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INVESTMENT TIPS PERTH AND BRISBANE BACK? $8.95
THE MAGAZINE FOR INVESTORS
The business Boomers
school making Bonanza
bacon by Now is the
hamming it up best time
to buy a
DRINK IT UP
How Manny Stul
turned a fledgling
toy company into a
ISSUE 56 THE SECOND COMING POWER FLOWERS
AUS: $8.95 INC GST From car rentals to Edible Blooms bites
NZ: $9.95 INC GST residential development into opportunity
ISSUE 56 MAR / APR 2012
26 Manny Stul
Melbourne toy maker becomes global sensation
8 Boomers bonanza
As the Boomer generation nears retirement,
opportunities are increasing to buy successful
30 Funny Business
Inside Pete Crofts’ Humourversity
44 Property Hotspots
48 Drink it up
36 The Second Coming
34 Power Flowers
Inside Business Invest & trade
30 Funny business 42 An eye on Japan
10 Inside the Storm Pete Crofts looks to The Yen provides a rare
share the laughs opportunity
15 ASSOB Update
22 The Elevator
Spotlight on ASX 46 Funds focus
38 Patrick Bright
44 Property Hotspots
48 Toast your success
50 WIN with
EXOTIC INVESTING GUIDE // See page 41
WEALTHCREATOR.COM.AU MARCH /APRIL 2012 3
Group Executive, Equities
IN THE INVESTMENT
BUSINESS, THAT’S THE
NAME OF THE GAME.
Cathy Doyle is Perpetual’s Group Executive They’re very self-motivated and they’re very
of Equities, overseeing a team that looks after competitive. They talk, eat and sleep stocks.”
around $20 billion in funds. Yet unusually for
As Cathy explains, the focus on promotion
someone in her position, she doesn’t come
from within means Perpetual’s processes
from a background in managing money.
A human resources professional with a degree and philosophy are deeply ingrained. “Our
in psychology, she specialises in managing the team has a lot of unique people with great
people who manage the money, so that they individuality and initiative, but in the end
can consistently perform at the highest level. we’re all working for the same outcome.
And that is using Perpetual’s quality
“This really is a people business, and I think
approach, aiming to beat the market,
our talent management and succession
and delivering a consistency of
planning is the real difference at Perpetual.
returns over time for our investors.
My role is like a coach I suppose – to make
That’s what they expect from us.”
sure we have the best team in Australia
and to house them in the right culture and The bottom line is that talent begets talent;
environment for them to continue to deliver a phenomenon Perpetual has employed to its
returns to investors, year after year. great advantage for 125 years. The ability to
“Some of our portfolio managers have been consistently attract and keep top performers
with us for over 20 years. Matt Williams, has been vital to Perpetual’s longevity and a
our Head of Australian Equities, has been key to its success as one of Australia’s premier
here for 18. A lot of these guys started at investment houses. Quite simply, when you
Perpetual in junior roles, and have steadily place your investments with Perpetual, you
risen through the ranks. So they know how can rest assured that you’re with a company
things are done around here, they know that invests in the best people in the business.
the different fund mandates intimately. It always has, and it always will.
This advertisement has been prepared by Perpetual Investment Management Limited (PIML) ABN 18 000 866 535, AFSL 234426. It contains
general information only and is not intended to provide ﬁnancial advice or take into account your objectives, ﬁnancial situation or needs. You should
consider the relevant PDS (available at www.perpetual.com.au) issued by PIML before deciding whether to acquire or hold units in a Perpetual fund.
Contact the editor: firstname.lastname@example.org
Managing Editor / Chris Jackson
Artist / Gavin Bell
Brave new world ADVERTISING
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Twenty years ago you could not imagine something like Facebook or Twitter would email the editor, fax (03) 9591 8660 or post to
exist, yet now they are economic powerhouses. Perhaps even more importantly, you Suite 5, 214 Bay Street, Brighton 3186.
couldn’t imagine their model of doing business would exist, yet now these models are
seen as scalable templates for a new commerce infrastructure.
I’m not advocating setting up a new Facebook or Google or trying to be an IT boffin – IMPORTANT MESSAGE
but I am saying that you should not be afraid of trying to redraw the entire canvas if you The publisher of Wealth Creator Magazine (WCM),
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think you can do it differently. Or better. distributed by Network Services. WCM publishes articles
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on is changing the way you think. inform and illustrate and should not be taken as ﬁnancial,
real estate, legal or accounting advice. We do not endorse
So I will leave you with a passing quote, not from Cosper but from a sticker on the the views, statements, claims, strategies or ideas put
outside of my guitar case: “Don’t go with the flow – create the turbulance.” forward by contributors to the magazine. We are merely
relaying information. Any strategy in business or investment
Chris Jackson should only be applied after taking into consideration
your own ﬁnancial situation and objectives. Investing and
business can be risky and you should seek independent
Managing Editor professional advice before making any decisions. We are
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due diligence when making a purchasing decision as
Daniel Kertcher Patrick Bright Charles Leyland a result of reading this magazine. Several individuals
CEO Director Managing director associated with advertisers in this edition of WCM have
also contributed articles. These articles have been
Trading Pursuits EPS Property Search Leyland Private Asset
published because they ﬁt the theme of our magazine.
Management These articles are not advertorials. Publication of these
Kathy Lien Gavin Wendt articles is not in any way dependent on their respective
Director of research authors or organisations taking up advertising space in this
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GFT Forex MineLife in this magazine in return for fee, it is identiﬁed as an
6 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
UP FRONT FYI // In the news
Baby boomer business boom
The Australian business landscape is strength and will continue as baby boomers people who can learn how to spot a bargain
set to undergo massive change as the continue to exit the sector. With 2.1 million and successfully renovate a business.
baby boomer generation ages, creating businesses nationally in 2011, we estimate “The riskiest part of any business is the
opportunities for new businesses and there will be 280,000 businesses for sale ﬁrst three to ﬁve years, when most fail. Why
intergenerational change. in the next ﬁve years, factoring in recent would you consider starting a business
This year the ﬁrst baby boomers turn succession models.” when you can buy one that has survived
65, an age traditionally associated with “There will also be plenty of bargains this most volatile period, one that is up and
retirement, although research from BIS around for keen investors and ordinary running?”
Shrapnel shows that workers are continuing
to work until they are older.
Senior economist Tim Hampton said TREND
there were several key factors in workers
remaining longer: more women in the
workforce; people are healthier; and
Australia may tyre in 2012
recovering losses from the global ﬁnancial The Australian resources sector might data since before the global ﬁnancial crisis
crisis. not have such a rosy outlook as some in 2008.
Regardless of the reason, businesses analysts have predicted this year, “The index was able to predict how the
need to get ready for a fall in available according to an innovative index created sector was affected by the GFC,” Skelton
labour, he argued. by freight-forwarding company Skelton said. “It showed mining equipment imports
“Lower growth in the labour supply Sherborne. slumped in the last half of 2008, as the
is going to have signiﬁcant effects on Based on the idiom that the only people GFC arrived, and the ﬁrst half of 2009.
businesses and the Australian Government’s guaranteed to get rich in a gold rush are the There was a 90% drop in the number of
ﬁnances,” Hampton said. merchants selling the shovels, director Brad machines being shipped into Australia. This
“Businesses will ﬁnd it increasingly difﬁcult Skelton has launched an industry index that represented a decrease of $350 million in
and more expensive to ﬁnd the staff they tracks the amount of heavy machinery and the value of the machinery imported.
need. The Government’s ﬁnances will also tyres imported into Australia. “Since that time though there has been a
come under increased pressure as lower “Our shipping index keeps track of heavy slow but steady increase and by the middle
growth in the labour supply feeds through machinery imports. It’s an authoritative of 2011 the index indicates the number of
to lower growth in tax revenue, at the same resource that sees the trends before they imports has surpassed pre-GFC levels.”
time as the ageing population is pushing up occur. It provides perspective and will Skelton said the current trading
health-related spending.” empower companies to make the most of conditions were being inﬂuenced by the
“So far, only the retail trade and an uncertain year ahead,” he said. twin issues of the mining and carbon tax.
accommodation and food services “We’re also introducing a tyre index. It “These factors signal an uncertain year
industries have shown a signiﬁcant measures the amount of work currently ahead,” he said.
movement toward using more part-timers. underway in the sector and the tyres that “I believe a conservative approach will be
Other industries, including goods-producing are worn and need replacing as a result.” taken by the industry and that could affect
industries, will need to ﬁnd a way to follow The company has been collecting this revenue as well as company proﬁts.”
suit. Businesses will also need to ensure that
they extract all of the relevant institutional
knowledge from their experienced staff
Money tips for 2012
before they do ﬁnally leave the labour force
and put their feet up in retirement.”
But it’s not all bad news. As the boomers
reach retirement there were opportunities 1. Create a budget to get your money sorted
for others to purchase privately owned small
2. Start paying off your credit cards (pay the one with the highest interest rate ﬁrst)
and medium businesses.
Business strategist and investor Kerwin 3. Set up a direct debit to put money into a savings account each fortnight
Rae said it was “the biggest boom sector 4. Pay extra off your mortgage while interest rates are low
we have seen in some time”. 5. Switch loans if you can get a better deal
“Approximately 22% of business owners
Source: MoneySmart (www.moneysmart.gov.au)
are 60 or over, so the market is gaining
8 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
“Our problem is that more and more franchisees are getting booked
out and are unable to take more work. In some areas we’ve completely
eliminated advertising but there is still too much work coming in.”
Jim Penman explains why Jim’s Group is seeking a $10 million capital
injection to ﬂoat as a public company to fund more franchisees and expand
Back to the future
Wary investors spooked by warnings of 2006 2007 2008 2009 2010 2011
a second global ﬁnancial crisis should
Source: Russell Investments
think twice before rushing into single asset AUS. AUS. AUS. INT. SHARES AUS.
classes, a leading investment house has SHARES BONDS SHARES HGD BONDS
warned. 16.2 15.0 37.6 13.5 11.4
Data from Russell Investments shows
that investors are better off following a
AUS. INT.BONDS INT. SHARES INT. BONDS INT. BONDS
diversiﬁed strategy over the long term than CASH
SHARES HGD HGD HGD HGD
trying to chase last year’s winner. 6.7
24.5 9.2 28.4 9.3 10.5
Despite many investors ﬂocking to cash
as a safe haven, over the long term this
INT. SHARES INT. BONDS 70/30 AUS.
strategy has returned an average of 8.7% CASH CASH
HGD HGD BALANCED BONDS
per year – the worst of the asset classes 7.6 5.0
17.6 6.6 17.3 6.0
“The research shows there’s no
guaranteed method for picking the winning 70/30 INT. SHARES 70/30
AREITs CASH AREITs
asset class, and those that seek to do so BALANCED HGD BALANCED
9.6 4.7 -1.6
15.9 6.4 -22.5
are playing their own game of investment
bingo,” Russell Investments portfolio
manager Kathy Cave said. INT. 70/30 INT. INT. BONDS 70/30 70/30
“The prudent approach is to ensure SHARES BALANCED SHARES HGD BALANCED BALANCED
you’re adequately diversiﬁed across asset 11.8 6.3 -25.9 8.0 3.7 -2.0
classes to minimise the risk of sometimes
extreme volatility swings from year-to-year
AUS. AUS. AUS. INT. SHARES
“While one investment may be a hot CASH CASH
BONDS SHARES SHARES HGD
ticket one year, putting all your eggs in that 6.0 3.5
3.5 -38.9 1.9 -2.4
basket may not yield a positive return the
next year, and is less likely to preserve and
INT. BONDS INT. SHARES
grow wealth over the long term.” INT. SHARES INT. SHARES AREITs INT. SHARES
Despite recording the worst performance -1.9 2.0 -0.7 -5.7
in 2011 of an 11% drop, in the long term
Australian equities have outperformed the
other asset classes the most often and hold AUS.
