A well-established and second-generation family enterprise, this plastic injection moulding business has been trading for over 50 years. Business was extremely successful for several decades, however, they encountered trading difficulties following the GFC and never really recovered. They recruited an experienced management accountant in late 2016 to provide turnaround consultancy services for the business.
Over the past 18 months, this consultant has been successful in steadily restructuring the whole operation. The consultant identified that the existing bank’s working capital solution was too inflexible in structure and size, because it was secured with real estate security and would be inadequate leading into the future.
The Solution
Octet was approached to discuss the need for a flexible and well-structured invoice discounting facility. With the current receivables ledger at $800k, Octet implemented a $1m Notified Invoice Discounting facility, providing a revolving line of credit against the business’ unpaid invoices.
This ideal solution enabled three key outcomes:
No requirement for property security
Facility allowing them to draw on available funds only when needed
Access to a flexible funding facility that would grow along with their business into the future
With the facility now in place, the business has a flexible and stable working capital base that is aligned to their sales. This has provided them with security and comfort knowing that in their peak trading periods they will always have sufficient funding to meet their inventory and wage requirements. In addition, they can continue to fund the planned expansion of their business.
Octet welcomes the Federal Government’s recent announcement of plans to create a loan program of $2 billion to support Australian SMEs, called the Australian Business Securitisation Fund. At its core, this unprecedented investment will entail the purchase of loan packages from smaller banks and non-bank lenders that will furnish them with more capital to on-lend to relevant businesses.
“This is a positive move that aligns with our long-standing vision of seeing more quality Australian businesses grow and prosper,” said Octet Chief Commercial Officer Brett Isenberg, “This funding gives proven lenders more inventory to help SMEs, increasing their access to cash flow and giving businesses more options in the lending market.”
Since the global financial crisis, with the implementation of measures like Basel II/III and APS120, banks are required to hold increasingly more capital in proportion to their SME loan exposure. As a result, they are less able to readily offer loans to smaller businesses, despite their ability to repay and their overall potential. This is forcing even strong businesses that were historically “bank quality” to look elsewhere for funding.
According to Isenberg, this program is encouraging for two reasons:
It highlights the government’s recognition that adqueate SME funding is critical to the growth of our economy and, moving forward, more funding to this sector will come by way of non-bank players, illustrating how important they are for the sustainability of the SME market.
The fund appears to be a rated program, meaning the quality of debt originated is critical, encouraging better quality lending practises.
Lenders with a proven track record, such as Octet, can now better satisfy the demand for the necessary finances to see more businesses grow.
Whilst the move seems like a promising one for smaller lenders, SMEs and the economy, we will have to wait and see what the actual effects of the Australian Business Securitisation Fund are.
Octet looks forward to working with the government and other financiers to inject power into the Australian business landscape.
Since 2009, JasonL has been “your furniture mate”, delivering full-service office furniture fit outs and growing to become an industry leader. Australian owned and operated, JasonL has long been an Octet partner, helping them to continually achieve their business goals and keep looking forward. We met with co-founder, owner and CFO, Marc Levin to hear about how Octet has played a role in their success.
Starting out
“Our business has been growing 30%, year on year. And Octet has been fundamental to our growth.”
Marc and his brother Jason started their business together nine years ago importing and distributing their own office furniture for small and medium-sized businesses.
When they partnered with Octet in 2011, JasonL was still a relatively young business. They sought a finance solution from Octet for a number of reasons – first and foremost it was for working capital.
An unsecured trade finance facility provided their business with the growth capital that allowed them to increase buying power and step up their game.
Growing, growing, gone
“Initially we partnered with Octet because of finance. But it’s become so much more than that.”
Beyond the finance itself, JasonL has found the platform highly useful in terms of their supplier relationships. Octet has enabled relationships with their suppliers to become closer and more responsive. It’s made their processes more efficient and transparent, giving JasonL control over all the paperwork floating going back and forth, streamlining their accounting function.
Meanwhile, they have more options for how to make final payments to suppliers. This added flexibility in the cash flow process, allowing them to juggle their economy as a small business, has been hugely beneficial for them. One of their funding sources are their credit cards, which they can use on payments even overseas, a new feature of the platform that has allowed them to earn valuable points and spend them when needed.
“Octet’s support has really powered JasonL to carry on growing and pushing the envelope.”
