2 GOVERNMENT-BACKED DIGITAL AU$ = GOOD CENTS 3 BE WARY OF THOSE

SEEKING SAFE HARBOUR 4 FIVE AVOIDABLE

MISTAKES MADE BY STARTUP FOUNDERS 6 FAST-TRACKING

WITH THE GO1 TRAIN 7 YOUR FUTURE EMPLOYER – YOURSELF 8 WHAT’S NEW

Evolution – essential to business

A PUBLICATION EXAMINING ISSUES FOR OUR CLIENTS

CONTACT SUMMER 2017/18

A culture of innovation has become an influencing factor in the success of business today.Once tucked away in the realm of software companies and fledgling startups, innovation within business is now seen as a requirement to maintain relevance and generate growth regardless of industry or business size. The famous Venture Capitalist, Marc Andreessen once penned the phrase ‘software is eating the world’. This is truer than ever today, however you don’t need to be a software company to take advantage of this evolution. Cloud computing and the plethora of software available mean that most businesses can make use of tools and platforms built by others to help them build efficiency and innovation within their businesses to leverage growth and ultimately profitability.

Here in Queensland, we are seeing significant activity and growth in the startup ecosystem at the heart of this innovation. With the support of the Queensland government through their Advance Queensland program

and an Australian first ‘Chief Entrepreneur’ initiative, there is a push to make Queensland the ‘Startup State’ and build a Silicon Valley like ecosystem here. One of these initiatives under Advance Queensland is the HotDesq program, of which Pitcher Partners is one of the key partners. The HotDesq program, which is in its second term, is bringing up to 25 cutting edge startups from around the world to Queensland to set up their business here and contribute to the broader ecosystem and economy.

The current Chief Entrepreneur Steve Baxter (prominent angel investor and Shark Tank shark) is also behind a bold initiative that in the next year hopes to fill a chartered Qantas 747 with a mixture of global startup leaders (think Elon Musk) and a select group of Australian entrepreneurs from San Francisco to Brisbane for a two day startup and innovation festival called Myriad.

Pitcher Partners Brisbane is also at the forefront of this wave. One of my fellow partners, Cole Wilkinson, is as I write this, heading to San Francisco with the Chief Entrepreneur Steve Baxter and a group of high net worth angel and venture capital investors. They are on a one week mission to develop contacts and build expertise in this area to help Queensland and Australian entrepreneurs grow into the next unicorn (a company worth $1bn) like Uber, Google or Facebook. As a firm we are looking to utilise this knowledge and resources across all of our clients to assist and advise them on their individual journey and challenges ahead.

Finally, on behalf of the network we wish all our clients, people and business partners a safe and enjoyable festive season and all the best for a prosperous 2018.

By Nigel Fischer Brisbane

EDITORIAL

The Australian government needs to take a leading role in the emerging fintech sector and adopt a Digital Australian Dollar (DAU$) so that middle market businesses can remain internationally competitive.A DAU$ is simply a digital representation or store of value for transacting with, as an alternative to standard currency. Unlike the much hyped Bitcoin, its value would be equivalent to standard currency, and not have the value fluctuations of current cryptocurrencies.

Australia needs its own digital currency, such as Bitcoin, that is underwritten by the Australian government because this will deliver the necessary trust people require to transact digitally with confidence. This will help facilitate the move to a more digitally enabled Australia, which will be good for business, particularly those in the middle market.

These sentiments have been echoed by globally-recognised fintech expert, Matthew Gardiner (pictured) who was recently a guest presenter as part of our International Institute of Entrepreneurship.

“A DAU$ would see Australia taking a global leadership position in cryptocurrency issuance which could deliver unique advantages to middle market firms,” Mr Gardiner said.

“ASIC’s Greg Medcraft has predicted that cryptocurrencies could render traditional bank accounts obsolete within ten years. UBS have recently begun work on a cryptocurrency with four partner banks following The Bank of England’s working paper on the subject.

“Japanese banks have announced their intention to introduce a digital currency in time for the 2020 Olympics, following Russia’s announcement of their intention to create one, whilst leading Chinese banks continue to develop advanced blockchain capabilities.

“Standards Australia is at the forefront of innovation in this fast moving space through their leadership of the ISO’s global blockchain committee. Macquarie attracted international attention with the opening of the Australian market’s first open banking platform in September this year.

