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Start-ups to be hit by “triple whammy” of increased costs on July 1

5:42AM | Wednesday, 22 May

Small business will be slammed by three cost increases in the new financial year: An increase in the minimum wage, another 0.25% rise in superannuation contributions and an increase in penalty rates for many retailers, according to the Australian Chamber of Commerce and Industry. The Australian Council of Trade Unions is before the Fair Work Commission today lobbying for a $30 per week award wage rise across the small business economy, and ACCI is characterising the push as a raid on the payrolls of hard-working small employers. ACCI is proposing a rise of no more than $5.80 per week, a position which it says is consistent with last weeks “alarming” budget forecast. David Turnbull, director of communication at ACCI, told SmartCompany an award wage rise would weaken business viability, reduce profitability and cost jobs. “If the union claim gets up and there is an increase of that magnitude, it will come at the same time as an increase to the superannuation guarantee and increasing costs under modern awards that continue to be phased in,” Turnbull says. “We’re referring to it as a triple-whammy, at a time when businesses are under significant strain you can see why we would be concerned.” ACCI is calling for a specific superannuation wage offset and says without this the increase to the superannuation guarantee will hit hard. Small business will also be impacted by the next round of rate increases with casual loading going up 24% and penalty rates increasing from July 1. Peter Strong, executive director of the Council of Small Business Australia, told SmartCompany “without a doubt” the increases would all hit small business. “What is difficult for small business is passing costs on, which is proving more difficult the way landlords work and the way the big supermarkets like Coles and Woolworths work,” Strong says. “The government often says if there is an increase in costs pass it on to the customer and that is easy to say, but in the past decade that is more and more difficult as the big supermarkets won’t let small businesses put up prices.” Strong says businesses will also be hit by the administrative costs of implementing the increased costs on July 1. “The other problem that confronts us is red tape, every small business has to dive into their software and change the super contribution, it’s not like a pay rise, super is more difficult,” he says. The FWC’s annual review of the minimum wage concludes today.

THE NEWS WRAP: One in four Aussie workers miss out on overtime pay: Report

5:23PM | Sunday, 5 May

More than one in four Australian workers are not being paid for their overtime, according to newly released figures. The Australian Bureau of Statistics data shows that one in three employees spend more time at work than they are contractually obliged to. However, 26% of the workforce, around 800,000 people, do so without compensation, with female employees more likely than their male counterparts to do unpaid overtime. Pacific Brands’ warning about major retailers Pacific Brands chief executive Peter Bush has warned about the growing market power of Coles and Woolworths, along with the potential damage they could inflict on smaller suppliers. "I am not a big believer in regulation. I am a big believer in self-regulation. But I am also someone who believes everyone should have a fair go. And I think the important thing in this process is that there needs to be a level playing field… I am certainly not convinced there is," Bush says. “If you are a small supplier and you want to have your product listed with the major chains – anywhere, whether it is in liquor, apparel or on the supermarket shelf – it’s going to cost a lot of money. It is pretty tough.” Abbott under pressure over paid parental leave scheme Tony Abbott is coming under increasing pressure from economic dries within his party and conservative think tanks to abandon his paid parental leave scheme, with Coalition MP Alex Hawke writing an essay attacking the proposal for the Institute of Public Affairs’ IPA Review. “As the Labor Party continues to expand the welfare state and re-regulate our labour market, the Liberal Party must be mindful not to join them in adding to the burdens on our businesses… At a potential cost of $4.3 billion, a parental leave scheme at full pay would be an unjustifiable impost on business at a crucial time in the economic cycle,” Hawke says. “Alex Hawke is saying what many Liberal MPs think and privately admit - Tony Abbott's paid parental leave scheme is unnecessary, unaffordable and unjustified," IPA Review editor James Paterson says. “It is a truly bizarre situation to have the Liberal Party going to the next election promising a higher rate of company tax than the Labor Party, particularly when Australia already has one of the highest rates of company tax in the world.” Overnight The Dow Jones Industrial Average is up 0.96% to 14,973.96. The Aussie dollar is up to US103.13 cents.

