Tough work staying on top in the good times

Navigating a business through Western Australia’s economic boom presents enormous challenges for business, according to several leading WA business executives.

And as the good times roll on, operators will need to sharpen their focus on reducing costs and attracting and retaining good staff, they say.

The boom also presents challenges for mergers and acquisitions, according to former WA Business News 40under40 winner Stephen Lauder, who said some business owners sold up because they thought the boom might bust while others were looking to cash in during a buoyant market.

Mr Lauder, managing director of AHS Hospitality, was part of a five-member panel launching WA Business News’ 2008 40under40 Awards this week.

He said he would “get a knock on the door every 12 weeks with someone who has an idea or a plan”.

“There is a whole argument that this isn’t a boom…that this is a way of life and it will be this way for a lot longer,” Mr Lauder told those at the breakfast forum.

 “We have got into this zone at the moment where people are saying ‘quick sell the business and get out now because tomorrow the good times are going to end’. I don’t think that is the case.

“If you don’t need to get out right now, why would you? Why not stay in longer and continue to ride it, unless there are other pressures and reasons.”

Mr Lauder likened selling a business to selling a house, with rising prices often catching people out and making it more difficult to get back into the market.

iiNet managing director Michael Malone and TSG Key Group chief executive officer Dave Simmons are on the lookout for acquisitions, while Australian Mine Services co-founder Julie Smith-Massara is in the process of negotiating the sale of AMS to Leighton Holdings Ltd.

As mergers and acquisitions bubble away, each executive is concentrating on maintaining or reducing costs and finding good people.

So too is Sally Malay Mining managing director, Peter Harold.

Mr Harold said cost pressures had become more noticeable in the past two years and he expected wage pressure to continue to increase in the next 12 months.

“I don’t think the salary push has stopped yet,” he said.

“The margins are great but you can start to see them being squeezed. We sell everything in US dollars and the Aussie dollar at 90 cents is a concern for us.”

Mr Harold said labour supply was a major difference between the current minerals boom and the “last big boom” that took place in the 1960s.

“There were a lot of displaced Europeans who were very skilled who flooded into Australia and did a lot of the building,” Mr Harold said.

“This time we don’t have that influx of skilled workers.”

Mr Malone said he was expanding the internet company’s staff numbers in New Zealand, despite iiNet selling its assets there.

“It has become a good employment market relative to Australia,” he said. 

Mr Malone said sourcing skills from Asia and Africa was WA’s best opportunity to attract “the best and brightest” people but it was at odds with Australia’s current immigration policy.

“We are not going to get people out of Europe now, they’re having good times. We are not going to get people out of North America because they don’t know that the rest of us exist, and so Asia and Africa are our best opportunities to attract the best and brightest in the planet,” Mr Malone said.

“For the last six or seven years we have had a White Australia policy returned and dressed up in politically correct terms,” he said.

“It is very restrictive on where we can get our skilled labour from and we need more of it.

“We are going through a boom time now but we should be using that as an opportunity to attract the best and brightest from around the world, and yet because of the cultural cringe we are not.”

Businesses are also being confronted by a band of employees who think their skills are better than they actually are, Mr Lauder said.

“The biggest thing I am concerned about is the number of people who think they are better than they are, and long-term that could be a problem,” he said.

TSG Key Group chief executive officer Dave Simmons said the boom had allowed the company to grow quicker.

But he said there were some “ridiculous” prices being offered for businesses.

“It is a very good time but that doesn’t mean we are going to go over the top. We drop our valuations to take into account the period we are in and go back further than the typical three years and want five years plus.”

Mr Simmons said getting a more long-term view of a company helped him work out what the “normal” business activity was because many businesses could appear to be performing well in the back-drop of boom-time conditions.

Mr Malone said iiNet was “cashed up” and was looking at smaller internet service providers to buy.