AUS. INT. AUS.
the highest average return of 13.7% per BONDS BONDS SHARES SHARES
year. 3.1 1.7 -1.4 -11.0
WEALTHCREATOR.COM.AU MARCH /APRIL 2012 9
UP FRONT FYI // Interview Reviews // WCM recommended reads
NOT A PERFECT poached from a bank that I used to
STORM work for to take on a new job with a
company called Storm Financial,” she
In the UK it was Northern Rock, in “At the time I did my due diligence A fter
America it was Lehman Brothers with Storm – I met clients who had losing
and AIG. And in Australia, it was the been with the ﬁrm for years. I knew everythingng
collapse of Storm Financial that has it was not a ﬂy-by-night company, I aid
– Nolan said she is still in her
come to epitomise the tangible fall-out knew they were really progressive and house while legal issues are being
of the global ﬁnancial crisis in 2008 independently owned and there was settled – it’s easy to understand why
and 2009. not one client I met that did not love she has become disillusioned with the
For Jodie Nolan, the collapse was the company or love the results they ﬁnancial planning industry.
particularly painful, as she was an were getting. “I think the average Australian isn’t
employee of the company, a client of “I had a lot of questions at the given ﬁnancial information that they
the company, and her baby girl was time around their gearing levels, need to make decisions,” she said.
only six weeks old. because I came from a banking “I think they are blindly led by
Nolan said the ﬁrst time she realised background where you can imagine planners and although I applaud
something was wrong was when she that borrowing for an investment was the way the commission structures
received a letter in the mail. ﬁne but margining up on your house are changing, it is still very much a
“I went on maternity leave for about sales driven role. These days so many
was considered double gearing. I was
six months when I found a redemption companies are tied into products, so
wary of all that, but I was shown so
notice which said we had been they can’t give complete brokerage
many examples [of it working] that it
completely sold down,” she recalled. information – they don’t give people
Despite having enough cash to a true indication of what all their
“My husband and I ended up putting
withstand a margin call, Nolan said options are with shares, property and
all our own money and investments
she was never given the opportunity to cash.”
into the Storm model.”
ride out the volatility and found herself Nolan has written a book detailing
But it wasn’t just her own ﬁnances
in the same situation as many other her experiences called Surviving the
that were spun into jeopardy, Nolan
Storm clients: losing everything. Storm, which recounts her personal
had also talked other family and
But how did she come to be in that journey and offers basic ﬁnancial
friends into investing with the
position in the ﬁrst place? literacy information aimed at ordinary
“I had been in the ﬁnancial planning readers. She admitted that some
“It seems to be quite a conundrum
industry for many years, and was have questioned her ability to hand
and many people have asked me if
out ﬁnancial advice given her own
I led the lambs to slaughter,” she
“My story brings up a whole heap of
“In a way, I did. My own family wounds at the moment, and the odd
became clients on my say so. But 10% of ﬁnancial press is saying it is
as an employee we didn’t know any hypocritical to be telling people what
different – it seemed to be all water to do with their money,” she said.
tight. I saw the markets falling. My “But who better to learn from? I’d
husband and I had $300,000 in cash much rather take weight loss advice
at the time, so we could have easily from someone who had been fat and
withstood margin calls – but we never then lost weight than someone who
went into a margin call. was always thin and never lost weight
“It is disheartening. Every single so they don’t understand how hard it
ex-Storm client says the same thing, is.”
‘You worked there and you still didn’t And despite the setback, Nolan
know what was going on’. There might remains upbeat about the future, not
have been some key players who knew just for herself but for others who may
more about it than we did. For the be on various stages of their wealth
most part most of the employees were creation journey.
just left without jobs and for me most “People can do it,” she said.
of my investments were tied up with “Even if they are starting late they
them.” can still do it.”
10 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
Angels target techs,
biotechs and green
Angel investors across Australia on investment exits for the
are excited by biotechnology, calendar year,” said Bentleys
clean technology and web- associate director Tim
based software companies as Bridges.
opportunities for investment in “Data to hand shows 85.7%
2012. of investments had positive
That’s the verdict from the returns, with 25% returning
2011 National Angel Survey, between six and 10 times the
conducted by Bentleys for the initial investment.”
Australian Association of Angel AAAI chief executive
Investors. Ruth Drinkwater said the
The results showed contribution of angel investors
participants invested $5.4 was not limited to capital.
million in angel capital in more “In addition to ﬁnancial
than 90 businesses last year. investment, angels contribute
The most popular sector their time and expertise to their
was clean technology, which investments, with the average
attracted $1.23 million. angel spending 50 hours
In 2012, participants have per month on activities like
planned to allocate an average mentoring, attending pitching
of just over $275,000 of capital sessions and post investment
to use in angel investment, management,” she said.
up more than $40,000 on “The contribution of
their planned investments the intellectual capital is an
previous year. essential element of the angel
“This year we investment
were able to strategy and
collate data philosophy.”
The Wiley Trading Teacher
Millionaire Teacher Top Stocks 2012 Bulls, Bears and a
Guide Volume II By Andrew Hallam By Martin Roth Croupier who stopped
Edited by Kristen gambling and made
Hammond There seems to be many Although history is no millions
books on the market guarantee of future results, By Matthew Kidman
When we got the ﬁrst professing to teach you the Roth’s Top Stocks books
volume of the Wiley Trading things you should have learnt have become a publishing There’s normally a worry when the title
Guide we could tell it was at school, so it is refreshing phenomenon, entering a of a book is more than ﬁve words – if
something special. It’s such to ﬁnd one that has been remarkable 18th edition this they couldn’t get to the point in the
an obvious concept that written by an actual school year. Those who are already title, what chance do they have in the
it’s a surprise it hasn’t been teacher. Sticking with the familiar with the series can rest of the writing? Fortunately this
done before – take the best school theme to give it a tune out now – it’s likely this book is an exception to the rule, as
writers and let them loose on grade, the strong points are is preaching to the converted. Kidman draws on his experience as
their area of expertise. that it is incredibly easy to For the others, these books a journalist to deliver a punchy tale
Volume II picks up where understand and it covers the offer a quick, legible insight with plenty in it for the beginners. In
the ﬁrst book ﬁnishes off, subject matter well. On the into more than 100 Australian some ways this book is an open love
which is to say that it has negative side, it is extremely listed companies and provides letter to the stock market, reminding
a little bit of something for US-centric and for some an overview of performance everyone of the opportunities that
every trader and a lot of unknown reason there are and a likely outcome for the exist despite the global economic
great fodder for improving lots of internet addresses year ahead. As Roth himself woes. Another way to view it is as a
your trading performance. right in the middle of ordinary admits, he might not always love letter to the reader, reassuring
And the best bit? If you ﬁnd sentences. Whoever did get it right. But by providing them that they have the skills and
a section is too easy or too this needs to visit www. analysis on such a scale ability to navigate their way through
hard, you can just move on itsveryhardtoread.com before comparing apples with the big bad sharemarket – regardless
to the next. they edit the next book. apples, there are few better. of whether it is a bull or a bear.
UP FRONT ASSOB Update // News from the Australian Small Scale Offerings Board
ASSOB UPDATE “The problem is that we need to ﬁnd a
way to make the cost more expensive. FOR NEW WINE
“People say they feel like sitting in the
With more than 40 companies currently
raising equity capital on the Australian
Small Scale Offerings Board (ASSOB), front row seat of a concert – they have
it has been described as the largest the illusion of actually being there.
source of new equity capital for fast Flextank International is making
growing smaller businesses in Australia. The audiophiles love it because of the
waves on the global stage as
Investors interested in reviewing incredibly natural tone and a natural winemakers slowly make the switch
opportunities can register on the ASSOB
quality to the sound. You really do to a new winemaking technology,
think that the person is there. When challenging almost 500 years of
Entrepreneurs can obtain information
about attracting equity capital by
you listen through these speakers you tradition in the process.
contacting the ASSOB head ofﬁce on will often get up to answer the telephone
1300 722 954.
or the front door, but it is in the movie
For years high-end wine makers have
or in the recording.
been held over a barrel – pardon the
“I was listening to a live concert on pun – in their reliance on traditional
the computer and I almost died of fright oak barrels to mature wine.
because suddenly I heard someone a But as managing director Peter Seer
metre away clapping their hands – it explained, the company’s new Flexcube
was so real I actually jumped back removes the need for expensive
and realised that the microphone in barrels.
the recording had obviously been right “There are millions of oak barrels
LISTENING ON next to someone who had clapped their around the world, and they are all
ANOTHER LEVEL hands. lovely, but they don’t actually work all
“It’s just like the real thing.” that well – there are lots of drawbacks
Smaller, cheaper and better. That’s the The speakers are created using a to them,” he explained.
promise from Acoustic3D Holdings mathematical technique developed “They are very difﬁcult to work with,
managing director Joe Hayes when by the company, which also has they’re very expensive and they have a
he talks about the latest product applications in other wave-based very short life. While they were the best
offerings from the company as it technology 500 years ago, things have
technology (such as wind power or
prepares to launch an entry-level moved on since then.”
$999 speaker system. The company has invented two pieces
But for now the focus is on producing
of equipment to replace the barrel.
speakers with incredible performance
“One is a polymer vessel, which
from much smaller electricity and
According to Hayes, the system allows you to regulate the oxidisation
volume metrics. Hayes said the company
has been compared to a $100,000 in a controlled manner,” he continued.
audiophile stereo system – and if you was already working with production “It is a plastic vessel that beautifully
think that sounds like an unrealistic companies for live music events to controls the amount of oxygen going
price tag, think again. introduce speakers with much lower into the wine in the way that a barrel
“These are absolutely unadulterated OH&S management requirements. The just can’t match.
audio lovers who would think nothing company would also look at logical “The second part, which is a new
of spending $30,000 on the right power extensions to the speaker technology, part of our business, is that we have
cable for their speakers,” Hayes said. such as mobile phone speakers. introduced top barrel grade oak from
our own joint venture company in
“If you’re going to mature wine in
barrels you need to provide two things:
you need to provide oxygen and you
need to provide the oak.”
With the company’s technology
protected by a series of local and
international patents, Flextank is
rolling out the sales drive to reach the
local market and key international
markets in Europe, the US, South
America and South Africa.
WEALTHCREATOR.COM.AU MARCH /APRIL 2012 15
UP FRONT ASSOB Update // News from the Australian Small Scale Offerings Board
Steer said many winemakers were THE YOUNG AND THE “The primary revenue stream is
greatly interested in the product, but RESTLESS through the paid broadcasting and
remained wary. events system,” Cracknell said. “Any
“Because it is so radically new, and events that are run through Kondoot
Kondoot executive director Mark
because wine makers have one chance with a ticket price, Kondoot takes a
Cracknell is starting to get used to
a year to make their wine, they are very 20% cut of the ticket sales. The second
having people talk about his age.
cautious to change anything to make revenue stream comes from our games.
Then again, there are not many others
sure they don’t ruin their one chance under 25 who are successfully raising On the site we have a whole bunch of
for the year,” he explained. money to fund an Australian-tech games that make the site fun and easy
“However, as people become familiar startup some are comparing – already to use. All the games are available on
and conﬁdent with the technology, – to Facebook. iPhone and Android for a nominal fee.
they don’t look back. There are many “Our third revenue stream comes
winemakers in Australia who now And as Cracknell is quick to point out, from advertising. We are in the process
declare they will never touch another while there are plenty of experienced of designing and reﬁning our advertising
barrel in their life. Several wineries business brains guiding Kondoot’s platform, which will be pushed out into
have said that they are switching commercial strategy, part of the buzz the site at a later date.”
totally to this technology.” surrounding the company is the After launching softly into the
Despite the caution, sales results fact that the product it offers is so Australian market last year, Cracknell
have been strong and the sales have contemporary. and co-founder Nathan Hoad embarked
grown at 33% year on year for the past “Kondoot is social live video,” he on a PR blitz in the US before Christmas.
three years. explained. Now the site has users in 137 countries
“We are also rolling out a very and the company is planning to launch
“We are a social media site geared
interesting range of new products,” a US ofﬁce in the near future.
around this whole concept of live video.
Steer added. “We are expanding and will be
You can be online and broadcasting
“The current largest vessel is 1000L, moving a couple of guys over to the
to your friends and family, sharing
and this year we are introducing a
live video with everyone you know, or
2000L version. There are plans for a
you could do a public broadcast where
5000L version, which starts to take
anyone in the world tunes in.”
us into a new, almost industrial,
While the site combines traditional
winemaking territory. This would allow
social media elements such as posting,
us to roll out this technology to larger
messaging and instant messaging with
winemakers, which could be quite
new services such as video calls direct
groundbreaking for us.
from the browser window, it also offers
“The new products will grow us into
‘broadcasters’ the opportunity to make
new areas. We’re also playing in the
money for themselves.
spirit industry, which is a huge and
very proﬁtable industry, so we expect “We have just launched our events
that will open doors which is very and paid broadcasting system, which
valuable to the company.” is the ﬁrst of its kind in the world,”
“It enables someone to jump online to
create an event and if they have fans
and followers who would pay to see the
event, they can set a ticket price of $10
and instantly start broadcasting and
generating revenue online as well.