The support of the Octet team has allowed JasonL to harness the full power of the platform and finances. A prime example of this can be seen in onboarding suppliers with the digital platform, following Octet’s specialist, local staff explaining the function and benefits of the system to JasonL’s suppliers across Asia.
Throuh Octet’s support, the business has shaved down their timelines dramatically. According to Marc, with the combined power of Octet’s inhouse support team and the digital wallet, their supply and transaction timeline has been made more efficient by at least four weeks. This is an asset not only to their business, but also their customers, who don’t have to wait as long on stock to come in for their office fit out.
“Partnering with Octet has been vital up until now and as we pursue further growth, it’s definitely an ace up our sleeve.”
The history of JasonL and Octet’s relationship paints a picture of what’s to come. Marc shares that the longer their business has been with Octet, the better their understanding, the more they’ve gotten out of it and the more the partnership has grown – a positive knock on effect.
JasonL aspires to become a national player in our industry, with showrooms in every major city. Based on the success that Octet has already witnessed JasonL achieve, we look forward to being part of seeing these future goals become a reality.
“When anyone is thinking of fitting out their offices – JasonL will be the go-to.”
When it comes to business negotiations, perhaps the most important phase is the preparation. An integral part of the planning process is to consider not just what you want from the exchange, but what you can bring to the table. Getting a great deal is as much about what you can leverage and have to offer as it is about what you stand to gain.
More than an afterthought
All too often, business finance is something considered on the fly, a resource used to help with an immediate situation. However, thinking about your cash flow and ongoing funding support with eyes to the future can set your business up to maximise – and the context of deal-making exemplifies this perfectly. Octet’s finance solutions can help your business find leverage, flexibility and wriggle room in negotiations.
Many clients seek finance solutions in a bit of a fluster – energy that no doubt follows them in to the negotiation room, hampering the ability to make a good offer or carefully considered decisions. This fluster could become an achilles heel in the end, leading the other party to take advantage or be put off from doing business altogether. The deals struck should always be in your business’ best interest – ideally, for your prospective business partner, too – not because you’re backed into a corner or are so desperate for business that you’ll take any offer. Being in a financially sound position will empower you with a strong foundation and options.
Bargaining chips
A strong credit line can help you to find and accelerate opportunities throughout your business operations, including in negotiations. A tangible example of this is seen in trade or purchasing facilities. Simply having access to a revolving line of credit can be a great way to bring more options to your proposal.
To put this into context, imagine you’re negotiating with a supplier on the price of an order. The ability to bring the payment waiting time from the standard 30-60 days down to zero is a bonus the other party would be remiss to not utilise. You’re now in the position to open up the conversation to better terms or prices by negotiating an early settlement discount. Bargaining chips that are of high value to them, low cost to you are aces that it pays to have up your sleeve.
Go bigger
Another scenario could be the option of increasing the size of your purchase or frequency of your purchase based on the facility you have recourse to – thanks to the appropriate. This could be a simple yet effective way to sweeten the deal for the other side, leading to opportunities such as better rates through economies of scale.
Octet customers can also be put in a stronger position by using our platform. Through this digital wallet, you can make payments in foreign currencies, accessing sharp exchange rates. Offering to pay parties overseas in their preferred currency, removing the need for conversion on their part and giving you certainty of the absolute cost, can be a handy asset to be able to leverage.
Octet even has offices in China who can engage with local suppliers on your behalf. Domestic and overseas suppliers connected on the platform may also feel more assured to do bigger deals with Octet customers, simply due to a trusted and common link that connects the two parties.
Confidence on your side
Negotiating with confidence will impact how you behave and, ultimately, the outcome. Confidence can be gained through knowing that you have chips to bargain with and your finances are in order, clearing your mind from stress. This clarity will enable better, more measured decision making. Particularly when negotiating with stronger competitors or pitching for much larger clients, confidence in what you can offer and can actually deliver may mean the difference between winning or losing the deal.
With many factors at play, financial solutions that suit your business’ unique needs and aspirations can arm you with the means to negotiate better deals. Contact Octet to see what power you can leverage for your business.
Want to learn more about good negotiations? Download Powering Business Issue 1: The Power of Negotiation.
