The Pit - IMI Trust

It seems like each month we are hearing announcements that companies will be outsourcing support and IT functions to India.

Companies are finding that they can no longer get the depth of experience they seek in Australia. Companies are finding that they can outcomes achieved for cents in the dollar and in less time then they can in Australia.

In Australia, this has caused a lot of controversy! The interesting thing about this is, if you ask people who have dealt with Indian IT companies, more often then not they will rave about their standard of service and their responsiveness.

An Australian based company recently tendered a job to both Australian and Indian companies. The response highlighted a strong difference in the hunger to do business, and the reason why companies are using outsourced services.

By the time the company received a reply from an Australian service provider, the job had been completed in India, and they were going through a testing phase.

Many corporate organisations are outsourcing to India, whether it be there call centre or the IT departments. Globally, the largest companies on the planet are also outsourcing these departments. In the UK, the have companies which have established European shop front, and then they outsource the business to India. The companies are generally… none the wiser.

It is great to see these developing nations thrive. It is refreshing to see the professionalism in their approach to business. Their hunger to succeed and thrive will make news announcements about the outsourcing of jobs increasingly common.

As technology advances, it feels like the world is becoming smaller and smaller. Simply go back just 10 years and the idea of trading stocks on the NASDAQ or on the New York stock Exchange, was only for the elite traders. In fact go back 10 years and no one in Australia has ever heard of CFD’s.

Now… Online Trading has broken down all barriers and given Australian traders an all access pass to the world’s leading markets. Whether you are trading Stocks, CFD’s, Currency or Futures, if there is a market open… you can trade it.

Previously companies which has seen phenomonal growth in the US or UK were unable for Australian traders. Imagine if you were able to place trades on Microsoft, Dell, Yahoo, Ebay and Amazon at the beginning of the tech boom.

Now companies that we associate with on a daily basis are available for trading. Whether it be clothes, shoes, food, software, internet, electronics or cars from international companies… we can now trade them.

You dont have to go through the hassle of researching US brokers, placing your money in a US account, having currency risk (on placing your money in US dollars in an account) and having to stay awake at all sorts of strange hours to make trades.

Now, you just go on your computer, click on an icon to open your trading platform, and within seconds the world’s stock exchanges are ready for trading. You can also trade internationally, with your money in an Australian account. Another example of technology making life easier.

What is interesting is the CFD phenomenon. Australian can trade CFD’s over American stocks, but American’s can’t. it has been estimated that over 50% of trades on the London Stock Exchange are CFD’s.

This is what Australia Stock Exchange potentially has to look forward to. It is no wonder, that you can now trade ASX CFD’s on the top 50 stocks and a few major currencies.

A trip to the dentist was in order. It has been some time and a cracked tooth made up my mind to visit. I was not that concerned as I already had root canal work done on this culprit.

This was the first time I had been to this dentist. It met the mandatory criteria - looked clean, close to where I live, attractive looking people inside and I had heard some good things from friends of mine.

The girl at reception were very welcoming and asked me to fill out a questionnaire. One of the questions was interesting. “Do you feel nervous when you go to the dentist?” Not being afraid to admit it… I ticked ‘YES’. Not long after my name is called. As we go up the stairs, the dentist gave my form a quick read.

Within seconds of sitting down, he starts stabbing inside my mouth *OWWWWW!!* was my first thought. ‘Thanks for helping me to settle my nerves!’ was my second thought.

After my yelp he decides that it is not able to be fixed and he needs to take out half the tooth to have a look. But just to make sure, he does an x-ray. Red flags and alarm bells. A course of action decided before full information is gathered. Is that usual?

So he then explains that what he can do is…

1) Take out half the tooth and see if it can be fixed. He thinks it is ‘unlikely’ and a ’small possibility’ that it can be fixed. If it can, he will fix it and set a crown on it.

2) “If it cant be fixed, we take the tooth out, shave down the teeth next to them, place caps on them and then put a bridge in.

and the last option, which he didn’t favour at all…

3) Extract the tooth and leave a gap.

I have only been sat in the room 5 minutes. By this stage, I am thinking “what the %$&*?”

I am feeling pain, visualising gaps in my mouth and thinking about eating without a tooth, or the damage it will do to the teeth on either side. Also I am thinking, neither of the ‘preferred’ options sound cheap.

Nerves have turned into flat out fear.

Then he says, ok… now I am going to take out this side of the tooth and see if it can be fixed. I am thinking by this stage I am being rail roaded down a path in which I have minimal information of cost, procedure or other options.