“There is no hassle, no set-up time
and no set-up costs, it is just there and
it works straight away. It’s perfect for
people like musicians, who might be
able to put on a concert and get their
name out there a bit more. It could work
for things like sporting events as well.”
The business is structured around
three revenue streams.
16 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
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UP FRONT ASSOB Update // News from the Australian Small Scale Offerings Board
states,” Cracknell said. “We are looking Like most internet businesses, for months, they had seen a 25% increase
at getting more team members and Kondoot the sky may indeed be the in daily page use. Continual innovation
getting a bunch of new features into limit. “The site will never be ‘ﬁnished’ – will drive your business.
the site – there will be little tweaks and there will always be something that you “I was speaking with someone from
improvements around the site. We’re can improve,” Cracknell said. “Facebook Groupon and talking about the issues
also looking at getting more audience is always striving to innovate, which they faced with scaling and the problems
members using the paid broadcast is one of the reasons their user base they had to solve. They had issues that
system, so there will be a sales force continues to grow. YouTube published no one else has ever encountered, and
working on that to market it around the ﬁgures recently after they redesigned we will no doubt face the same thing in
world.” their entire interface. In the last three the future.”
WOWING THE people sitting watching and the ball summer cricket campaign were also
CROWDS comes down off the crossbar,” he said. watershed. While previous campaigns
“Is it over the line or not? It creates a received a response rate of 2%, this
lot of anxiety. If we could capture the particular campaign was closer to
While most start-ups like to boast
sentiment at that particular moment, 10%.
about their potential numbers, iPowow
how much power would that have? You Now, the focus of the company is
has backed its talk with its walk since
landing some impressive deals in the could see the same thing with devices signing other events and sporting
past year. such as the worm during the election organisations, with the company signing
debates.” up media-giants Aegis International
After patenting the cloud-based to assist with the international sales
The company offers the technology application, iPowow started off small effort.
behind the new wave of interactive with the American Music Awards show in “We have now got one of the biggest
television – for example the Vodafone 2010, before joining with NBC Universal communication companies in the world
Viewer Verdict, where viewers watching in the US to use the technology for its bringing clients to the door, and we
the cricket can vote with their phones Miss USA contest. This lead to a deal have to deliver: it is that simple,” Fourie
on contentious decisions and even man- that could be considered the tipping said.
of-the-match awards. point: using the technology in the Miss “The company will probably grow nine
Chief executive Ettienne Fourie said Universe competition where 23.6 million to 10 times in the next nine months to
it heralded a new breed of television votes were counted in nine minutes from what we currently are.
participation for broadcasters, 150 countries. “We are in a situation where the
producers and advertisers. “That pretty much changed technology is proven, we have a
“Never before in the history of television everything,” Fourie admitted. sales team set up, we have an ofﬁce
has the TV and the audience been able “It was peaking at 65,000 votes per established – the real game for people in
to interact in real time,” he said. second. In order to get to that stage we our space is speed to market.
“There are two trains of thought had already done our time. We had done “Whatever technology company can
in that sphere at the moment. One is around a dozen live events, all smaller get there ﬁrst and gain market position
called social TV, which is where people scale but every time we did it we took is going to be in a strong place.
are sitting at home with their iPhone the technology and updated it.” “We just want to sign up as many
or iPad or laptop and they’re engaging While the numbers from that networks and as many high proﬁ le
with the TV show or something competition might have been a tipping sporting and television assets as we
related to the show through Twitter or point, Fourie said the results from the can.”
“Where we come in is a new area
called participation TV, which really
allows the audience to interact. As you
are sitting there watching they ask you
a question and we are collecting – in
real time – millions of votes and putting
them on the TV screen in point ﬁve of a
Fourie said the idea for the technology
was based around watching a World
Cup game of soccer. “Imagine a billion
18 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
IF THE “In fact our team has a fair amount of “We focused on developing our
SHOE CLICKS footwear experience, and most recently platform and building something
we were involved with Footlocker, the that was quite unique and different
international retailer that specialises to what is out there at the moment.
Online footwear retailer Shooii is set
to go live with a focus on unmatched in the youth retail market. We saw It has unique features such as a new
customer service. a gap in the market place and also a way to search the site, a drag and drop
lack of focus from the major retailers function so you can save shoes as you
looking at online retail in particular. are browsing.
This is the mindset Shooii managing “The whole concept was born out But Shooii is not simply relying on a
director David Prince has applied to of frustration more than anything, ﬂashy website, Prince said.
his online footwear retail start-up, because we couldn’t get our superiors “The other component of the business
and it’s not just about getting the right at Footlocker to understand that there which is really important to us is the
shoes on feet. was a huge opportunity to service a idea that we offer legendary customer
For Prince, the market is missing younger market online.” service – generally we think customer
something at the moment: a competitive Prince said the company had spent service in Australia is slipping and is at
online retailer aimed at the youth the past year building its website, a pretty poor standard,” he said.
market and delivering unparalleled which is expected to launch shortly. “We were trying to reinvent the way
customer service. “We started looking at best practice that we approached the service side of
“My background is in footwear retail, from around the globe, which made us the business. We wanted to create a
I have been in the industry for 17 realise that online retail in Australia is delivery system that was truly great as
years,” Prince said. still in its infancy,” he explained. well. I think the standard we should be
trying to achieve as online retailers is
an overnight service to customers – but
then to make it really easy to return
MELTING POINT products.
“We’ve got this unique returnable box.
From an outsiders perspective Each parcel that goes out to consumers
welding might not be the most is packaged in premium packaging, not
exciting industry generating press in a satchel like you might normally
in the ﬁnancial space, but for those receive. The box actually serves as a
on the inside the latest product return package – it is a simple matter of
offering from Keyhole TIG Limited is
sliding the drawer out and then sliding
it back in reversed and there is a reply
paid already printed.
Chief executive Gordon Kay told Wealth controlled by a smart controller that “We get around that issue of returns
Creator that the new form of welding not only records data for processing on that may stop customers from buying
technology, which is based on Tungsten work in progress, but also records the online because they think it may be too
inert gas welding, was generating rave data for quality control. hard to return if it is the wrong size.”
reviews based on its speed. With a number of global and local
“The predominant difference with patents, Keyhole TIG has recently
the TIG technology created through the been in discussions with international
Keyhole TIG is that it does very thick
distributors planning to target the
materials in a single weld very quickly,
UK, Germany and the United Arab
anywhere from 10 to 100 times quicker
than conventional TIG welding metals,”
“We are also in discussions with one
of the major distributors of welding
“Previously it was claimed that it
technology in South Korea as well, in
wasn’t possible to go any quicker. It
certainly has been proven otherwise.” addition with some smaller players,”
While traditional TIG welding melts Kay revealed.
the parent metal with a wire ﬁ ller to join “Interest is rapidly accelerating now
the gaps, this new form of technology we are actually making noise about it.
keeps melting the parent metal past It is really about getting the product out
what was previously thought possible to market, and we’re well positioned to
through a special tip. The system is also make it happen.” Shooii managing director David Prince
WEALTHCREATOR.COM.AU MARCH /APRIL 2012 19
UP FRONT ASSOB Update // News from the Australian Small Scale Offerings Board
GROWTH ago and the ﬁrst commercial run went The company would also continue to
INDUSTRY into ﬁeld two years ago,” Hubbard focus on innovation, he said.
said. “Research and development never
“The response has been tremendous stops and we are in the process at the
The world’s booming population is
driving demand for more efﬁcient and it has been supported by the fact moment of designing some interesting
agriculture through products such we have been able to win a couple of value-add options to the Moisture
as the Moisture Manager, created by major awards. We won the Australian Manager, which will be released in time
Ross Hubbard. Business Award last year for product for the 2013 season,” Hubbard said.
innovation, and we also won the “There are two or three of those
NAB/Monash University award for which will be released next year to
Hubbard, the managing director of product innovation and excellence last keep us ahead of the pack in terms of
SustainAg, is working to commercialise December
innovation and technology.
the trademarked seed planter through “The recognition of the design
“At the end of the day it is about
the newly formed company. excellence and the product quality and
continuing to develop products which
“The company has grown out of a innovation has been very encouraging,
improve two things for farmers: their
previous business I have had here and certainly it’s a product that leading
ability to remain sustainable and their
for 25 years in northern NSW, which edge farmers can see the beneﬁt of a
ability to remain proﬁtable.
was called Namoi Valley Implements,” genuinely dual-purpose machine.
“We’re in an industry that has some
Hubbard said. “It is a machine that can place seed
tremendously exciting times ahead of
“I made a decision to sell that in the soil using different soil opening
us. The agrifood business is the most
business, which was a retail farm mechanisms, which are required if you
important in the world, because it is
machinery business, and concentrate have different soil types or different
on a manufacturing/wholesale/retail amounts of crop residue left on the pretty obvious what happens if we
business which concentrates on the surface after the previous harvest.” don’t eat.
tillage, seeding and spraying side of Hubbard said the company had been “It’s exciting when you see the
farming.” vigilant in ensuring its intellectual demand which will be placed on food
The company operates a retail and property has been protected and was supply. When you have a look at what
support operation in northern NSW to now looking to springboard its success is happening in developing parts of
provide a base for innovative design of into a national distribution network in the world, where it is estimated that
new equipment, such as the Moisture Australia, as well as looking to take the in the next 10 years 50% of China’s
Manager. products offshore to key international population will be urbanized. Where
“The ﬁrst prototype Moisture Manager markets in North America and Eastern are 800 million people going to get the
products went into the ﬁeld three years Europe. food from?”
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ON TRACK TO TARGET TUMOURS “We have taken a generic drug and
improved it to make a new branded
ASX: ACL product out of that,” Smith said.
“We could work with companies that
Although Alchemia Ltd has made its chemotherapy but targeting it at the are developing new drugs to make them
name developing a generic version of tumour site. This technology has the work better, or companies that have
blood-clotting drug fondaparinux, it promise of increasing the potency drugs which are going off patent to assist
is advances in the company’s cancer of the chemotherapy drugs towards with life-cycle management. There are a
portfolio that investors should keep an the tumour but not change the way it whole range of different deals we can do
eye on. behaves outside of the tumour.” with this technology.
Chief executive Pete Smith said The company has just commenced “The dream is that in the future a
the portfolio was acquired after the phase 3 testing on the products, lot of different cancer drugs will be
company purchased Meditech about with phase 2 testing in colorectal formulated using our technology. We
ﬁve years ago. cancer showing the technology more see enormous upside if we get this trial
“We are taking generic cancer drugs than doubled the effectiveness of the working right.”
and making them work more effectively chemotheraphy without changing the In other areas of performance,
in targeting a cancer tumour,” he said. toxicity level. Smith told The Elevator that Alchemia
“We’re using a formulation technology “We were amazed we saw such a big was founded on its ability to perform
called HyACT, which is the platform result,” Smith said. complicated chemistry processes.
technology to formulate drugs that “For a lot of cancers, we haven’t seen “That complex chemistry has enabled
target the tumour. We have shown very big gear changes in the effectiveness us to come up with a synthesis of a
clearly that we can give the same dose of treatments. Even some of the newer molecule called fondaparinux,” he
of chemotherapy to the patient, but we therapies, that people can pay $30,000 explained.
However, the molecule had one ﬂaw
– it was incredibly difﬁcult to make
on a commercial scale. Most synthetic
chemical processes have ﬁve to six
steps, but this process had more than
“Every step has a yield – the more
steps you have, the less material you
produce at the end,” Smith said.
“Obviously if you are trying to make
many kilograms of this it becomes an
issue. If you are losing a third or half
the material at every step, you will only
produce a small amount.
