Australian Newsagency Blog

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What if the most important stream of revenue for your business was cut off overnight?

Mark Fletcher
November 4th, 2020 · 4 Comments

Hundreds of Australian businesses yesterday discovered that China was blocking their exporting of products to that country. According to news reports, Australian wine, copper, barley, coal, sugar, timber and lobster are set to be banned from Friday.

This is dreadful news for the businesses, those who work for them and the communities that rely on them for income and purchases. The ramifications across Australia could be extraordinary.

Hearing the news of the move by China, I wondered – what would happen to your business if a key income stream was cut off overnight?

Would your business survive? Do you have a plan B? Can you move quickly enough to recover? Were you too exposed to and too reliant on the key revenue stream?

These are questions you can discuss with clarity with hindsight. Better still, they are questions you can discuss in advance.

I raise the questions today because considering them before you face the challenges being faced right now by Australian exporters of wine, copper, barley, coal, sugar, timber and lobster gives you the opportunity today to be less reliant on a single revenue stream.

I get that this can read as a ho-hum topic, something not worth worrying about today. However, I bet there are wine makers, sugar farmers and fishermen who several days ago would have thought the topic ho-hum too.

What if the most important revenue stream to your business was cut off overnight, without notice?

Actions I think anyone reading this could consider include:

  1. Assess income to understand the income category streams on which the business most relies and take immediate steps to broaden these.
  2. Assess income sources. In retail especially most income comes from a shop or physical presence. Broaden this, rely on more than the physical presence.
  3. Assess the importance of suppliers by looking at percentage of revenue attached to each and taking steps to broaden these.
  4. Look at your business finances and consider the impact if any supporting finance arrangement was removed overnight.
  5. Workshop with key people as to what it would mean if any supplier was cut off from you or if any product category or brand was overnight stripped from your business. Those participating in this need to challenge each other.

In terms of the situation that has emerged in China this week, we need to look at our reliance on product from China, especially is we rely on people connected with wine, copper, barley, coal, sugar, timber and lobster. For example, if we have customers who work in wine businesses that export to China. How will they feel purchasing product from us that are sourced from China when China has struck so hard at the core of their income source?

What has happened in China is a reason for us to take stock, look more carefully at our businesses, and ensure that we are better structured to trade through unexpected decisions by others.

A personal story: Decades ago, my software company developed software for radiology practices, managing patient accounts and reports on x-rays. I wrote a word processor to make it easier and faster for radiologists to write report. It was a hit, gaining terrific early sales. A year and a half in, an international x-ray film supplier offered radiology practices free software from the US if they contracted to buy their film for 5 years. Our sales stopped overnight. I decided then that my company would never rely on a single customer or a single channel for the majority of business. It’s why we are now in 12 specialty retail channels, why we only sell to sell business retailers and why we will not borrow to fund the business.

Footnote: I wrote this for newsXpress members, as part of on-going strategic planning advice for members of that retail community. I share it here because of the many communities in Australia today confronted by the challenge presented by China.

17 likes

Category: Newsagency challenges · Newsagency management · newsagency of the future · Social responsibility

4 responses so far ↓

  • 1 Steve // Nov 4, 2020 at 9:34 PM

    I can absolutely relate to these fears Mark. Wearing another hat I am a director of Australia’s largest exporter of alpaca fibre. More than 90 per cent of our fibre heads to Chinese processing mills . With a 11 tonne shipment currently heading for Shanghai I worry every day about the very possible loss of this market. Diversification is the key Luckily I am able to apply the same principle to my newsagency business and I focus on growing our non traditional product lines. These lines tend to be less subject to supplier whims and monopolies. Unfortunately the alpaca exports remains a greater challenge and risk.

    3 likes

  • 2 Mark Fletcher // Nov 5, 2020 at 6:35 AM

    Steve thanks for sharing the alpaca story. It adds valuable weight to the need for all of us to consider the question: What if the most important stream of revenue for your business was cut off overnight?

    3 likes

  • 3 Michael // Nov 5, 2020 at 12:23 PM

    Mark I think you are right to ask this question. My business is close to a seafood town that relies on export sales. You are on the money in pointing out the seriousness of the China situation and asking us to consider this in the context of our own shops.

    In my case it used to be NSW lotteries years ago. Today while lottery sales are good the base of the business has broadened and is better protected as a result. Not enough, but better than it was.

    3 likes

  • 4 Peter // Nov 6, 2020 at 7:11 AM

    years ago in my shop it was magazines. I gained other revenue streams before it hit too hard. Then it was lottery sales. When I saw Tatts go online I decided to do what I had to to meet their requirements but to never rely on them again. Mark you would know what I’ve done and it has paid off. When I look at where my profit comes from, it is a much better picture today than 5 yrs ago. I’m in a wine area. The news from China is concerning. But I am happy with the changes made because they help me be better prepared.

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