“Middle market firms are well advised to keep up to speed and position themselves to benefit from the potential introduction of a DAU$.”

The middle market is often described as the engine room of the Australian economy, and as such could gain a real competitive advantage if a DAU$ was introduced as it is best placed to capitalise on a DAU$.

Small businesses don’t transact extensively with international trading partners using digital currencies. Big business will see the investment opportunities in it, but the middle market, comprising around 30,000 Australian businesses, employing a third of the workforce and representing a third of this nation’s GDP, would generate the most growth.

Trade of all sorts requires trust between counterparties. The more remote the counterparty, the more challenging it is to facilitate trust. Cryptocurrencies built on the blockchain can engender that trust.

Currently, Bitcoin and a small selection of cryptocurrencies are the main methods of transacting digitally. But, they are volatile and speculative, and seen to be fraught with risk and the broader community lacks the confidence to use these currencies for everyday trading.

By facilitating trade with more confidence and efficiency using the blockchain, a DAU$ would potentially give Australian middle market businesses an edge over their competitors through the adoption of these technologies.

With so much speculation in Bitcoin at the moment its ability to be used as an accepted currency for trading, often known as a ‘fiat’ currency, is rapidly diminishing.

Middle market businesses would likely prefer to be paid in Aussie dollars, digital or otherwise, rather than in a medium full of speculation. If the DAU$ had a relationship with the existing Aussie dollar business would trade more confidently, trusting in its value.

It makes sense, and for middle market businesses, it makes even greater cents.

By David Knowles Melbourne

ADVOCACY

Government-backed digital AU$ = good cents

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On 18 September 2017, Royal Assent was granted to the Safe Harbour Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017, and the bill, more commonly known as the Safe Harbour reforms, became law. The reforms were introduced due to the government recognising the need to better preserve the enterprise value for companies and their stakeholders, by enhancing the ability to continue to trade outside of a formal insolvency process.The first part of the reforms introduces a carve out of liability for directors from the existing civil insolvent trading provisions, offering Safe Harbour for directors of a company that undertake a restructure in accordance with the new Corporations Legislation.

What is a Safe Harbour Restructuring Plan? Where a director suspects a company may become or is insolvent, he or she may commence a Safe Harbour plan, a course(s) of action that is reasonably likely to lead to a better outcome than immediately placing the company into voluntary administration or liquidation. This process, subject to evidentiary requirements, will protect the director from civil claims for insolvent trading in circumstances where the company subsequently enters into liquidation.

In ascertaining whether a director be excluded from liability for insolvent trading the Court may have regard to whether, when developing or implementing the Safe Harbour plan, the director:

• was properly informed as to the financial position of the company

• took appropriate steps to prevent misconduct by officers or employees of the company

• ensured that the company maintained appropriate books and records

• obtained advice from an appropriately qualified entity, and

• constructed a plan that had reasonable prospects of improving the financial position of the company

The director must also ensure that employee entitlements are paid when they fall due during the period of the Safe Harbour plan and that all tax lodgements are made on time.

By Daniel Cooksley Sydney

Be wary of those seeking safe harbour

Please contact a member of the Pitcher Partners National Business Recovery and Insolvency team should you have any questions.

Supplier Beware…While it is generally considered that the Safe Harbour provisions offer opportunity for turnaround, except for continuous disclosure requirements for publicly listed companies, there is no requirement for a company entering a Safe Harbour plan to notify its creditors. As such, suppliers of services or goods may be unaware they are funding a plan that may put the payment of their accounts at risk, yet with no risk of penalty for the director of the company where that plan results in formal insolvency. So how can you be better protected?

• speak with your solicitor and consider making Safe Harbour a notifiable event in your terms and conditions

• ensure in circumstances where you are utilising credit insurance that your customers remain within credit limits set by your insurer

• ensure that your security registrations, where available, are properly registered on the Personal Property Security Register

• where you have obtained a personal guarantee, obtain a statutory declaration of the guarantor’s assets and liabilities on a regular basis

• keep abreast of your customers’ financial circumstances through credit reporting agencies and the requirement for your customers to provide financial information on a regular basis, and

• where you become aware of the potential insolvency of a customer, seek advice to ensure that your future receivables are not voidable where that customer subsequently goes into liquidation

It is acknowledged that the above list is not available or reasonable in all circumstances, but should be considered where non-payment of your account may find you needing the shelter of the Safe Harbour.