THE NEWS WRAP: Gillard warns “all reasonable options are on the table” in the federal budget

4:14PM | Monday, 29 April

Prime Minister Julia Gillard has warned “every reasonable option is on the table” to deal with a $12 billion budget shortfall and fund the Gonski school funding reforms and NDIS, in a speech delivered to the Per Capita Institute yesterday. “I have expressly determined we need to have every reasonable option on the table to meet the needs of the times – even options previously taken off the table… The nation and the government must have maximum flexibility to deal with these complex, and rapidly changing, events … that is my approach,” Gillard said. “All options are on the table, so increased tax on superannuation, increased taxes on the family home, death duties, which Wayne Swan ruled out in Parliament – all options are on the table,” Shadow Treasurer Joe Hockey said in response. Merrill Lynch downgrades Woolworths over $800 million Masters loss Merrill Lynch has downgraded its earnings estimates for retail giant Woolworths over concerns its home improvement chain Masters is set to lose $800 million over the next four years. Despite Masters generating gross margins of 42%, compared to 32% at rival Bunnings, the brokerage firm predicts losses for the chain of $135 million this financial year, rising to $265 million in 2015/16. “The problem for Masters is, despite its very high gross margin… its costs per store are currently inhibitively high,” analyst David Errington said. BHP sells US Pinto Valley mine for $629.5 million Mining giant BHP Billiton has announced it has sold its Pinto Valley copper mine in Arizona to Canadian firm Capstone Mining for a better-than-expected price of $629.5 million. Pinto Valley was one of 10 non-core assets or offshore assets flagged for sale by BHP in response to weaker cashflows as a result of lower commodity prices. Overnight The Dow Jones Industrial Average is up 0.72% to 14,818.75. The Aussie dollar is down to US103.51 cents.

Tech industry not satisfied with answers given by Apple at IT price inquiry

3:14AM | Monday, 25 March

The tech industry has been left disappointed after major companies including Apple and Microsoft at last week’s parliamentary inquiry into pricing in the IT sector didn’t deliver any sufficient explanations as to why local consumers pay so much. The organisation which helped push for the inquiry in the first place, Choice, said the companies involved didn’t necessarily offer appropriate explanations and, in some cases, gave “bizarre” alternatives. “Adobe gave some bizarre comments around the personalised nature of its website, and how that somehow justified charging people $1,200 more for its Creative Suite,” spokesperson Matt Levey told SmartCompany. Choice spokesperson Levey said while the pressure placed on these companies by having to appear at the inquiry is in itself a positive outcome, Choice wants to see a recommendation on geoblocking – a tool used by companies to prevent local users from accessing prices used in other countries. “We’re think there’s a strong case for that to be looked at, and we’d like to see some strong recommendations there,” he said. Three major companies appeared before the inquiry – Microsoft, Adobe and in a rare appearance, Apple. Firstly, Apple local managing director Tony King, who is rarely seen in public, shifted much of the blame from the company onto the local rights holders. As a result, he said, local users pay more for iTunes content than in other countries. “Apple must pay the rights holders to distribute content in each of the territories in which the iTunes store exist,” he said. “The retail pricing of digital content is based on many factors and foreign exchange is not a major factor. The main differentiator is the wholesale price.” Apple has faced scrutiny in the past due to the price disconnect between countries. Users in Australia often pay much higher prices for music than customers in the United States. Levey said while this argument did carry some weight, he likened Apple’s market power to the same kind used by Woolworths and Coles to reduce the price of milk. Microsoft took a much more defensive stance, with local head Pip Marlow saying the current prices were set and if customers were unhappy, they could shop elsewhere. “If they don’t like it, they vote with their wallets,” she said, adding there wasn’t a “silver bullet” for addressing pricing issues. Finally, Adobe game some aggressive answers in which it suggested customers could even fly to the United States and purchase products if the end result was cheaper. Local managing director Paul Robson told the inquiry the company’s policy of geoblocking, in which customers are directed to the local store and cannot access lower prices in other countries, is completely valid. “The personalisation is relevant to the experience you get when online. One of our key interactions is to allow [buyers] to talk among themselves and ask them to contribute to the future of our product,” he said. Levey says the inquiry provided “three different approaches but no real explanation”. This story first appeared on SmartCompany.

