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Australian Financial Review : October 17th 2006
FBA 048 SMALL BUSINESS OWNERS WANTED Small Business Forum The Australian Bankers' Association (ABA) seeks expressions of interest from experienced small business owners who would like to join the ABA Small Business Forum, which advises the banking industry. ABA IS SEEKING CANDIDATES • Knowledgeable in their market segment • Having solid understanding of small business banking needs Places are limited, and the ABA needs the Forum to represent as many parts of the small business market as possible. Expenses will be reimbursed, with no sitting fees. Please address a brief CV and expression of interest to: Tony Burke, ABA Director email@example.com. Phone: 02 8298 0409 ABA5006/ABA ARBN 117 262 978 (Incorporated in New South Wales). Liability of members is limited. 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Trademark/Wordmark available for license Limited classes, from Surfboards to Cosmetics Free Call 1800 64 1870 "The White Fella" BARRINGTON BROKERS 02 9955 1690 0418 606 196 Scheduled Ferry Service Blue Chip Lifestyle Investment Operates exclusive Ministry of Transport routes on beautiful Pittwater. 3 Ferries all in Survey and waterfront office. Minimum management involvement. Owner works 10 to 12 hours a week. Vendor considering offers in the order of $1.3 million The Australian Financial Review Tuesday 17 October 2006 www.afr.com 48 ENTERPRISE How this little product went to market Don't get burnt . . . James Newbury and a model wearing the patch Photo: GLENN HUNT The right distribution channel can be critical to a product's success, writes Richard Hemming. '' A broker's sales force pushes the product to pharmacy chains.'' Finding a good product was just the start of establishing a market pres- ence for contract-based manufac- turer and distributor Newchem International. When the small family company of nine employees came across a product called SunSignals UV Sen- sors, it thought it had hit the jackpot. ''Most people come along with a new product which is a 'me too' product, which replicates an exist- ing product in the market and can only compete by lowering its price or with a massive advertising budget,'' says strategy and market- ing manager James Newbury. ''We think this product is innovative because there is nothing else out there that does the same job.'' SunSignals UV Sensors are small patches that change colour when wearers have been exposed to dangerous levels of UV-B rays. But in reality, finding the product was just the beginning in a chain of events that led to it being distributed to pharmacies six to seven months later. Newbury says finding the right distribution channels was as import- ant as the product itself. Newchem learned about the product through an associate and travelled to its distributor's base in the United States to negotiate sole distribution rights for Australia and New Zealand. The negotiations in Florida took a month and then the product was tested by the Australian Radiation Protection and Nuclear Safety Agency, the government body that tests anything to do with radiation. After this, Newbury says, his real education about the complexity of marketing and distribution in the pharmaceuticals industry began. He first visited Symbion Health, a wholesale operator in the domestic market, warehousing and acting as a distribution centre in each of the states. It sends the product out to the individual pharmacies. ''I spoke to one of the buyers at Symbion and he said he wouldn't look at the product to list in their warehouse unless a national [phar- maceutical] broker was pushing the product,'' he says. A broker's sales force pushes the product to pharmacy chains and individual chemists. The buyer connected him with a couple of the bigger pharmaceutical brokers and Newchem ended up choosing the second biggest, Cross- mark, on the basis that it had already handled sun-care products, and liked the product. Crossmark's national marketing manager, pharmacy, Rebecca Stimpson, says that after doing due diligence on the SunSignals prod- uct, 25 of its representatives sold it to pharmacies and grocery outlets. She says Crossmark also helped in advising on the initial marketing for the product. ''We assist in the marketing and advise on this but we are employed as their sales company at retail level,'' Stimpson says. Newbury says his company has spent about $200,000 since Febru- ary on this process, which includes marketing expenses, and that Sun- Signals is now rolling out into pharmacies. He believes if the product sells well it could add sales of about $1 million to the group by February ± an impressive result considering his company has not had to develop the product. His role is to make sure the right amount of product is ordered and the correct message about the prod- uct is getting through to consumers. ''There is a fair bit to co-ordinate to make sure that through the supply chain the right information is pro- vided,'' he says. ''We also have to bring in bulk product from the US, repack into the different point-of-sale formats and ensure it is available at the right time.'' All this, he says, as well as an advertising program, co-ordinated by Newchem. Nobody said making money was easy. BlueScope joins the hall of shame COMMENT Mark Fenton-Jones '' Disgraceful behaviour towards small business.'' W hile governments seem to understand the importance of the small business sector to the national economy, parts of the larger business community appear to view it as a soft target worth exploiting. BlueScope Steel joined big business's unofficial hall of shame when it announced last week that it would pay invoices 62 days beyond the month in which an invoice is tendered ± which could mean waiting up to three months for payment. According to Dun & Bradstreet's research, the trade payments average is 54 days, up from its recent low of 48 days in 2004 and 64 days in 2001, soon after the introduction of GST. BlueScope's position is out of step with the federal government, which aims to pay invoices within 30 days of receipt. The government claims that 93.9 per cent of invoices are paid on time, an increase of 85.2 per cent on 2002. Federal small business minister Fran Bailey, a strong supporter of small business, blasted BlueScope, calling its behaviour towards small enterprises ''disgraceful''. The cash pressure on small businesses is likely to rise in the near to medium term as the National Australia Bank's monthly confidence survey predicts a gradual slide in business confidence. Furthermore, the September bankruptcy figures out last week were up 10 per cent over the 2005 September quarter. Significantly, in last year's September quarter, the increase was only 5.25 per cent. For small businesses, the rise in bankruptcies indicates not only the reduced spending power of consumers, but the rise in business-related bankruptcies shows that small business margins are being squeezed. Bailey rejected the idea of introducing legislation that would allow small businesses to charge late payers interest on outstanding invoices, as happens in the United Kingdom, as an unnecessary layer of bureaucracy. But she is in favour of a ''name and shame'' approach, one that would certainly have the support of many small businesses whose cash flows suffer when big business adopts these late payment strategies. The Opposition and Independents who claim to be small business supporters should also think about getting behind such an idea.