INSOLVENCY

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Five avoidable mistakes made by startup founders

By Cole Wilkinson Brisbane

EDITORIAL

Following on from our last article on the traits and skills of successful startup founders, this issue we look at some of the common mistakes startup founders make and what they can do to avoid them. More than 90 percent of startups fail, yet many of these failures are caused by predictable and avoidable mistakes. Colin Kinner, long-time advisor to the startup ecosystem, shares his experience around the common mistakes made and how to avoid them.

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1 Building a product that nobody wantsJust about every startup founder knows the term “lean startup”, but sadly owning a copy of “The Lean Startup” book by Eric Ries isn’t enough. The advice to validate your idea with customers is widely talked about but rarely followed. New founders often burn through cash reserves building a product only to launch it and find it misses the mark. Instead, startup founders should talk to customers first to validate their idea solves a real problem and can be monetised.

2 Outsourcing tech developmentHiring external developers can work for some startups, but it’s generally not a road to success. Founders are building a tech company, and for most investors a tech company that lacks tech skills within the team is simply not investible.

Pre-revenue startups need to conserve cash, and haemorrhaging cash to pay an external developer is a poor alternative to having the tech skills in the team and available at little or no cost.

3 Getting naming and branding wrongIf I wanted to start a company called Facebook today I wouldn’t be able to have the domain facebook.com (for obvious reasons) – nor would it make sense for me to go and register facebook.io, facebo.ok, getfacebook.com, facebookapp.com or any other variant.

Still, I see lots of startups compromising the strength of their brand from the outset by choosing a name for which the dot com is not available. Instead they settle for an inferior domain such as [company].io, .biz, or engage in domain hacks such as the examples above. I strongly believe that Australian startups that plan to go global should have the dot com from the outset.

4 Not understanding how to raise capitalFundraising is one of the hardest and most time-consuming tasks for a startup founder, and probably the area in which founders struggle most.

Many founders don’t understand how investment works, or what investors are looking for, and as a result spend a lot of time pitching investors before they are ready, or approaching the wrong investors.

5 Issuing shares upfront to co-founders Startup teams often split the equity in the company equally among the founders from the outset. This approach has two major drawbacks: First, it fails to recognise the reality that in most startups the founders’ contributions are not equal. Some investors view an equal split of founder equity as a warning sign that the team makes lazy decisions or is unable to have a robust conversation about the relative contributions each founder will make.

The second issue relates to issuing shares upfront. Problems can arise when one of the founders quits in the early stages, as often happens when things get tough. If a departing founder walks away with a large chunk of the business it can be a demotivating factor for the remaining founders (who are working hard but for no additional benefit) and makes the company less attractive to investors.

A better approach is to adopt founder vesting, in which each founder earns their equity over a period of time, contingent on their ongoing involvement.

Startup founders need to build relationships with investors over a period of time rather than show up and ask for a cheque. Good investors get to know founders before they pitch for funding and are happy to offer them advice.

For those planning on taking the leap into a startup, and are interested in attending workshops or receiving mentoring and advice please contact your local Pitcher Partners advisor.

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Here we ask co-founder and Rhodes Scholar, Dr Andrew Barnes about the company’s runaway success.

What drives your business?

Prior to starting GO1, the founding team had been doing a lot of work in the social enterprise and not for profit space. We saw how both small and large organisations struggled to deliver good training opportunities for their teams. From this we saw there was a gap in the market and a large commercial opportunity to explore.

However, what has really driven us is our united belief that even a small amount of change with education can have a big impact. By making it easier to access learning and training material we could reach hundreds of thousands of people.

How did you build your business?

Initially we funded the business through our customers where they paid for our products. This was the cheapest form of capital. When we saw there was traction in the market, we looked at other means to secure funding because we knew there was an opportunity to grow faster. So, recently we have taken on-board external capital.

We have been very lucky with our investors. For us, it has been crucial that we partner with investors who share the same values, and views of the world and business, that we do.

What’s behind your success?

What we offer is unique. We aggregate all training programs, from compliance through to professional development, so clients can access whatever training they need in the one place. We work with a range of training providers who own their own training content and we license this from them. We are able to deliver an extensive range of training to our clients by doing this.

Tell us about one of the biggest challenges you’ve faced

The unknown unknowns. As we have grown as a business there have been several topics we stumbled across. For example, there have been many lessons learned when entering new jurisdictions and geographies.