Meet the Startmate class of 2013 – part two

3:16AM | Tuesday, 19 March

Above: Ben Sze, Duncan Anderson and Jeremy Cox from Tutor on Demand Yesterday, we profiled three of the restless young start-ups that are aiming to become the next Aussie tech superstars, with a little help from the Startmate accelerator program. There was the SME tech help service, the communication tool for parents and child minders and the security crowdsourcers. Below, we speak to three more of the Startmate class of 2013, which have been lavished with $50,000, intensive mentoring and a trip to the US. Tutor on Demand Website: https://tutorondemand.com.au/ Founders: Ben Sze, Duncan Anderson and Jeremy Cox What if you were a student wanting to top up your studies with some learning via your smartphone? And what if you were a teacher after a little extra cash and the chance to help a wider pool of students? These two elements are drawn together for Tutor Demand, which features video content of 18 different teachers discussing 15 different topics, to help high school students. Where did this idea spring from? Anderson: Ben, Jeremy and I all worked together at Goldman Sachs and then did our own thing. We kept in touch and Ben was tutoring a bit. He had an idea to set up Skype, so we have tutors one side of a city and students the other side of the city. He spoke to me about an idea in South Korea called MegaStudy, which is an on-demand resource with multiple teachers. It has a market cap of $1 billion. We thought the business model could work here in a similar way. Why hasn’t this happened until now? It seems like quite a simple idea. Sze: Internet speeds weren’t so good until about 10 years ago. But, also, schools are slow moving beasts. We are focused on finding great teachers and empowering them to teach more than the 50 students they normally teach. Another barrier to entry is the time teachers would have to take to build and then sit and upload content – there’s a lot of time commitment there and not a lot of time. How does it work? Sze: We record teachers doing video lectures over a week period and show it in bite-sized pieces, five or six videos. The focus is high school at the moment. There’s a really good opportunity as no one rewards good teachers – you get the same regardless of whether you are a good or bad teacher, unlike, say, a lawyer. We have a recording studio, so the teachers come to us, do a Powerpoint presentation and walk away. There’s no need for them to have equipment, so there’s no hassle for them. Students get access online through a referral or their school purchases access on their behalf. They might use it for just Year 12 physics or five other subjects, for example. Four weeks before exams, we expect to see lots of students watching all the videos and doing a crash course. Who are you selling this to, exactly? Anderson: Initially, we saw this as additional to the schools – there’s a big market for top-up lectures and here you get great teachers at great price points. But we had teachers come to us and say they want to purchase for a class and a few libraries asked the same. So two schools purchased from us. We are currently looking at all channels – directly to students and parents and some to schools. What’s the business model? Anderson: We sell subscriptions to get access to a subject for an entire year, over two parts. So you get, say, chemistry for $25 for one part. That gives you unlimited access. We’ve found that students usually buy more than once. Schools can then buy access for all subjects, for a price per student. We are still trying to figure that out. Sze: One school we piloted with had nearly 50% of students using the videos getting an A or A+ in their final exams. Only 25% get an A or A+ usually. We were quite pleased with that. So far, we’ve reached 2,700 students across 350 different schools. For schools, it adds another level of teaching. Students get access to a great teacher whenever they need it. They have an iPhone app they can use wherever they go and consolidate what they’ve learned. None of you has a tech background, which is strange for a tech start-up. Anderson: Yes, it is a bit unusual. But we did get it designed and get it all done, so I’d view us as project managers that have an understanding of tech, but didn’t build the core project. We had people help us out with recording, generally multimedia students. The back-end was initially built by friends of Ben, while the design came from a few different places. What would your advice be to anyone applying to Startmate? Anderson: If you’ve built a lot of start-ups in the past, you’ll probably have an easy time. But if you haven’t, get traction first. It helped us that we had customers, product and revenue. It wasn’t just talk. If you apply, don’t just have a great idea. Go out there and build something. You all had comfortable jobs. Why do this? Anderson: Building your own thing is much more interesting and engaging than working for other people. Tutor on Demand can have strong, positive effects on society. Good education allows people to make better decisions. We feel we can empower great teachers and build something that is riskier but the reward is completely different. As Steve Jobs says, do something you love that doesn’t feel like work. You end up really caring about what you’re doing. Story continues on page 2. Please click below. Shiftr Website: http://www.shiftrapp.com/ Founders: Adrian