“Using our chemistry we came
up with a new way of making it. It is
still quite complicated. The barrier to
entry is just that it is a very difﬁcult
make it work better because more of the for, are only pushing out patients lives molecule to make. We think we will be
treatment is targeted at the tumour. by a matter of weeks or months. I think the only competitor in the market for a
“The problem with chemotherapy is what we have is on a par with the considerable period of time.”
that it is poisonous to a lot of cells in incremental improvement of these other After launching in the US market
the body, including the tumour. Every drugs, but obviously at a much lower last year after approval from the
chemotherapy is given at the maximum price point.” FDA, the Alchemia has paired with
dose the patient can tolerate, not the The company is expecting primary Indian manufacturer Dr Reddy’s for
optimal dose, which is optimal for results from this phase 3 study in Q3 distribution, where the latest data
killing the tumour. 2013, with the option of creating a new shows sales around $1.4 million weekly.
“What we are doing is soaking listed company to handle the cancer Alchemia receives a 50% share of the
the body in the same amount of portfolio also being slated. operating proﬁts.
22 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
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COPPER HOPES UP FOR CYU’S FRESH EYES
Chinalco Yunnan Copper Resources “We also keep our eye open for
is celebrating its latest ﬁnd, with the any other elements that may come
company announcing its latest drilling up, particularly heavy rare earth
results – from an area which had elements,” he said.
already been tested. Beckton said the immediate focus
Managing director Jason Beckton was to develop two mines in Laos to
said the company had received production as quickly as possible
promising results from its project in to generate cash ﬂow to fund other
Elaine in Queensland, after earlier discoveries.
studies seeking uranium had not “The mines in Laos are more
pursued copper sulphides found in the realistic for short-term production
area. because of their proximity to other
The company also has projects in existing mines in our sister company,”
Laos and Chile, where Beckton is based. he said.
“The main focus remains Australia, “We can take advantage of
where we have the discovery of a new those relationships to bring it into
copper ore body,” Beckton said. production quicker.”
“We still need to quantify the quality The company is also working with
of the discovery. We started releasing tier one partners Rio Tinto and Xstrata
strong results from Queensland’s Elaine Copper in Chile on a number of
discovery in July. Obviously it is not the projects.
best time in the market, but we don’t According to Beckton, the results of
warehouse the results.” these explorations are integral to the
Beckton said the company, which is company’s ongoing success.
indirectly backed by China’s Chinalco “Discovery of new deposits is the key
through its 51% stake in the Yunnan driver for what we are doing – and we
Copper Industry Group, was mainly have only just done it,” he explained.
focused on discovering copper and “It’s an excellent time to have a look
gold deposits through exploration. at CYU.”
within a specially designed power
THE BROWN plant using the energy within the
REVOLUTION coal to burn out the moisture, which
takes away some of the available
ASX: ESI energy, and with whatever is left
over you can produce energy,” chief
Environmental Clean Technologies is operating ofﬁcer Ashley Moore said.
heading to the drawing board to design “Our technology takes the water
a commercial scale plant in the Latrobe out in a sensible way before you use
Valley. it, so that when you use it you are
The company is looking to capitalise using the coal far more efﬁciently.
on its Coldry technology, a technique This means you can reduce the CO2
that removes the moisture from brown emissions, but you also make that
coal to increase its efﬁciency and energy coal a transportable energy source
output and reduce its CO2 emissions. because there is less water.
“The traditional way of using high- “Raw brown coal has around
moisture coals is that you burn them 2000 kcal/kg energy as it is dug
24 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
out of the mine, and our material “It’s important to consider the picture “There isn’t a ﬁnite life for Coldry
is between 5500 kcal/kg and 5900 15-20 years from now. In Victoria, the at brown coal power stations, it is a
kcal/kg. It takes a little over two energy consumption of coal will diminish gateway technology to those higher
tonnes of coal to produce one tonne to the extent that is required to meet our value operations to utilise that
of the [new] coal using Coldry CO2 targets. But we can’t leap straight enormous resource we have in the
technology.” there with an entirely sustainable Latrobe Valley.”
The company is looking to solution, the technology is not mature Davies said the company was also
commission a full-scale plant by enough and the population can’t cop working on another technology –
2014, depending on available ﬁnance. the signiﬁcant price tag associated with Matmor – to improve the process
options available. it. Coldry plays an important bridging of producing primary iron, which
“It could be part of the Victorian role, in that it enables coal to continue would decrease the cost of raw
solution to signiﬁcantly reduce its to be used, but in a much more sensible materials and also the CO2
CO2 emissions, which on its own has fashion. In developing the technology you footprint.
signiﬁcant economic advantages,” also open up higher-economic value uses A pilot plant for Matmor was
Moore added. of the brown coal as well. being designed, he said.
TANDOU COTTONS ON TO WATER
A new business model has given value of water over time. The Murray recently returned to full production.
traditional farming operation Tandou and Darling River plans will effectively “We have just completed a 4000
a refreshing ﬂexibility to cope with improve the quality of the system, hectare cotton crop last season, and
Australia’s ﬂuctuating weather but also reduce the amount of water we have just planted a 6500 hectare
fortunes. available for consumptive use which cotton crop for this year, which is
Chief executive Guy Kingwill said enables us to believe our investment the largest cotton crop we have ever
the company had developed a long- will increase in value.” grown,” Kingwill said.
term water investment portfolio to Founded in 1970, Tandou has been “In addition to that we are growing
complement its existing signiﬁcant listed since 1987 and is a large farming 2400 hectares of cereal. The crops
cropping operations. operation with 13,000 hectares of have already been planted and we’re
“Tandou has always owned water cropping area in far western New South hoping for an average season. We
entitlements for its cropping operations, Wales. are looking at two years of ﬂ at out
and we were one of the ﬁrst to do inter- Kingwill said the new business cropping [based on current water
valley trades of water,” Kingwill said. model allowed for two basic modes of storage levels].”
“Since the de-regulation of the water operation. When water is plentiful and Kingwill said Tandou was using
market and the separation of title the value of water entitlements is lower, funds from a capital raising in the ﬁrst
from water and land beginning around the company is able to plant crops half of 2011 to continue to build its
2005, the whole market has been according to traditional farming cycles portfolio of water entitlements.
evolving. and operate as a normal production. “You have to look at it like a property
“Long-term, we believe water will However, when water is more scarce the portfolio,” he said.
continue to increase in scarcity company is able to sell its entitlements “There are continuing ﬂuctuations
in terms of more demand and not to others with permanent crops – such in the short-term value of your water
necessarily more availability from our as almond trees or vineyards – at a entitlements, but over the long-term
current systems. much higher value. we expect them to increase in value
“We believe there are signiﬁcant While the company employed this as they have done over the past 15
factors that will continue to drive the model during 2007-2009, it has years.”
WEALTHCREATOR.COM.AU MARCH /APRIL 2012 25
Beans and garbage have paved the path to success for
Manny Stul and his innovative toy company Moose Enterprise
FOCUS // COVER STORY
Let’s be honest. Nearly every kid wanted things – the company became far more “Most people have good ideas, but
to work at a toy factory at some point ethical. very few have the ability to translate
while they were growing up. In fact, “The staff had a lot to do with it, them into a commercial reality. That is
until they are old enough to read Charlie because with a change in staff we our forte,” he said. “If you ask me what
and the Chocolate Factory and consider changed the attitude and the whole our core competency is, that would be
a career change, many children would way we operated and got into genuinely it. We can take something from nothing
happily take up Manny Stul’s position developing innovative products.” and all we need is that spark and then it
in a heartbeat. After enjoying moderate success can be turned into a commercial reality
As the chairman of Moose Enterprise, with a toy called AquaSand, Moose hit very quickly.”
Stul oversees a company that is the big time when it launched Mighty So what is the latest idea to be turned
making big news in the toy industry Beanz, a small collectable based on the into reality? Meet the Trash Pack, a
since the release of Trash Packs – soft traditional Mexican jumping bean. Stul
rubber collectable characters based on said the toy was the joint brainchild of
garbage. business partner Jacqui Tobias.
When Stul is asked if making toys is “Mighty Beanz established us,” he
as much fun as it sounds, his answer is said.
“Mighty Beanz is a collectible based
But while the job title might seem
on the old Mexican jumping bean, which
like a dream to many, Stul admits that
is the catalyst for the shape, only this
he fell into the position by accident
has a small stainless steel ball inside.
after retiring in 1995 from his giftware
“It has a really weird rocking
company, Scansen, which he founded in
motion. I actually used to play with
1974 and took public in 1993.
the real Mexican jumping beans as a
“Moose came across my desk as an
kid, and while there have been a lot
investment, and the intent was for my
of people who have had the idea of
investment to be passive but things went
using these beans, no one has been
wrong with the partners I was involved
able to successfully translate it into a
with,” he recalled. “I bought them all out
and stepped in to run the company.”
Admitting that his due diligence “We re-launched it two years ago and
wasn’t as strong as it could have been – it was bigger than the ﬁrst time. We
he was faxed 400 pages of ﬁgures to his have an established brand now that we
hotel room but he couldn’t read it, so he can bring back.
relied on the analysis of his brother-in- “There is no hard and fast rule for
law – Stul said that he stepped into a what will be successful. Most of the
company in deep turmoil with a messy ideas early on came from us. All of our
company culture and poor systems. current successes, and we’ll have four
“There weren’t too many positives in product ranges on television in the US
terms of the way the company was being next year, are all our own ideas.”
run,” he said. Stul also credits fellow director Paul
“In a very short period of time all the Solomon, who oversees the company’s
staff changed – it wasn’t pretty. It was exports, as having a brilliant mind for
a very small organisation that wasn’t product development. He said this ability
doing big turnover. We changed the to deliver on products was critical to the
culture, and changed the way we did company’s impressive performance.
26 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
collection of “gross” creatures that come television offering to support each you have something hot, they will ﬁnd
in their very own trash can. product. you.”
“Out of the box this has been a bigger “Everything we produce we go to So what are the challenges of
hit than Mighty Beanz was,” Stul said. television with in-house, which works overseeing a company delivering
“We gave Toys R Us an exclusive in out to roughly 30-40 TV productions thousands of toys worldwide? Finding
America for Christmas 2011 and next per year,” Stul said. the right people, Stul said.
year we have all the retail chains on “With the overseas customers it has “The growth that we have experienced
board – WalMart, Walgreen, Target and taken a while to develop the right sort is unsustainable without the right
Kmart. It is a phenomenon over there – of relationships with them, which is people,” he said.
it’s already one of the top 15 toys with again based on credibility and ethics. “One of the problems of ﬁnding
Toys R Us Because we go to television with every the right people is ensuring they are
“What surprised us was when we product we deliver, we have to go to the engendered with the right culture. I say
started having a look at the people bigger companies which can afford the this to everyone who joins us: as much
blogging, there was a tremendous quantity to justify the TV expenditure as we may look very relaxed and casual
number of girls. With Mighty Beanz we in those countries.” and colourful, and there is a lot of
knew it was around 30% girls collecting Stul said that this process was laughing and joking, we are very good at
them, but the Mighty Beanz weren’t as becoming easier. what we do. We have to be. As much as
gross.” “We don’t have to ﬁnd them, they we give the impression of sitting around
With a distribution network across 75 come to us,” he said. the ofﬁce in casual clothes, you have to
countries, Moose not only designs and “I don’t say that in an arrogant way: be exceptional at what you do and you
delivers toys, it also runs a sophisticated in this industry the product is king – if need to be able to deal with pressure.
AT A GLANCE:
Name: Manny Stul
Revenue: $100 million plus
Growth: 60% year on year
We have a very low tolerance for wanted them to catch me out – the company has sold 10 million
incompetence or ineptitude. That once you have lost someone’s and expects 2012 sales ﬁgures
intolerance doesn’t necessarily trust you have lost them forever. to top 100 million, contributing
come from us as the owners, it is Your integrity and your word to revenues of more than $100
often from the co-workers. mean everything, because people million last year – there are moves
“We have a fantastic team know that if you say something into new products which Stul
and it is a pleasure to come to they can believe you.” predicts will be even bigger. And
work. I make sure these days I This adherence to ethics the competition is watching.
interview everyone, not so much has paid off for Moose, which “We have got to the stage
for their ability but for their recently secured a strong deal where we are being watched very
personality, to ensure they ﬁt for an upcoming product launch closely, and I am reluctant to
in with the culture. We have on the strength of its word. talk about some things because
had some incredibly qualiﬁed After founding one company we will be knocked off – even by
people come to work for us with and turning another around some of the bigger companies,
great references and impeccable dramatically, what words which is a disgrace,” he said.
backgrounds and they were a of advice does Stul have for “We have another girls program
nightmare to work with. Culture others on their entrepreneurial which we believe will be bigger
is very important.” journey? than anything we have ever
Moose employs 70 people “Crawl before you walk,” he done – every single person we
in Australia, with another 75 said. “Do your research, do your
have shown it to has fallen over
based offshore in Hong Kong and homework and don’t assume
backwards for it. It’s called Stika
China. Together with a strong anything.