Setting up a structure in the US and Vietnam was different because we hadn’t done it before. Different jurisdictions have different rules and regulations both from a legal and cultural perspective. For example, in Vietnam after the first year, all staff were asking about their 13th month salary. We had no idea what they were talking about. But it wasn’t just a clever trick to get an end of year bonus, the practice is a standard part of doing business there.

You can jump into things a little naively at times, and then need to learn and solve issues as you go, which can be challenging.

Where would you like to see your business in 10 years?

It is the sort of market where I believe there will be a global player, and I am hoping it is us. I want to grow geographically as well as expand the content and training material we provide. Over time we want to help extend the service and supporting materials to improve the journey for everyone using our product.

An important part of our future growth story will be understanding what the future of training looks like, and ensuring our content and platform is developing with these trends to ensure our customers are having all their needs met and enjoying the best learning experience possible.

What makes you proud?

The team we have built. We have a fantastic team and as a result we have been able to deliver what I think is quite incredible impact. Training half a million people a year is quite an exciting achievement.

What would you like your legacy to be?

I am not sure. I think family is the most important thing so that is still at the core, but at the very least – without sounding too clichéd – I want to contribute towards creating a positive impact in the world.

By Cole Wilkinson Brisbane

CLIENT PROFILE

Fast-tracking with the GO1 trainFrom a garage in the suburbs of Brisbane, tech startup, GO1 has experienced exponential growth establishing themselves as a global leader in online training only 2.5 years after launching. Today, GO1 trains half a million people every year, has more than 85 staff operating across a number of countries, and works alongside some of the largest companies in the world to help them meet their training requirements using the GO1 online learning portal.

Above left to right: Co-founders Vu Tran, Chris Hood, Dr Andrew Barnes and Chris Eigeland6

Today, difference has extended itself to the modern workplace and shaken up the traditional employee-employer relationship. Applying a HR lens on the topic, ponder, as business owners, the way your organisation, your industry and your people can adapt and embrace this new normal. It is widely accepted that navigating the complexity of workplace change is critical for Australian businesses amid the rise of the sharing economy and the concurrent trend towards contracting and flexible workforces.

Self-employment is becoming the way of doing business. What’s happening globally is that technological change combined with attitudinal shifts in the employee-employer relationship is resulting in new business models that are competing with traditional employment structures. It’s hard to ignore the effects of digital technologies on today’s workplaces, but one thing that flies under the radar is the shift in traditional workplace relations caused by the boom of tech-based markets that connect companies and consumers directly with freelance and contract workers.

Companies such as Freelancer.com and Airtasker have come to exemplify the rise of the work-on-demand economy, and it’s not unusual to hear something referred to as ‘the Uber of X’. Crowdsourcing, along with the closely related practice of online outsourcing (also known as micro-tasking), is opening up the world’s labour market and enabling workers from everywhere to bid for work on offer anywhere.

Don’t underestimate the potential reach this has. A much bigger impact is being felt as organisations turn to crowdsourcing services for a broader range of tasks, as they enable organisations to select and engage

with a wide variety of service providers in a very transparent manner. This is highlighted by the Board of Taxation who have stated that the profile of Australian workers is evolving with more ‘white-collar’ workers adopting forms of contracting and self-employment in many sectors such as management consultancy and financial services. Closely connected to the proliferation of contractors is the growth in the provision of personal services.

For those of you wanting the numbers, here they are. Contingent employees – or freelancers – account for roughly 8.5% of the Australian workforce, or about 1 million workers. It’s far from a majority, but this number is expected to only grow in coming years. Why? The perks that more and more workers are looking for from traditional job markets are built into the fabric of the sharing and on-demand work economies.

In 2015, 1300 workers who participate in the on-demand economy were polled. Perhaps not surprisingly, 75% of participants listed flexibility as the number one reason for choosing this type of work; second was increase in income. Self-employed people see themselves as more secure because they control their own destiny and spread the job risk across multiple clients. Self-employment can be seen as a rising-star, due in part to increasing numbers of self-employed people, as well as self-employed individuals being at the cutting-edge of cultural and attitudinal change in global workforces.

So what are some of the sticky points from a business perspective?• The C word (culture that is) – the more

freelancers you employ, the more scattered your workforce will be. This can have implications for establishing coherence among staff and company culture, and employee engagement levels could suffer.