Dean and Ludek Dolejsky Shiftr is a very modern start-up story. The founders discovered each other via Google and launched a simple but clever idea for an app despite only meeting each other a couple of times – mainly due to the fact Dean’s Canberra base was a little far from the Czech Republic, where Dolejsky was living. The start-up’s app allows workers to swap shifts without lengthy phone calls and organisation. What’s the benefit of being in Startmate? It’s a big learning curve, having seen the calibre of our peers. Startmate has given us $50,000 – which is 50,000 $1 experiments we can make to run and iterate our ideas. We want to get into a tight cycle of rapid change, while companies don’t change so quickly. We want bang for our buck in every way, such as getting a place rent-free in Sydney. A friend agreed to this if we arranged to move his stuff in, which I did. It saved us around $10,000. So how did you meet Ludek? I was in San Francisco when I first made contact, via a Google search. I had another idea called MyMyke, which was a distributed microphone app. He’d created software for that so I contacted him. He’d developed something to just spy on friends, something fun, and I said let’s retool it. We worked on it for a month and then I shared a Pilsner with him when I went backpacking. I then floated the idea of Shiftr maybe 18 months ago. My girlfriend couldn’t get out of work and had the whole hassle of calling around and getting a replacement. She had the threat of not getting work if she dropped out without getting someone to cover her. I thought there was a real opportunity there to create an app that was easy for staff to use. I didn’t want to create a full rostering system, as it’s hard for businesses to change those big processes, but employers weren’t bridging to smartphone very well when swapping shifts, they’ll use Facebook or text. How does it work? Any employee can download the app and invite co-workers in. We include managers in this too, as they are on the front line, having to deal with this pain with tools lumped on them by IT departments; people who have never flipped a burger. Employees jump in and can create a shift – it takes you about 10 seconds. You push ‘swap’ and it notifies everyone in workplace that they want to swap and other staff have the option to grab it. The manager gets to choose the winning employee. How will you monetise it? We are going to charge managers when they want to claim their workplace as official workplaces. We’ll add features such as group messaging and store ‘walls’. Obviously they get control over swapping too. It doesn’t require everyone in the business sign up, but catching point is around 40% of a workplace. We trialled a McDonald’s store and it had a 60% take-up in the first few hours. We’ll have a subscription model with a 30-day trial. The charge depends on the business, we’re looking at $30 to $40 a month. We are looking at a flat site fee. We found workplaces want that, rather than pay $1 per employee or anything like that. We’re actually a small part of these massive rostering systems. We are filling that pain point when someone calls up to say ‘I can’t make it’ because it costs a lot of time to coordinate. Eventually, we’d like to be able to match people who are skilled casual workers with different workplaces. That’s the long-term vision – complete labour flexibility. How did you persuade Ludek to move here? Well, Australia has a certain allure to it. Every European thinks Australia is a beautiful place with beautiful people and beaches. He has a tech consultancy company and felt he could take it as far as he could. This way, he gets to learn more and challenge himself. I think we complement each other well. I’m not overly technical, while he’s not someone to sit in front of a client. How many workplaces have signed up? We started on one site with a trial. We had a terrible product but the look on the manager’s face was ‘wow, staff can see shifts in their phone’. He recommended it and it grew rapidly to eight workplaces in Canberra. We’ve now got 18, with another three coming on board – I’ve had calls from businesses in Hobart and the Central Coast. We feel a lot of these companies have this problem. This initial roll out works well with McDonald’s, but we’re also looking at Woolworths and Walmart – big brand names. We have interest from nurses and doctors too. We have just had the app on the app store and have done no marketing, so people are obviously searching for it. Managers say ‘we need this.’ Next, we’ll target industry groups and thought leaders that are talking about absenteeism. We’re starting to ramp the marketing up. We’re getting a lot of fanatical support from managers in McDonald’s –one guy got us into five different stores as he was raving about it. What are your ambitions for the business? Niki (Scevak) gave us a pep talk and said you need to accelerate to five to 50 to 100 stores quickly, otherwise you’ll lose out. The longer term goal is to crack into the US market. We’ve had to be very careful when choosing our words – shifts works well across countries, where roster in US means sports roster. I hope to get into the US by May. If we’re not hitting our targets, we’ll see if the value proposition is strong enough and if we can continue. We don’t want to be stuck with a stillborn company, earning enough to pay salary but not growing.

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