Five years later, and Bellingham Wallace is still going strong. In an industry stereotyped as stagnant and traditional, we’ve dared to be different from the rest.
Read more: Overcoming Growing Pains
In our five years of operation, every project has been defined by relationships: with the clients, with their businesses, but perhaps most importantly, with the ever-changing business world where you have to keep up to survive.
On Bellingham Wallace’s fifth anniversary, let’s take a look back at those changes and what they meant for us, for your business, and perhaps indulge in a little crystal ball gazing. What lies in store for New Zealand enterprises in the future? How will the role of business advisors change?
Why businesses fold in the first five years
The five year point is a cause for celebration for any business. There’s only about a 60 per cent survival rate, according to the Ministry of Business, Innovation and Employment. Make it this long as a business owner, and you have a very good reason for popping open a moderately-priced bottle of sparkling wine.
But don’t be fooled; business survival isn’t about luck or statistics. Aaron Wallace and Matt Bellingham, co-founders of the company, give us some insight into why businesses fold in their first five years—and their own experiences in dealing with them.
Running out of fuel
The first issue the pair highlights is one that has plagued businesses since the first bright spark had the idea of using the shiny rocks as a form of currency: cash flow.
“When they first start off, a lot of businesses manage to get sales through the door. They are make a profit, and life is good,” Aaron explains.
“But here’s the problem: often that profit doesn’t turn into actual cash. They aren’t always directly correlated. When you’re a small company just starting out, all you’re doing is growing—and something has got to fuel that growth.”
“That fuel is your ‘profits’. It isn’t getting the chance to turn back into cash, because you’re having to reinvest it right back into the company as it grows,” Matt continues.
“Profit is like food, but cash is like oxygen. You can survive a while without food, but only minutes without oxygen. Juggling debtors and other clogs in your cash flow will end up with you needing to take out loans from the bank to get back on top of things—and that’s a snowball that can cause an avalanche for your enterprise.”
The solution, they say, is quite simple: cash flow forecasting and choosing a business growth strategy. You can’t expect to have smooth sailing by the end of your first five years if you are still flying by the seat of your pants. As Aaron puts it, your business needs to “grow up”.
The next significant issue Aaron and Matt tick off is of quality labour. We have had low unemployment over the last few years, sitting at just under 6 per cent nationwide, and closer to 5 per cent for Auckland. This is generally considered a good sign for the economy, but Aaron points out how a small business can end up being a victim of this low unemployment:
“Unemployment is low, but productivity is still high. People aren’t working 40 hour a week jobs; they are working 45 hours a week. It’s really hard to get people, especially people with the right attitude and the right skillset. There just aren’t enough people looking for work!”
Matt provides an example that he sees frequently with new service startups.
“Let’s say you have a pool cleaning company. You might be set to do so many cleanups a month—you are selling hours, rather than a product. But if you don’t have enough people to fulfill those hours, no matter how productive they are, you aren’t going to be able to meet your goals. You can’t catch up with those opportunities.”
Bellingham Wallace has suffered from this issue itself, mostly due to the emphasis on advisory. Aaron explains that it now takes far longer to become a fully qualified accountant, and fewer people nowadays are getting into the profession. Even those that are becoming accountants are doing so with the traditional mindset i.e. bookkeepers—something that Bellingham Wallace has explicitly veered away from.
Some problems must be merely managed rather than solved; the skilled labour issue is one that Bellingham Wallace is still dealing with today, as will many other businesses across New Zealand.
Digital disruption was the buzzword of 2016 for a reason; there’s no escaping it, no matter what industry you’re in. Technology is redefining our world every day, and it’s changing the way we do business as well.
“If you’ve got an online sales system, you suddenly have a digital salesperson and sales manager—no need for shoe leather. You can reach a broader market,” says Matt, expanding on his view that being technological isn’t a choice any more—it’s a necessity.
“People are using technology a lot more. Consumers are searching out your company and its competitors, and your employees have far higher expectations for their workplace. Nobody wants to buy from or work for a company that is still stuck in the 1990s!”
What’s the solution?
Despite these issues, there are plenty of young companies that are still doing extremely well. Aaron points out how hospitality, tourism and accommodation are striding ahead in the short term with events such as the Lions tour. IT companies are also doing well, as people now have the money to invest in infrastructure after the GFC. Companies are also investing in their automotive fleets as well.
“That’s why you’re seeing so many utes on the roads at the moment—small businesses are investing in them because they can now,” Aaron explains.
But no matter how well your own particular industry might be doing, Aaron repeats that it is governance and advisory that will make a business truly successful.
“It’s lonely at the top. Don’t be afraid to ask for help. If you’re going to get involved in business and advisory, you need to get the people who walk the talk,” he says.
“That’s where we’ve been successful–in our advice for business.”
What’s in store for the future?
Five years of success—and plans for many more. According to Aaron, the company is going to continue down the same successful path that it has been walking for the past few years. Building relationships, being ambitious on behalf of their clients, and most of all, focusing on the development of the advisory side of the accounting firm.
“There’s a split coming—those that can and those that can’t,” Aaron explains when asked about what he thinks the future of accountancy will look like.
“Only about 40 to 45 per cent of our business is traditional accounting. Advisory has outgrown it. It’s more about getting the people who come in with no preconceived ideas about what it means, and are willing to learn how to do it. It’s not something you can teach—some people are stuck in the traditional past of accounting.”
Matt continues that line of thought:
“We don’t think that model is relevant anymore—it’s not the smartest. We think you need to specialise. And that’s where Bellingham Wallace has been successful; that’s where our future, and I reckon the future of accounting in general, lies,” he explains.
A solid past, a hopeful future—here’s to many more years of success for Bellingham Wallace!
There are a number of factors that are outside of our control, which is why it is important your business is ready to weather any storm. Start by using our Cause and Effect Navigator to help pinpoint any weak areas that need attention.