• Safety first – businesses should create workplace health and wellbeing programs. The job might be made easier when there are industry professionals looking to whip workplaces into shape?

• The letter of the law – this is a two-part problem. First, what are the legal implications for hiring a freelancer as opposed to a full-time employee? Second, can your HR and legal functions be outsourced? There’s a potential loop here where the legalities of hiring freelancers are handled by freelancers who deal in legalities.

• Who’s the boss? – when organisations bring in outside help, they, together with business owners, need to consider the potential for conflict. Who will have ultimate decision-making power?

• Training wheels – when outsourcing training and professional development functions, how can you be sure that a freelancer has received the appropriate training to perform a job?

By Karen Samuel Melbourne

BUSINESS IMPROVEMENTBeing different used to be the thing people wanted to avoid. Sameness meant being part of the ‘it’ group whilst society dictated difference was ‘uncool’ and being on the outer. Well, well, how things have changed. As the new world order evolves, contemplate this – the employment revolution is here. I challenge you now to consider your opportunity to adapt. Don’t be a follower. Be different.

So what now? Well, the short answer is it depends. The potential impact will vary from industry, to business to individual so you need to consider where you fit into this picture. What are the potential risks? Is now your opportunity to gain that advantage by thinking differently? One thing that’s for certain is that this new paradigm is here and your ability to navigate through it might just be the thing that sets you apart from your competitors. Being the cool kid is overrated anyway.

Your future employer – yourself

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What’s New For comments on this edition or if you wish to be removed from the Contact mailing list please email us at editor@pitcher.com.au. You can view Contact electronically at www.pitcher.com.au/insights/contact-magazine.

MelbourneBrendan Britten Managing Partner +61 3 8610 5000 partners@pitcher.com.au

SydneyRob Southwell Managing Partner +61 2 9221 2099 sydneypartners@pitcher.com.au

PerthLeon Mok Managing Partner +61 8 9322 2022 partners@pitcher-wa.com.au

AdelaideTom Verco Principal +61 8 8179 2800 partners@pitcher-sa.com.au

BrisbaneNigel Fischer Managing Partner +61 7 3222 8444 partners@pitcherpartners.com.au

NewcastleMichael Minter Managing Partner +61 2 4911 2000 newcastle@pitcher.com.au

Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation.

www.pitcher.com.au The material contained in this publication is general commentary only for distribution to clients of Pitcher Partners. None of the material is, or should be regarded as advice. Accordingly, no person should rely on any of the contents of this publication without first obtaining specific advice from one of the Partners of Pitcher Partners. Pitcher Partners, its Principals and agents accept no responsibility to any person who acts or relies in any way on any of the material without first obtaining such specific advice. © Pitcher Partners 2017 PrintPost Approved PP381827/0043

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SMSF and Accounting Awards

Pitcher Partners and our people have once again been recognised for our hard work on behalf of our clients. Recently, the state-based SMSF and Accounting Awards ceremonies were held, where we received awards for:

South Australia Arlen Dabinett – Newcomer of the Year

New South Wales Charlie Viola – Partner of the Year

Multi-service Firm of the Year

Victoria Shaun LaMotte – Specialist Advisor of the Year

Accounting Firm of the Year

International star with Global Focus

We would like to congratulate our very own Peter Jose who was recently awarded a Special Contribution to the Network recognition award at the Baker Tilly International Network conference in Amsterdam. Peter has been working for the past 18 months with BTI members from around the world to deliver a Global Focus audit methodology. All member firms now have the opportunity to adopt this global approach to ensure consistency and quality at globally recognised and accepted standards for all audits. In Australia, all audit staff across the nation have already received their training.

Travers and Dahn Powerful

Congratulations to Melbourne partner, Sue Dahn and Ben Travers from Brisbane who were named among the Financial Standard Magazines Top 50 most influential advisors.

Pitchers ranked 7th in AFR Top 100

Pitcher Partners was ranked 7th in the Australian Financial Review’s top 100 accounting firms for 2017, and ranked second fastest for growth among the largest Australian accounting firms. All firms across the Pitcher Partners national association achieved revenue growth during the year ended 30 June 2017 primarily as a result of the broadening service lines, appointment of new partners or winning new clients.

Season’s Greetings Wishing our people and clients a joyous and safe festive season. We look forward to working with you all again in 2018.