I stop the dentist and ask him can he outline my options and the cost of them. I explain I have meetings today and I need my mouth for those meetings. Not those kind of meetings. He says it’s OK it will only take 30 minutes max.

“I am happy to book another appointment”, I tell him.

The dentist kindly starts outlining the options he was trying to take me down today with no information, very minimal explanation and providing me with the feeling he is selling me and not serving me. In other words, I was getting the feeling it was ‘not’ the best path for ‘me’, but the best path for ‘him’.

The two options were $2,000 and $5,000 for a tooth I had already had root canal on. No information, no explanation, no rapport established and no time to think about different options and a form clearly stating that I am nervous. This hard-selling dentist has turned me right off going to this practice. It certainly didn’t provide any assistance in calming my nerves next time I see a new dentist.

In fact, I will be flying to Sydney next week on business and have booked to see a dentist I do trust.

Maybe dentists are being trained on sales these days. If they are, they should definitely invest time in understanding trust, rapport and ability to explain information in terms normal people can understand. Also, the should become aware, that if someone clearly states they are nervous, railroading them into an expensive path is not the best course of action.

From a business perspective, it highlighted how important trust is, and giving people the time to think. That trust can easily be developed through balanced information, and an understanding of someones personality. If you need to hard sell and railroad people into your product, then get a new product.

Also in listening to my own thoughts, I started to notice how I began generalising an industry because of one persons actions, and by the end of the day 5 other people knew about my experience.

And now I write about this experience in this post which will be read by over 1,000 people. This the impact we can have each day in our business. Positive or negative.

With the ASX 200 and the Dow Jones Index consistently achieving new highs, investors have now started to seek investments with higher risk and higher growth potential. Many sophisticated investors realise that this occurs before companies hit a stock exchange.

Sophisticated Investors, Retail Investors and Professional Investors are now seeking to invest in the companies of tomorrow. By investing in start-ups or early stage businesses they can reap large rewards if the companies lists or is bought out.  On the flipside, there is every chance the company could fail.

Why would they do this, when everyone knows the risk associated with companies in their infancy? Risk vs Reward is the simple answer. 

Investors are now looking to allocate risk capital to these companies as part of their portfolio.  When looking at asset allocation in a traditional portfolio, you tend to see cash, property, conservative investments, growth investments and aggressive investments.  Typically, early stage investment is seen as aggressive but in reality it sits in its own band even higher.

The rewards are great but the chances of losing money are just as high.  Which is why only risk capital, or in layman’s terms, money you can afford to lose, should ever be placed in these investments.

Even only as far back as 3 or 4 years ago, this kind of investment was only available to the wealthy who acts as business angels or venture capitalists.  Today, companies such as the Australian Small Scale Offerings Board (with whom IMI Trust is a member of) is making it easier for investors to gain access to these type of opportunities.

Early stage investment is an exciting prospect but carries heavy risks.  Investors should carry out their due diligence, ask questions, find out as much as they can about the Company, its Management Team, the Market, the Competitors and the Marketing Strategy for success.  By analysing these aspects, an investor can see if the Company is doing its best to be successful.

And by success, this can be defined in a number of ways.  As an early stage investor, a good result is a company takeover or a public listing.  Today’s penny dreadful may be tomorrow’s dollar dazzler.

Companies are looking for early stage investment but do they deserve the capital from investors?  Many don’t but some do.  To learn more, about emerging growth companies looking for early stage and expansion capital, click here.  Or if you have any stories to tell about early stage investment, please tell us here. 

There is a famous saying in hospitality:

“The answer is yes, now what’s the question?”

The sentiment behind this is that the customer is always right.  The customer has a need that requires fulfilling.  There are many companies that follow this customer-orientated ethic.  Starbucks is one, as no drink is ever not made no matter how crazy the concoction may be.  If that’s the way they want it, then that’s the way they get it.

In the corporate world, and in particular financial services, there are several companies that try and maintain a business model that revolves around this attitide. However, at which point does corporate responsibility take over?  In many instances in business the customer is not the best person to ask for direction or opinion. In fact, they are absolutely the worst person to ask.

Customers should have an end goal and how that end goal is reached should be down to the service provider on how it can be best achieved.  This is the basis of good business.  It’s a Win/Win situation.

There are some business relationships that, from the beginning, that it is clear that it is going to be a Lose/Lose situation.  Why do we enter these?

Have you knowingly entered any of these before and has the outcome been different to how you expected?

This week the Australian Financial Review reported that 80% of the 96 companies which listed on the ASX this year, had their share price go up in the first day of trading.