Lulu – it’s going to be massive.”
understanding of the company “Listen and learn from people
While Moose makes “99.99%”
culture, Moose staff are also who you intuitively trust. I would
of its money from toy sales, Stul
fully versed in the company’s also say don’t go spending up
says the company has previously
unofﬁcial rule: don’t lie. big on grandiose ideas. It’s so
been involved with licensing for
“Honesty and integrity are very easy to do a spreadsheet and
the Mighty Beanz range – and
important,” Stul explained. business plan and do all these
Trash Packs is already starting
“I try to ensure that whoever projections. These spreadsheets
to generate a buzz, despite its
is in my organisation doesn’t are like an accordion – you can
lie to whoever they are dealing have them as wide or as narrow
But Stul maintains that the
with. You don’t want to be trying as you want and you can juggle
key to the company’s ongoing
to remember who you said what the ﬁgures to say whatever you
success will be the products
to – it’s such an easy trap to fall like. But you need to dip your
that it develops, and looking
into. In the cut and thrust of the toe in the water before you go in
around the company’s ofﬁces in
business world there is a lot of boots and all – going boots and
pushing and shoving that goes all is a recipe for going broke. Melbourne it is easy to see why.
on to achieve a certain end – I “You need to really know There are toys literally
try to make sure that everything your market. We have done everywhere, and computer
we do from top to bottom is done some research for some things screens ﬂ icker with fun
on an ethical basis. where we were all going in animations and scary-looking
“I’m originally from Perth. different ways, and we thought monsters just waiting to be
When I started my gift company we should test it to see which turned into the next collectable,
I had no knowledge. I worked path to take, but overall we just TV commercial or website. But
on a rig for seven months to rely on ourselves to do our own it’s downstairs in the company’s
earn enough money to start research. show rooms that the real fun is
the business. When I started “When we develop a product it to be found. As the team from
the business there was no one costs us hundreds of thousands Wealth Creator walks around the
to show me what to do, I had to of dollars, so we would all have room we take the time to play
do everything myself. I had to to agree wholeheartedly before with each toy – often spending a
understand selling, accounting, getting to that stage. At that little bit too long in front of each
packing – I did my own packing point, we believe it is going to display.
for three years. One thing I learnt work.” It turns out that it’s not just
very quickly as I was setting But while the ﬁgures for Moose children who would love to work
this up was never to lie. I never and Trash Packs are exciting – in a toy factory.
28 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
Laughing all the
way to the bank
Pete Crofts has found a way to convert chuckles into
cash – now he’s looking for others to share the laughs
Have you heard the one about
the class clown and apprentice
butcher who became a comedian
and started a business school
based on humour?
It’s no joke that Pete Crofts has
developed his lifetime passion for
humour into a business model
with plans for growth, despite the
fact that some parts of his story
sound like absurdist sketches.
Here’s how he became a
“I became the class clown
because I wouldn’t accept the rigid
views that I was being taught,”
“I found myself on a train one
morning, going from Chelsea to
Mentone, and something funny
happened. When I got to work I told
the butchers what happened, and
they laughed, then I told ladies
in the shop what had happened,
and they laughed and I get home
that night – this is 1956 – and
mum and dad have bought the
ﬁrst television in the street. The
lounge room was full of people. As “I couldn’t afford nails to build “My big breakthrough was
I walked into the lounge room, I the building, so I took the nails AT A GLANCE: when I realised that I had
got to the front and stood there out of the fence to build the shed,” Name: Pete Crofts developed a sense of comedy
watching this little box, and this Crofts said. Position: where I could make others
comedian came on and told a “On the day I opened the ﬁrst creator laugh, but I turned 30 and
story very similar to the one I had Humourversity there was a Age: 68 realised that I couldn’t laugh at
just told. big storm which blew the fence Goal: launch myself,” he said.
“I thought to myself, ‘I can do down, but the Humourversity Humourversity “I was working for an
that! I don’t have to be a butcher, survived.” studios in each audience, surrounded by guys
major capital city
I can just tell stories’.” Crofts said he made the on leave from Vietnam who
Or about when he opened his leap from touring comedian to don’t know if they are going to
ﬁrst Humourversity, in Bonbeach founding the Humourversity after live when they go back or not,
in Victoria. having an epiphany on stage. and I am on stage entertaining
30 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
them they’re laughing their heads
off and I caught sight of myself in
the mirror and I wasn’t happy. I
realised then that I took myself
too seriously. I gave up comedy
that night and moved back home
At a loss with the next steps
to take, Crofts put together a
large collage mural to record his
experiences in the entertainment
industry, painstakingly cutting
out pictures over 16 weeks to
overcome the impediment of his
“As I was putting this together I
realised that you didn’t need booze
or drugs, you needed a passion
for something and a meaning to
life,” he said.
“I decided to work hard. I
put my heart into what I saw. I
opened the world’s ﬁrst bookshop
specialising in humour, comedy
and laughter. I borrowed some
money and bought 3000 books
at 10 cents a book. I borrowed 50
bucks from dad, and bought some
bricks and chipboard to open up
the boomerang book exchange.”
While operating the book shop with some speakers. One of I started doing the same thing.
and researching the books and the guys was handling Dale Instead of operating one on one, I
authors available, Crofts became Carnegie, and I began marketing started operating for small groups
a student of the art of comedy – Dale Carnegie. He was one of and hit the speaking circuit.
and eventually a teacher. the ﬁrst who understood the “At the same time I started
“I got caught up in the academic value of intellectual property. He putting together the various
aspect of it, the history and made a lot of mistakes along the training programs we do now –
community beneﬁt side of it,” he way and it took him a long time selling with a sense of humour,
said. “At that time I was doing to get his property out there. By public speaking with humour
some work with an advertising understanding what he was doing – there are 17 programs all
agency, and knocking around when his content was concerned, together.”
WEALTHCREATOR.COM.AU MARCH /APRIL 2012 31
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According to Crofts, humour going to see owning your own
and laughter are often the missing business as being Australian.
ingredients for companies looking That’s the bottom line. By owning
to boost their success. your own intellectual property
“If business is not fun,
“If business is not fun, what is and understanding how you can what is the purpose of
the purpose of doing business? Life turn that into an income, that is doing business?
has to be fun and we have to do the future. It’s not off the sheep’s
business with people who are fun back anymore, it is off the top of
to do business with,” he argues. your mind.”
“Humour, comedy and laughter Crofts said this paradigm shift
spin into fun, play and happiness, could eventually lead to a shift in
which spin off into creativity, the work-life balance equation so With a pitch aimed at sales
imagination and innovation, often cited in textbooks. managers, small business
and they spin of into people, “People will live for a living,” he entrepreneurs, teachers, trainers
productivity, and peace. said. and performers, Crofts said
“The bigger picture is a more “Within 30 years’ time business there was already interest in the
peaceful and happy life, because if is going to be replaced by liveness. franchise program.
you’re feeling good then you tend People want to live a life, they don’t In the meantime, there was
to do good. If a sense of humour want to be shackled. [Sigmund] still a lot of work to be done to
could be taught in the classroom Freud said most people go to work spread the word about the ability
the way politics or economics is, all day doing jobs they don’t like of comedy to successfully lift
then the kids are going to come and do hardly any work and they business performance.
out of school with a comic sense. come home and they’re tired. Why “Humour, comedy and laughter
They’re going to have a perspective are they tired if they’re not doing is a higher consciousness – you
which allows them to discuss what any work? It’s because they are think a story is going one way and
they believe fervently, but not lose using all their energy suppressing then the punchline comes from a
themselves in it. They’re going to who they really are. completely different direction and
have a sense of perspective.” “The old days are gone. Standing forces you to think another way,”
For those who may dismiss the at a podium demanding people Crofts explained.
addition of show business as a key listen is over. Even education is “The formulas that go into
skill set needed for businesses in becoming edutainment trying to making a joke are also ways
the 21st Century, Crofts points to keep kids interest alive.” of solving a problem, making
the rise of social networking sites With protégées including Tim a decision and creating an
such as Facebook. Smith and Elliott Goblet, in opportunity. We teach people
“There’s no longer a ‘business’ addition to hundreds of others who these processes. We train people
world and a ‘show business’ world have taken the business course, to be able to think creatively, to
anymore, they have married and Crofts said the time was right to put aside their prejudice and to
their eldest child is humour. It launch further Humourversity re-evaluate their values.
means being fun to do business studios across Australian capital “Kids need to be encouraged
with, and having a friendly and cities and regional centres in a to laugh. Children need to be
ﬂexible corporate identity and franchise model. encouraged to laugh, play and be
culture. One of the new programs “The system is set up now – the happy and encouraged to share
I’m designing covers hosting your procedure manuals, legals and laughter and to bring out their
own streaming video website, marketing are all in place,” he creative side. When you laugh,
which is what everyone is going to said. you’re liberated from dogma,
have to do,” he predicts. “Anybody who signs up to open restrictions and control and freed
“There won’t be photos on their own Humourversity studio up to let loose your creativity,
websites in ﬁve years time. Who will get all the training that is imagination and innovation.”
you are when you are running necessary. And the effects were tangible
the business is going to have to be “Not only will they be trained to a company’s bottom line as
presenting themselves down the up in running the programs, but well, argued Crofts. Increased
screen. also to work as humour coaches, creativity and productivity, plus
“In another 15 years, where the business show cases and public an improved attitude to enjoying
tradition of owning your own home speakers so there will be other work? Ultimately, that’s no
is Australian, I believe people are revenue streams.” laughing matter.
WEALTHCREATOR.COM.AU MARCH /APRIL 2012 33
Good enough to eat
A constant pursuit of innovation has driven healthy
growth for Kelly Baker-Jamieson’s Edible Blooms
While some women would consider age. But despite the business plan and Creator spoke to Baker-Jamieson she
receiving ﬂowers or chocolates a careful thinking, she decided to forgo was keeping an eye on each store’s sales
welcome gift, a bouquet from Edible the red tape of organising a bank loan around the country from her laptop on a
Blooms offers the best of both worlds. to start the business and instead put farm an hour outside of Adelaide.
Founder Kelly Baker-Jamieson her life savings on the line to start the “It’s really different to those early
created the business in Brisbane six company. days,” she admitted. “Now I am able
years ago. “I ended up putting the money I was to look at the bigger-picture stuff like
“We are just like a ﬂorist, but you get saving to buy my ﬁrst house on the marketing and business development.”
to eat our bouquets when they arrive line to get the business started,” she So why has Edible Blooms deﬁed the
because they are made from edible recalled. gloomy performance of the retail sector?
chocolate, cookies, fresh fruit – we even “Everything I worked for went on Baker-Jamieson credits the company’s
do champagne for the girls and beers the line to start Edible Blooms, and strong bricks and mortar infrastructure
for the guys to make a unique gift,” she we’re still self-funded today. A lot of supporting the ecommerce elements of
explained. businesses that grow quickly like ours the business.