Commencing business just over two years ago, this Western Australian-based labour hire business provides a specialised workforce to the mining and resources sector. During high demand seasons, weekly payroll requirements spike and put immense pressure on cash flow. The business is in prime position to grow significantly over the coming three years, off the back of increased activity in the WA mining and resources sector. The directors have property which could be used as security, however, their asset positions weren’t even and the amount of equity available wouldn’t carry them very far in a traditional bank facility.
The Solution
Given the receivables ledger position at just over $1.5m, Octet implemented a $2m Confidential Invoice Discounting line, which would provide a revolving line of credit against the business’ unpaid invoices.
This ideal solution enabled three key outcomes:
No requirement for property security
Facility allowing them to draw on available funds only when needed
Access to a funding facility that would grow along with their business
With the facility in place, the business now has a stable working capital base that is aligned to their sales. This has provided the directors with the security and comfort to know that in their peak trading periods they have sufficient funding to meet payroll spikes. In addition, they can continue to fund the expansion of the business through a robust period in the WA mining and resources economy.
Business negotiations are a challenging practice. And there’s a big difference between a skilled negotiator and an amateur. However, a lot can be said for having the right preparation behind you – being better prepared can give a novice the edge over even the most seasoned expert. The trouble is knowing what to prepare and how. That’s why we’ve put together this negotiation checklist, so you can go in confidently, with your ducks in a row.
1. Do your research
How you approach the negotiation is going to be heavily influenced by who the other party is. So, getting a clear picture of who’ll be on the opposite side of the exchange is a logical and advisable first step in your preparations. Learn about their company and, if you can, deals they’ve made in the past – the good and the bad – to get an idea of what a positive outcome might actually look like.
See who you’ll be personally dealing with. Decide on the best way to approach them and make sure that someone involved on the other side is a decision maker. You’re off to a bad start if the people you’re dealing with don’t have the authority to offer any kind of concessions or compromises.
2. Form the team
Now you know what the other side looks like, you should think about who’s going to be taking part on your side. Figure out who’s coming to the negotiation and what role they’ll play.
In an ideal situation, negotiations will be done as a team, ideally of three people, especially in a high-stakes scenario. This provides room for a lead negotiator (the most skilled and informed), a summariser (the scribe and timekeeper) and an observer (someone in a senior role). The three-pronged approach provides room for adequate support for the lead negotiator.
3. Make a game plan
Having a methodology or strategy for negotiation, both at an organisational level and on a personal level, will provide a good foundation to walk in with. That being said, you need flexibility in order to compromise and field curveballs should they come your way. So, whilst strategy is a great point of departure, it shouldn’t override setting tactics for what you want to get out of the exchange at hand.
Don’t make the classic mistake of walking in without a clear idea of what outcomes you actually want. Here lies a tendency seen in many preparatory contexts – the most important detail is overlooked. In figuring out how you’ll approach the exchange, ask yourself: what do you aim to get out of the negotiation? And of these things, what are your priorities? This will help you figure out what’s essential versus what’s desirable.
4. Find your leverage
Whilst you consider what would be the best deal for you, put yourself in the shoes of the other party. Think about how you can sweeten the deal for them, the things that may be of high-value to them yet come at a low cost for you – your bargaining chips.
Look at what you can add to your offer – and how that would then affect your asking price. Decide how much you’re willing to compromise before it’s time to take a break and re-assess. Flexibility is important, but this is also a crucial thing to have in your back pocket: the willingness to walk away.
Octet’s finance solutions can help businesses gain leverage in the exchange and add power to your arsenal. With the right tools you could:
These examples will give you buying power that may come in handy at the negotiation table.
5. Choose your setting
Consider the setting for your engagement. Meeting face to face is always the best way to do negotiations. Decide whether you’re meeting at your office, theirs or on neutral ground.
Food is also an important factor to take into account. It might sound trivial, but having something to eat in the negotiation room is actually proven to produce better, more profitable outcomes. Sitting down to lunch and sharing a meal is what people do when they’re relaxed and on friendly terms. So, it follows that doing the same within the context of business makes both parties more likely to be open and cooperative – the recipe for fruitful negotiations.
From finance to food, there are a few tangible resources you can call on to put your best foot forward. In addition, simply plotting a course and doing relevant research is going to go a long way when it comes to business negotiations. So, if you take the time to prepare well, then you’re off to a good start before the process itself has even begun.