Empowernet International (ENI.AX) is not one of those companies. In fact, on their first day of listing, their share price went down nearly 50%. Better yet, after a few days, Empowernet went from its list price of 0.55c to around 0.07c. For IPO investors, this signifies an 80% loss on their holdings to date.

If you do not know who Empowernet International is then you’ll see their main revenue stream derives from onselling Anthony Robbins personal development products and merchandise. Key person/company dependency. Check!

Empowernet International doesn’t have a written contract in place guaranteeing exclusivity either. No owned IP. Check!

Results can also be uncertain if their are changes to the marketplace - Few corporate processes or systems in place. Check!

When a company lists it needs to be able to drive by itself with the management team being custodians of the vehicle. If these continuity issues aren’t resolved then the market loses confidence and share prices fall. Incredibly, the one of the directors of Empowernet had the exact same issues when listing Sales Pursuit.
Our advice to Empowernet to get the share price up is a three step process:

1. Change the company name to Empowernet Resources International.
2. Announce that the company is now actively exploring Western Australia and Queensland for Uranium, Copper, Nickel and Gold.
3. Announce that the company was in negotiation to supply China and India with the new found resources.

If they did this, the share price will be hitting $10 or $20 in no time. Virtual miners are big on the ASX at the moment.

Imagine if you woke up stupid every day, with a hunger to learn, grow and evolve! That is the difference between the minds of innovators and routine.  Actually, it would probably be immensely frustrating that you have to start from scratch every day but in essence, innovators are those who wake up looking to pioneer.

Innovation is about looking at problems or gaps with new eyes.

When News Corp saw computerisation take hold they revolutionised the newspaper industry by streamlining and templating the whole process.

When Apple and Steve Jobs were being a thorn in the side of PC manufacturers Apple were busy conceiving how the music landscape would be changed forever.

It is interesting to look at the increase in Apples share price when Jobs is there… and when he is not.

1986 to 1998 Minus Steve Jobs - 120%

1998 til today with Steve Jobs - 1240%

Anyone else notice the difference innovation can make? What inspires you?

Time to get things off our chest…

It is our experience to steer clear of search engine marketers who boast badges with the Google AdWords Professional qualification.

Let’s be clear.  We, at IMI Trust, love Google and so should you.  It is the reigning champion of search and rightly so…however…

The Google AdWords Professional qualification can be earned if you, as a marketer spend $1,000 per month with Google.  Some people spend much more than this in a day.  Not because they are clever, or skilled in search engine marketing, but because they see the value in this type of advertising.  As they have spent that dollar value they qualify as being a Google AdWords Professional.  Can you begin to see where the issue lies?

There is no qualification in place and people can claim to be an endorsed professional.  This fails in a number of ways.

1. Punters that need help in Search Engine Advertising are looking for reassurance and expertise.  The Google AdWords Professional provides neither, though the name alludes to the fact it does.
2. Professionals who are great at Search Engine Marketing have more trouble finding work because they are competing with thousands of clowns who don’t know their KPI’s from their CPC’s.
3. Google is diluting its brand by offering this nonsense award.  Google do have other qualifications that are far more meaningful but as this is the easiest to achieve because you just have to spend dollars.

We are not against people becoming search engine advertising experts but if they claim to be experts there has to be more to it than that.  Which reminds me…I’ve got an email to answer about claiming my Fijian Medical Degree.

After the rumoured $70bn merger of Yahoo and Microsoft kind of went wet, news so astonishing began to come through the wires that if it happened I would believe that anything could happen. 

A couple of smart Merrill Lynch analysts figured that BHP Billiton is massively undervalued. Its divisions are worth more than the sum of its parts.  The multi-national resource conglomerate has a market capitalisation of approximately $117bn but if you split up all its divisions into individual resource companies the assets would be worth approximately $242bn.  Sounds great huh?  Let’s do it.

Perhaps in response to this analysis there has been speculation regarding BHP and Rio Tinto merging.  That would create a company worth over $250bn and surely would be protected from any kind leveraged buyout.

Please don’t tell me there is a bank or group of banks able to facilitate a quarter-trillion line of credit to buy a company?  If so, can I have Lo-Doc mortgage from you and don’t look to closely at my financials.  Thanks.

That would be a common sense play.  Who knows what will happen next?  Apart from a glut of Hedge Fund managers jumping off building tops because they didn’t know when to hold ‘em or when to fold ‘em.

Anyone have a spare $11bn?  Check down the back of the sofa.