“It’s a change from the traditional aren’t like that – they have to have some “More than 70% of sales comes
ﬂowers or hamper gifts. I started the form of loans or ﬁnance behind them. I through our online channel,” she said.
business in Brisbane six years ago with have had to run the business on a really “The actual stores are almost like
nine fresh-fruit bouquets. The business tight budget, and it took me a while to production centres. They are all on city
started quite small, but now those nine draw a proper salary out of the business, fringe locations – in Sydney we are in
bouquets have grown into a range of as it does for most people who start up Surrey Hills and in Melbourne we are
more than 100 things to choose from.” a new venture. in Port Melbourne – which allows us
Baker-Jamieson said the concept “Because I self-funded to start with I to do quick turnarounds. If someone
for the company came from a range of juggled two jobs for the ﬁrst eight months. remembers it is mum’s birthday on the
sources – her love of cooking and eating I juggled 30 hours of consultancy day of her actual birthday then they
combined with a passion for sending for a large law ﬁrm with running the can ring us up and so long as it is in
ﬂowers. business. By the time I had quit my day a metropolitan area we can get it there
job I already had three stores up and that day.
running around the country. “We have set up as an online
“It was a pretty intense period. The company with the bricks and mortar
By the time I had quit my following full ﬁnancial year we hit a infrastructure to offer great customer
day job I already had three million dollars in sales, so it was off to service. A lot of online companies are
a strong start and it has continued to easy to order from, but it might take a
stores up and running grow. Growth rate has averaged 35% week to get there. We have a much more
around the country. year on year for the past three years.” signiﬁcant bricks and mortar set-up
For Baker-Jamieson, the experience behind our ecommerce shopfront.”
of strong growth has created a strong Now that the infrastructure is
learning curve, particularly in time bedded down, Baker-Jamieson is
“It’s hard to get a consistent gift management. looking to expand operations offshore –
offering for ﬂowers because if you are “In those early days I wore a lot of hats, international global economic conditions
ordering from a website you don’t always as most business owners do, but as the permitting, of course.
know what is going to arrive at the other business has grown I have been able to “It’s a really exciting time for our
end,” she said. employ more people to assist with the business, because there are so many
With a background in marketing business and today I don’t work in the opportunities available,” she said.
and business development, Baker- business, I work on it,” she said. “We are just going through the
Jamieson said she had wanted to have After investing in a strong IT system process of setting up our infrastructure
her own business from a very young based on cloud computing, when Wealth and back-end systems to be able to
34 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
handle multiple currencies. We use a
fairly high-end cloud-based system,
which allows me to sit at home and see
minute-to-minute how each geographic
business is doing.
“New Zealand is the ﬁrst country that
will go online. We have been selling in
New Zealand for three years. My ﬁrst
full-time employee was a Kiwi, and three
years ago she went back to Auckland
and set up a store, which has been
doing really well. We will be using that
as a pilot to see how the system copes. If
you have the right systems it gives you
an enormous amount of control.”
But while 2012 has been described
as “a year of international expansion”
for Edible Blooms, Baker-Jamieson is
quick to point out that it won’t go ahead
as planned if global economic conditions
continue to deteriorate.
“We have all the systems ready
to go, but we’re also watching the
developments overseas with a very keen
eye,” she said.
“While we are set up for international
expansion, at the moment it is a matter
of ‘watch this space’ because I don’t
think anyone is silly enough to plough
ahead with an expansion plan without
seeing what happens on a global level.
We are doing it in a careful way, because
you don’t want to jeopardise a successful
Australian business by expanding
internationally at the wrong time.”
In addition to the expansion plans, the
company is also launching new product
ranges, including an eco-friendly line
which will launch in March.
“This is really relevant at the moment,
green gift-giving,” Baker- Jamieson
“One of the things we have been really
passionate about from the beginning is
continuous product development. We something new to send. There are lots “If you are going to go into business, do
have an ofﬁcial product development of new things happening with Edible something you love. It’s going to be hard
pipeline so that we can continuously Blooms, so we’re conﬁdent we are going work but if you love what you do then it
offer customers new ideas. Edible to continue to see growth this year.” won’t seem like hard work. Don’t start a
Blooms was a fresh concept when it And her advice for others starting widget factory if you are not happy with
launched, but you have to keep giving their own entrepreneurial venture? the widget you are producing – you’ll
customers fresh offers to keep them Take a break. ﬁnd that whole process very difﬁcult to
excited about your company. “Have a holiday before you start, get excited about. We spend too much
“We have a new range launching because you’ll be working really hard time at work to do something we don’t
early in 2012, which gives customers for the ﬁrst few years,” she said. enjoy.”
WEALTHCREATOR.COM.AU MARCH /APRIL 2012 35
Most people dream of starting one great company, but
for Mario Salvo doing it the second time around has
been double the fun
For years, the name Mario Salvo back or spoken to anybody. It’s just a
was associated with the car rental chapter that has now closed.”
business. So what do you do with yourself
Building on his mechanic after you sell out of a multi-million
background, Salvo created a car company? For Salvo, who took
dealership with his brother which a small team with him, it was a
he ran for a decade before the matter of looking around for new
opportunity to purchase the ﬂedgling opportunities.
Delta rental business came up. “I had a site on the corner
At that point, the business had 200 of Clarendon Street in South
‘bombs’ and revenue of $1.2 million, Melbourne,” he said.
but Salvo saw an opportunity and “I bought that in 1992 during the
pounced. He pounced again when recession for peanuts, it was around
Budget Rent a Car collapsed in 1990, $300,000. It was formerly a Europcar
seizing parts of the ﬂeet from the site, a very prominent site.”
liquidators. And he pounced again Not only was the site prominent,
when he took over the Europcar but it was also blessed by a series
franchise in 2000. of unforeseen events. Salvo said he
When he eventually sold the was approached by a developer to
business in 2004 it was the largest purchase the site, which he agreed
privately owned car rental business, to, but then the buyer’s ﬁnance fell
with annual revenue in excess of through and he handed the site back
$120 million. to Salvo – with a permit for a 25-level
“When I did the farewell speech I building now included.
was very emotional and teary saying Several years later the same
goodbye to the staff,” Salvo recalled. process happened again – only this
“It’s emotional because of all the time the buyer altered the permit to
people and remembering the things include more stories before the deal
you have done and created and fell through.
you walk out the door with a little “Now I had a vacant block of land,
piece of paper [a cheque] – it’s not a a permit, and no job. I said ‘How
celebration.” hard could it be?’,” laughed Salvo.
Complicating the decision was “And it hasn’t been hard at all. I
the family that Salvo had working was new to the act of doing it myself.
with him in the business, with two So I got architects to review the
daughters working for the company designs, and worked out the design
AT A GLANCE:
and his son in a part-time position. wasn’t as efﬁcient as it could have
Name: Mario Salvo
“They lived and breathed it and been.”
that was what they were going to do, While working on a design to set chairman Salvo
so they were upset,” Salvo said. the development apart from the pack, Property Group
“I did what was in their best Salvo approached several agents to Advice: Know your
interests, but they weren’t happy. assist with selling the apartments. competitors, then
offer something better
I wasn’t happy either, but I knew I “They looked at it and said it would for the same price or
made the right decision. Two weeks never sell, giving me ridiculous something the same
later I moved on – I have never gone negative feedback. I went to a number for a lower price
36 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
of them – but they were all the same,” them so they have to feel good about
he said. what they purchase and it has to meet
“So I thought bugger it, I will do it the requirements it has been purchased
myself. We set up a display suite and for.
within three months we had sold the lot “We design our products around
– and all at top dollar, around 30-40% affordability and intelligence. We use
more than what they told us would be great architects to engineer the buildings
possible. Obviously we were very excited to be very efﬁcient and look good. And
so we put it out to tender and built it. then you also need to take advantage
Then we looked around and thought, of the economies of scale. In our latest
‘what do we do now?’.”
development we have a concierge, yet
The answer for Salvo was to keep
our body corporate fees are lower than
going, and the Salvo Property Group
anyone else around.”
has certainly continued to do that
And his advice for others starting on
with further developments in South
their entrepreneurial journey? Know
Melbourne and another in Richmond –
the latest with 460 apartments.
“You have to know your product
“You can’t stop, you just have to keep
going,” he said. and know what your strengths and
“There are a lot of risks involved. I weaknesses are,” he said.
made it sound easy, but it’s like making “It’s no use selling steaks for $40
a cake – if you get someone who knows if everyone else is selling the same
what they are doing then it is easy but thing for $30. You need to know what
if you try it yourself and you don’t know your competitors are doing and how it
then it will taste very ordinary. measures up against what you are doing.
“We believe that we know what we are If you want to go to the marketplace you
doing. We believe in not cutting back all either have to do it better for the same
the way to the bone. We want to make price or as good for less.
money, of course, but we want to leave “People often ask me the secret to
behind a fantastic quality building that my success. I tell them it is about
everybody can be proud of. ﬁnding a good balance of brains, balls
“You can’t be in business for too long and determination. Brains means you
if you only get a customer once. You evaluate something, you look at it and
have to be able to get a customer to work it out. You could have all the balls
come back. It costs you so much to get a in the world but you’d be just as good
customer, you want them to come back putting it all on two-up or on black or red
again. In property development, if you on the roulette table without the brains.
can get a customer to walk through and
Once you have worked it out then you
love the quality then they will get more
have to put a sufﬁcient amount of your
comfortable with you, the banks will
capital at risk. Then you have to work
get more comfortable, the builders will
your bloody arse off to make sure that
be more comfortable. Then people will
you work hard to achieve your goals.
buy a second property and a third.”
“It is hard to get ahead if you don’t
Salvo said the key to his success in
have the risk of losing something. I
business was remaining true to the
principle of “ do unto others as you employ a lot of people that are much
would do unto yourself”. more talented than me. But they are
“You don’t want to get ripped off,” he not prepared or able to gamble – so
said. they have to have a job. I’m not saying
“I look at it from the perspective of that’s wrong, you have to put the kids
the customer all the time. When you through school and there are a lot of
are in car sales, car rental, property risks. But for me, I’m conﬁdent in my
development – you have to cater to what ability to deliver. Because hey, if you’re
people can afford. Even if it isn’t a lot not prepared to lose your money, then
of money to you, it is a lot of money to don’t go into business.”
WEALTHCREATOR.COM.AU MARCH /APRIL 2012 37
What is a
Although the phrase is
more often associated
with run-down dumps,
there are some
Properties with proﬁt
When undertaking a renovation
totally transformed taking them
to the next level and unlocking
Roughly speaking there are
project, obviously what you’re four types of properties that tend
properties that earn looking for is potential. Your ﬁrst to attract renovators:
the title of renovator’s consideration is the condition The patch ‘n’ paint is a
delight, as Patrick of the property. Ask yourself are solid property, in good nick
Bright explains. you searching for something a structurally but the décor is tired
bit rundown, or a property that and/or dated. It needs fresh paint,
requires a serious amount of carpet, ﬁttings and ﬁ xtures, and
work? the garden needs tidying up.
You must also consider the The ﬁ xer-upper is usually older
You want to make sure that you needs and wants of the local and rougher than the patch ‘n’
end up with a solid return on market, and whether the property paint. The décor needs updating,
investment if you’re embarking on could meet them with the optimal but it also needs a kitchen and
a renovation project this year. So, value-adding improvements. bathroom makeover.
how do you select an appropriate Finally, you need to consider The problem child has
project when properties that how far you can take the property structural issues. It might have
just require paint and carpet as you don’t want to over or cracks in the walls or need a
through to those that need serious under-capitalise. Some properties new roof. Perhaps the wiring or
structural work are advertised as a just need a facelift to gain a tidy plumbing is shot and needs to
‘renovator’s delight’? proﬁt. Other properties can be be replaced. These defects can
38 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
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be expensive to ﬁ x but don’t as the location and aspect, etc. –
necessary add any value. are ﬁ xed. You can do a ﬁrst-class
The knock-down requires renovation, but if the property
a top to bottom restoration or backs onto a rail line you’ll have
demolition. These properties trouble renting and selling it.
often catch the eye of developers, That’s why property selection is
especially if they’re in a great so critical.
location, on a large block or have If you follow the above steps the
fantastic views. experience should be a renovator’s
delight, instead of a renovator’s
nightmare as many renovations
projects turn out to be. As I always
You want to spend say, you can always improve a
your renovation budget property, but you can’t improve
its location so select not only the
on improvements that property but the location wisely.
tenants and buyers can This is an edited extract from
see because that’s how Patrick Bright’s latest book ‘The
Insider’s Guide to Renovating
you add value. If you intend to hold the for Proﬁt’ available from
renovated property then you need epspropertysearch.com.au or any
to research your target tenants good book store.
The amount of renovation work for the suburb. When you match
you should attempt depends on a property to the target tenants
your knowledge, skills, experience you’re less likely to have vacancies
and contacts. In general I would or need to discount the rent to get
avoid the problem child properties someone in.
that need structural work. You Talk to property managers and
want to spend your renovation ﬁnd out what type of properties
budget on improvements that are most sought after in the
tenants and buyers can see suburb. Tell them you’re looking
because that’s how you add value. at buying an investment property
Spending money on ﬁ xing defects in the area, and ask them what
that nobody can see doesn’t tenants prefer. What sort of
add value, but eats into your property is in short supply? What
renovation budget and proﬁts. rents the quickest?
