.

But they're just the tip of the iceberg, as a new Zenith client recently discovered.

Lights, camera, action...

Robert got in touch with us from a TV and film production company. They were desperately trying get finance for a new $220,000 camera to shoot ads and movies and wondered if we knew of a company that offered TV and film production equipment finance.

He was quite surprised - and very relieved - to hear that we do.

I explained to him that one of the reasons we offer a range of finance options - commercial hire purchases, chattel mortgages, finance leases and operating leases is so we can look at just about any type of equipment need, client situation, budget, etc and come up with a selection of smart finance packages to choose from.

6 other examples of less-usual equipment we've recently financed

To give you an idea of the range of equipment we can finance, here are six that we've helped clients buy of late. From beauty salon technology to excavating machine beasts they're an eclectic bunch if we ever saw one:

Shrink wrap machine
Think Glad Wrapping on 1970s East German Olympian steroids. This $22,000 was purchased by a logistics company that need to wrap pallet loads of product.

Trenching machine
A company that specialised in laying pipes used to carry water needed $1.7 million to buy a machine that can do the job of two excavators at twice the speed and accuracy.

Car parts carousel
A very clever piece of equipment purchased by a car parts supplier. The carousel has hundreds of compartments that can store something as small as a screw. The operator calls up the part required on computer.

Cool rooms
One of the major supermarket chains needed $450,000 to install a new cool room to store meat and other goods. The price was to construct the room and include shelving, etc

Beauty equipment
" What Price Beauty?" goes the saying. For a beauty salon that does minor cosmetic surgical procedures the answer was a $66,000 skin tightening machine.

Marble & granite - edge stone polishing machine
A company that supplies marble and granite to the public needed $275,000 financing to purchase a machine that cuts stone slabs to size for benchtops, floors, etc.

Not to mention...
Office and surgery fitouts, whole mezzanine levels, bakery equipment, garbage trucks, plumbing systems, ultrasound machines and more.

Perennial favourites such as cars, heavy vehicles and construction/industrial/ medical equipment are always going to be the most commonly financed products.

But as you can see, we can really help you buy or lease almost any business equipment imaginable, provided it's viable - and legal!

So if you need some help acquiring the type of equipment people don't hear about every day, feel free to get in touch with us for a chat

July 5 2011 - Reserve Bank keeps interest rates at 4.75%

Tue, 05 Jul 2011 05:39:00 GMT

A frugal start to the new Financial Year as the Reserve Bank Board keep the cash rate target at 4.75%.

Like to know why? You can find out here.

Or to learn how this might affect you and your finances contact Zenith Finance any time on 1300 288 874.