In this suburb do tenants
Meeting market prefer houses or apartments?
demand Do they want one, two, three or
more bedrooms? Do they require
I believe renovating for proﬁt is a parking or not? You need to know
people business, not a property these facts before you can make
business. That’s because the an informed decision on what to
tenants or buyers of your buy.
renovated property are the source If you intend to sell the property
of the money – from either the once you’ve renovated it, the
rent you receive for the renovated same principle applies but now
property or the proﬁt you make you must consider the wants
when you sell it. and needs of buyers rather than
So to maximise your return tenants. While there are a lot of
you must create a property that similarities there are differences
tenants want to rent and buyers you should cater for.
want to buy. That’s the golden Some features of the property
rule of renovating if you want to you can improve to meet market
make a proﬁt. demand, but some features – such
40 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
Steven Dooley examines the market for exotic investments
Ever watched Antiques Roadshow and But some investors look even more that conﬁrms storage. If you own exotic
dreamed of striking it rich? Of course left-of-centre, and buy assets including investments such as art in your super
you have. But how do you do it? rare boats, classic cars or even fund, and have them hanging in your
One the one hand, investing in exotics memberships to elite sporting or social house, there’s no need to panic. There
can be one of the most enjoyable ways clubs. And don’t forget thoroughbred is a ﬁve-year transition period for you
of investing. If it is an area in which horses, an asset class in which you can to ensure your SMSF meets its legal
you have an abiding interest, then you quite literally ‘hit the jackpot’. obligations.
can ﬁnd your time spent researching One thing to be aware of: don’t bother
through art galleries and wineries are with the sporting memorabilia that is Neither ﬁsh nor fowl
some of the best moments of your life. offered on the TV during the footy or the
Especially if you have someone to share cricket. There’s a legion of disappointed While exotic investments offer some
it with. At the very least, it certainly sporting fans that discover that their great beneﬁts, there are some serious
puts time spent sifting through the $3000 signed cricket bat is one of 1000 drawbacks when it comes to this asset
share pages of the Australian Financial and unlikely to return even a percentage class.
Review to shame. of the outlay, let along providing a juicy First, unlike traditional investments,
Secondly, many investors have proﬁt. exotic investments tend not to pay
used Self Managed Superannuation Some experts will say that investing income such as dividends.
Funds (SMSF) as vehicles to pursue in gold, oil and other commodities For many experts, the major
their interests in exotic investments. might also be classiﬁed as exotic component of any investment is the
However, since the release of the Federal investments. However, investing in income, so this is the reason why
Government’s Cooper Review in 2010, more speculative companies, or even non-income paying investments are
this area has become more problematic. private equity investments including classiﬁed as “exotic investments”.
A third, more troublesome, means start-up companies, is usually seen as Second, the markets for exotic
of exotic investing is focused mainly traditional investing. investments are nowhere near as liquid
on reducing tax. This can become an as that for traditional markets. If you
obsession and there are numerous A super investment? need to sell urgently, you might ﬁnd
stories of investors that have been left that you need to deeply reduce the price
holding deep losses on schemes centred Until recently, many SMSF investors you are willing to pay.
on olive farms, tree plantations or would look to hold artwork or other Finally, exotic investments are even
ostrich farms. exotic assets in their super fund. This more exposed to the cyclical nature
seemed like the perfect arrangement of markets than more traditional
Good times, great picks – buy great art, hang it in the lounge investments. When times are tough for
room, fund it with your super and enjoy markets, they are especially tough for
There’s a very wide range of investments its beauty. those millionaires that are the lifeblood
that can be included under the heading But the superannuation regime has of the exotic investment market.
of “exotic investments”. You won’t be recently changed. As a result of the If you think it is tough holding
surprised to hear that the most common Cooper Review, introduced in 2010, Australian shares during a bear
exotic investments tend to be artwork, the rules for collectables that are held market, think about the market for art,
antiques, stamps and rare coins. in your super fund have changed wine or jewellery when oil, commodities
However, there is a veritable signiﬁcantly. and ﬁnancial markets are at their lows
smorgasbord of options when it comes As a general rule, if you hold exotic and demand from Russian or Saudi oil
to your investment choices. investments in your super fund, you tycoons, or New York-based hedge fund
So what else can you invest in? Rare are unable to keep them at your house managers, has totally dried up.
archaeological artefacts, ﬁrst editions or at a friend or family member’s house. But if you are choosy about what you
of famous books, celebrity memorabilia Exotic investments need to be stored at buy and sell, and you enjoy the process
and good quality wine or spirits can all a purpose-build storage facility (such as well as the rewards, you could ﬁnd
make you money if you are choosy and as a bank or similar storage group) that it brings you a lot more than just
buy and sell wisely. and there must be clear documentation signiﬁcant cash returns.
WEALTHCREATOR.COM.AU MARCH /APRIL 2012 41
The Asymmetric Trade
of the Decade
The timing may be right for a controversial trade,
argues Trading Pursuits founder Daniel Kertcher
While everyone is still preoccupied
with Europe, I thought now might
be a good time to focus on a longer- “Even if they never got anything for it, it was cheap at that
term investment theme whose price. Without malice aforethought I had given them the best
time has ﬁnally come; shorting
the Japanese Government.
show that was ever staged in their territory since the landing
What do you do when an of the Pilgrims! It was easily worth ﬁfteen million bucks to
investment is no longer attractive watch me put the thing over.”- Charles Ponzi
on its own merits? Simple answer,
you start to market it more
aggressively. Japanese government
debt no longer offers the type of
yields that would attract any in taxis recommending the campaign with a sex appeal focus.
risk/reward conscious investor. buying of JGBs. They relied on The ads targeted men, and took the
Yet, Japan has to consistently sell celebrities to make their point. approach that Japanese women
an ever increasing amount of this Actors, famous news anchors, prefer men who own JGBs. Yep,
debt, and to make matters worse, and models have all touted JGBs playboys are boring, bondholders
cannot afford to offer higher over the past decade. are what women want.
returns. So what to do? But eventually celebrities don’t Yet, at some point even all
Hire a good ad agency. do the trick. You need to get these ads are not enough to sell
Over the past few years Japan more creative. Last year Japan’s something that offers virtually
turned to running advertisements Ministry of Finance rolled out a no return. You need to get more
42 JANUARY/FEBRUARY 2012 WEALTHCREATOR.COM.AU
creative. So, lately Japan’s revenue would barely cover debt would work. See, Japan dumping
Ministry has turned to gold to service and borrowing needs treasuries would strengthen the
help move JGBs. Yes, gold. Buy would increase. yen, which would then reduce
$100,000 or more in JGBs and Now where is all this money the value of remaining dollar
you get a commemorative gold going? Can’t they drastically cut assets in Japan’s portfolio. The
coin. Well, to be clear you get the spending? Given 57% of Japan’s value of their treasuries if they
coin only if you hold the bond for budgeted revenue is being spent were to try to exit would be lower
three years, but you get the point. on social security, and the country than the current exchange rate
And just to make you feel better, has the fastest aging population value because the yen would
elected ofﬁcials are buying. Oh, on the planet that leaves little start to signiﬁcantly appreciate.
and if this isn’t enough, I forgot wiggle room for austerity. But knowing the Japanese, they
to throw in that you will get a But why would Japan need would never let this happen.
thank-you letter from the ﬁnance to worry about bond vigilantes If the yen was to appreciate
minister. and austerity, isn’t their debt signiﬁcantly from here it would
For those of you not familiar almost 95% internally owned? cause a major problem for their
with the matter, you may be Yes, Japan’s debt is almost all export-driven economy, and
wondering why is the Ministry of held domestically, mostly by the would thus just exacerbate the
Finance so desperate to market pension funds. Up until now that situation.
JGBs. Well, let’s look at some has worked great, but because of So, what to do? Well, the
numbers. Last year the Japanese Japan’s ageing population these Japanese have to know this day
Government generated just under funds have become net-sellers of is coming, and I am sure while
50 trillion yen in actual revenue. debt and no longer net buyers. the Europe saga has unfolded
At the same time they paid a little That means Japan will need to they have been doing even more
over 20 trillion yen in interest ﬁnd external investors to plug the contingency planning. My view
on outstanding debt. That’s 40% hole. is that there is no way around
of non-debt issuance revenue But Japan is a creditor nation this problem that doesn’t involve
going to debt service with rates with plenty of foreign reserves, significantly depreciating the
where they are at today. Now, they can manage, right? Japan yen. The BOJ is already holding
last year Japan’s government does have over $1.2 trillion in 10% of JGBs and my guess is
spent more than 90 trillion yen foreign reserves, of which more that number will only go up.
on expenditures. So, they needed than $900 billion is sitting in US Short yen going forward makes
to borrow another 40 trillion plus Treasuries. the most sense to me. You can
yen to cover the shortfall. Could they dump these do this by buying out of the
As you can see this math does treasuries if need be, to plug money put options on the yen.
not add up. If rates were to rise some of the hole? In theory You can also short JGBs at
to more than 2%, Japan’s current yes, but in practice I doubt this these levels.
WEALTHCREATOR.COM.AU JANUARY/FEBRUARY 2012 43
In 2011 the housing market was spooked, but how
long it takes to get over its jitters remains to be seen
as focus shifts to Brisbane and Perth
After a year of sliding sideways “Values were down 4% over the
and down real estate investors year to October across the combined
may still have to wait for the capital cities, the number of homes
housing market to recover, with available for sale is close to record
many analysts predicting a slow levels and transaction volumes are
recovery to the end of 2012. running well below the historic
Data from RP Data-Rismark average,” he said.
Home Value Index showed capital Real Estate Institute of Australia
cities home values declined by president Pamela Bennett agreed
0.5% (seasonally adjusted) for the there was a general softening
December quarter last year, with across the market, with the
values dropping around 3.5% in exception of the outer suburbs of
capital cities for the year and 3% Hobart and the Palmerston region
in regional areas. of Darwin.
RP Data director of research “That last quarter still reﬂects a
Tim Lawless said the year was lack of conﬁdence out there in the
one of the weakest on records. market,” she said.
Outlook units). Has it hit rock bottom and to soften in 2012. Volumes in
is now starting to rebound? September last year were 18%
below the ﬁve-year average.
Sydney: One of the best to take Adelaide: Should hold steady this
advantage of conditions in 2012. year, perhaps with a slight drop. Darwin: After a decade of strong
Undersupply remains a factor Still the most affordable mainland performance, Darwin is expected
and rents increased 5.4% for capital city, but rents were ﬂat at to move sideways in 2012, unless
houses and 6.4% for units in 0.3% growth in houses and 0.1% rents start to grow substantially,
2011. growth in units in 2011. in which case buyers may be
attracted back to the market.
Melbourne: Likely to have a weak Perth: After a bumper run pre-GFC,
year in 2012, perhaps ﬁnishing Perth has been underperforming Canberra: After a strong 2011,
lower again. Although rent for for ﬁve years now. The value gap is Canberra remains the country’s
houses increased 6.2% for the widened compared with Melbourne second most expensive capital
year, rent for units was ﬂat at and Sydney and rent is surging (as city. With low unemployment,
0.7% growth. much as 13.1% for houses). There a tight rental market and high
is a potential for recovery after wages it should continue to
Brisbane: May have turned the long-term underperformance. perform well in 2012.
corner after the worst year of
any capital city in 2011 (down Hobart: With weak rental demand
8.8% for houses and 2.4% for in 2011, Hobart is expected Source: RP Data
44 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
on and even though the effect values decline by 7.7% from the
may not be to the degree that will market peak and Brisbane has
effect household buyers generally, returned a lower 9.5% fall from
there will be hesitation. the market peak.”
“As soon as people think While the best buying
there may be change or there opportunities have been
is uncertainty over the current highlighted as being detached
or future governments, they houses within 10km of the CBD,
wait. A certain percentage of the Lawless said those seeking
population will wait until that immediate capital gains should
uncertainty is resolved, and look to the resource driven
you need those people at the regional markets.
margins. “The coal ﬁelds and natural
“This year will be a measured gas projects around Queensland’s
improvement, which reﬂects that Bowen Basin, Surat Basin and
people are still generally cautious, Galilee Basin are prime examples
but in 2011 we did hit the bottom of markets where demand for
and from there it will be a gradual labour and housing is likely to
improvement.” drive property prices upwards,”
Lawless agreed with the modest he said.
forecast. “The major service centres
“While there should be some around these regions such as
improvement in market conditions Mackay and Gladstone are likely to
over 2012 we don’t expect capital see an a further uplift in investor
gains to improve dramatically; demand as rents continue to rise
a macro-level performance in and capital gains outperform the
line with growth in disposable broader market.
incomes is probably the best-case “In New South Wales a similar
scenario,” he said. example may be seen in Newcastle,
“Of course there are always which acts as the major service
areas that show a better result centre for the Hunter and Upper
than others. The weaker Hunter coal ﬁelds and natural
“Even though we have had two performing capital cities (Perth gas projects. In fact, the Port of
interest rate cuts together, I don’t and Brisbane) over the past ﬁve Newcastle is the world’s largest
think that quarter has shown the years may be the ones to watch coal-handling facility.
effects of that.” over the coming year. This is “Of course, investing on the
Both expect to see modest partly because these two cities are back of commodity markets can
improvement this year. further into their correction cycle, be a risky move. A downturn in
“I read the market as a very but also the market fundamentals coal or gas prices could affect
measured improvement – I think are showing some green shoots. labour demand and consequently
it will take until the second half Perth, for example, has seen home housing prices.”
of 2012 [before we see further
improvement],” Bennett said.
“Householders, whether they A tale of two cities
are buying houses or not, are
being very careful in their buying Affordable suburbs within 10km of the CBD
decisions and I think that will be
the trend in 2012.”
Buyers’ conﬁdence was spooked Osborne Park $355,000 Keperra $413,000
by reports of Europe’s economic
Queens Park $393,000 Salisbury $441,000
woes and other meltdowns on the
global stage, she said. Tuart Hill $411,000 Chermside $446,000
“Even though we are ﬁnancially Westminster $414,000 Murarrie $448,000
stable compared with other
Ashﬁeld $419,000 Chermside West $449,000
countries, there will be some ﬂow
WEALTHCREATOR.COM.AU MARCH /APRIL 2012 45
SNAPSHOT Managed Funds // Morningstar Funds Focus
TOP FIVE STOCKS -
MORNINGSTAR FUNDS FOCUS – BT ASIAN SHARE BT ASIAN SHARE
WHAT IT INVESTS IN HOW IT’S PERFORMED
Data at 31-Aug-11
BT Asian Share offers investors a solid BT Asian Share now has a 5.12
route into the region. Investment manager ﬁve-year track record under 4.69
MFS invests in what it considers high- MFS’ management. After an
quality companies with above-average inauspicious start, particularly 4
growth and reasonable valuations. in 2007 when it lagged the 3.34
Analysts assess factors including the index materially, the strategy 3
quality of a company’s products and has come back to deliver index-
and peer-beating results. It 2
services, management quality, ﬁnancial
has tended to outperform in
strength, and the regulatory environment.
falling markets such as 2008 1
The reasonably stable and experienced
and the majority of 2011. Stock
team coupled with a high-conviction
selection has been the key
approach are positive factors. Team
driver of returns. MFS’ most China Unicom Samsung Taiwan Sands AIA
members are not afraid to back their
(Hong Kong) Electronics Semiconductor China Group
successful stockpicks over Manufacturing
ideas with high-conviction positions, the past three years included STOCK NAME % OF PORTFOLIO
although this adds stock-speciﬁc risk. Hengan International, LS China Unicom (Hong Kong) 5.87
However, portfolio turnover is relatively Industrial Systems, and LG
Samsung Electronics 5.12
high, ranging from 77.0 - 90.0 percent per Chem. Satyam Computer
annum. BT Asian Share has the potential Services (the subject of a major
to continue to deliver, and this is by no accounting fraud), China
means an unwise choice, although we’re Unicom Hong Kong, and Acer Sands China 4.69
not convinced it’s the ﬁnished article yet. were the greatest detractors. AIA Group 3.34
TOP FIVE RETAIL AUSTRALIAN SHARE FUNDS RANKED BY THREE-YEAR PERFORMANCE
Fund Name Status Start Date Min. Inv. $ Size $m Return 1 yr % Return 3 yr %pa Return 5 yr %pa Fee %pa Star Rating
Clime Australian Value O 25-Aug-06 10,000.00 15.20 2.88 19.46 5.84 1.31
Perpetual WFIA Perpetual Ethical SRI O 10-Nov-08 2,000.00 2.98 -1.99 17.77 NAv 2.25
Perpetual WFIF Perpetual Ethical SRI O 29-Oct-03 2,000.00 8.58 -1.99 17.41 0.79 2.25
Greencape Wholesale Broadcap O 11-Sep-06 10,000.00 44.60 -4.21 12.93 3.17 1.50
Macquarie High Conviction Incentives O 16-Feb-07 20,000.00 2.18 -8.33 12.64 NAv 1.58
BOTTOM FIVE RETAIL AUSTRALIAN SHARE FUNDS RANKED BY THREE-YEAR PERFORMANCE
Fund Name Status Start Date Min. Inv. $ Size $m Return 1 yr % Return 3 yr %pa Return 5 yr %pa Fee %pa Star Rating
EQT SGH Absolute Return O 12-Oct-01 5,000.00 2.34 -17.44 -9.63 -10.41 2.02
Naos Long Short Equity O 24-Jan-05 25,000.00 3.22 -33.75 -2.85 -5.93 1.18
Navra Blue Chip Aus Share Retail O 28-Apr-03 1,000.00 16.22 -5.47 0.87 -3.47 1.78
Advance Concentrated Aus Shares C 01-Sep-05 1,500.00 1.61 -12.38 1.38 -6.37 1.99
Mercer Australian Shares O 30-Nov-04 100,000.00 337.70 -9.12 1.97 -4.25 0.90
TOP FIVE RETAIL INTERNATIONAL SHARE FUNDS RANKED BY THREE-YEAR PERFORMANCE
Fund Name Status Start Date Min. Inv. $ Size $m Return 1 yr % Return 3 yr %pa Return 5 yr %pa Fee %pa Star Rating
Macquarie Sharemarket Fund - Int'l Share O 23-Mar-94 5,000.00 10.19 0.06 15.82 3.72 2.03
Platinum International Brands O 18-May-00 20,000.00 628.88 -6.27 14.20 4.45 1.54
Peters MacGregor Global O 12-Jul-04 10,000.00 61.61 -0.97 13.28 1.34 1.67
Platinum Unhedged O 05-Mar-07 20,000.00 156.13 -10.02 9.22 NAv 1.54
Alpha Global Opportunities O 02-Apr-07 25,000.00 48.98 -2.51 5.77 NAv 1.32
BOTTOM FIVE RETAIL INTERNATIONAL SHARE FUNDS RANKED BY THREE-YEAR PERFORMANCE
Fund Name Status Start Date Min. Inv. $ Size $m Return 1 yr % Return 3 yr %pa Return 5 yr %pa Fee %pa Star Rating
Australian Ethical International Equity O 13-Jun-07 20,000.00 5.44 -21.53 -9.80 NAv 1.52
ANZ OA Inv Pfolio-AXA Glo Eq Val NEF O 31-May-03 1,000.00 8.49 -16.47 -8.98 -15.62 2.89
OnePath OA IP-AXA Gl Bal Eq Val NE O 19-Aug-02 1,000.00 2.51 -16.46 -8.96 -15.57 2.89
Perpetual WFIF AXA Global Eq Value O 29-Oct-03 2,000.00 5.42 -14.78 -8.85 -14.83 2.15
Access AXA Global Equity Value O 01-Aug-05 3,000.00 2.89 -14.66 -8.77 -14.83 2.20
46 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU Performance data to 30-Nov-11
Volatility and massive liquidit i currenc markets mean there are opportunities to make
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A TOAST TO YOUR
Creating and running a successful business means nothing if you don’t step back to enjoy
it with your co-workers and loved ones. Here is a quick guide to the perfect drink (with
thanks to thebar.com for the recipes) for those major business milestones…
GETTING THE Mojito:
BUSINESS STARTED 45ml spiced rum
You’ve had a good idea for a 12 mint leaves
business, and more importantly 1 teaspoon sugar
you have actually taken steps to 15ml lime juice
get it started. This needs a drink 60ml soda water for
to celebrate, right? Absolutely. But Combine mint, crushed ice, rum, margaritas,
unfortunately for you it’s going to be sugar, and lime juice in glass. from different
something non-alcoholic, like the Muddle. Top up with soda water fruits infusions
freshness of an Iced Green Mint Tea, and garnish with extra mint leaves. to presentation
because you need a totally clear As an alternative, add whole lime methods. Feel free
head for the challenges ahead. cut into quarters instead of to experiment but don’t
lime juice. mess with the basics:
Iced Green Mint Tea:
use high quality tequila and
90ml sugar syrup
1l fresh brewed green tea
DEALING WITH always serve in a rimmed
3 mint leaves
First things ﬁrst. By all means, pop
Combine ingredients in a jug
and chill in the fridge until cold.
a cork on a bottle of champagne. DEALING WITH
Serve quickly and get back
Yes, it may be traditional and clichéd, SETBACKS
but sometimes such traditions are Your ofﬁce ﬂoods on deadline day.
to work… born from the fact that they simply Your best salesperson leaves in the
make sense. If, however, you want middle of a deal. Your photocopier
HAPPY HOUR to take your celebration of success explodes while you are putting
Depending on the time of year, and turn it into something more party together presentation packs.
celebrating a hard week of work like, then start making Margaritas. Setbacks are a normal part of every
with a shared drink needs a different And we’re not talking about the business, but the important thing is
focus. In the winter, for example, a colourful creations found in Mexican to quickly clear your head and get
heart-warming mug of Irish Coffee fast food chains, we’re talking about back in the game. While this drink
is a pleasant way to wind down from a concoction which will have you may have made its name as a drink
the week’s toils while in summer a seeking more success. de rigueur on Sex and the City, its
classic Mojito is sure to have you origins are based in the upscale
refreshed and charging the batteries bars of New York where executives
up for the weekend. quickly closed off on the day’s
15ml orange liqueur
Irish Coffee: 120ml margarita mix
60ml Baileys Original Irish Cream Combine ingredients over ice in Cosmopolitan:
120ml hot coffee shaker and shake well. Pour into 45ml vodka
Put the ingredients in a mug and rimmed glass with a fresh fruit 5ml triple sec
stir then drink. One of the easier garnish – most citrus fruits work 30ml cranberry
ones. well. There are plenty of options juice
48 MARCH /APRIL 2012 WEALTHCREATOR.COM.AU
While you may hate public speaking, getting up in front of your
Lemon team to give a presentation is a key business skill that needs
twist to be mastered.
Pour vodka, triple But you don’t necessarily need to rush out and buy a copy
sec and cranberry of Powerpoint just yet – a short, well-delivered toast could
juice over ice in a shaker. provide the same level of public engagement in just a fraction
Mix well then pour into of the time.
glass, ﬁnishing with a twist of Toasts can be used for almost any occasion, for celebrating
lemon. the end of a trying quarter to welcoming the newest member
of the team.
THE RETIREMENT So what is the secret to giving a good toast?
PARTY Firstly, remember to make eye contact. The point of the
Whether it is the old guy in accounts
toast is to deliver a shared message to the group, so ensure
or the managing director who’s pulling
you have everyone’s attention and engagement by looking into
up stumps, getting to the end of your
their eyes. It doesn’t have to be a long stare, mind you, just
professional life is something to be
enough to show that you care.
celebrated with something a little bit
Second, don’t overthink it. You won’t need an A4 sheet of
classy, and a little bit reﬁned. Meet
notes or presentation slides or a laser pointer – well, you can
the Citrus Sunset, a classy mix of
keep the laser pointer if you like – but the key here is to be
classic summer ﬂavours with a hint
spontaneous and genuine. This means using no notes and
speaking from the heart. If the thought of speaking without
Citrus Sunset: notes terriﬁes you, consider this – the whole point of the toast
30ml citrus ﬂavoured vodka is to deliver one message. That’s all you have to remember.
15ml coconut rum Thirdly, speed is the essence here. You’re trying to get
60ml cranberry juice across a simple message, so limit yourself to one story, or
60ml pineapple juice one feeling. For example, if we are toasting David in sales for
1 lime wedge his successful up-selling of a key client we simply need to
Fill a tall glass with ice. Add mention how he clinched the deal and why he is appreciated
ingredients, stir for it.
well and garnish
Finally, raise your glass and drink in their honour. That’s it –
message delivered and, no doubt, received.
WEALTHCREATOR.COM.AU MARCH /APRIL 2012 49
SET UP LOG ON,
YOUR CASH IN
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