All Female Business Very Popular

Shebah Rideshare Pty Ltd broke the Australian record for the largest Crowd Funding Equity Raising deal to date recently. The intermediary company which acted for Shebah, Birchal announced that $3 million was raised from 2,117 investors which tops the previous record of $2.6 million held by digital banking start up Xinja.

Birchal said that, prior to this offering, Shebah had been “dismissed by Australia’s Angel and VC investors”.

95% of the investors were female.

Andrew Geddes, an experienced public company director, Chair and founder of Financial Management Research Centre (FMRC) and consultant was asked “do you think that Shebah’s success will encourage other female entrepreneurs to attempt to raise capital for their companies?”

Geddes answered “Yes I think that Shebah’s success in raising $3 million is an example of a specialist niche – why aren’t more accountancy firms targeting as their preferred customers, businesses controlled by women?”

“This obviously illustrates that women have a need for secure transport for them and their families – why can’t that be extended into trusted advisory industries as well?”

Geddes also indicated that “AICD (Australian Institute of Company Directors) has just announced that the top 300 ASX companies have all achieved their target of 30% of their Board of Directors being female.”

36 companies have now raised $28.9 million by utilising Crowd Sourced Funding Equity Raising.

Andrew Geddes agreed to answer some questions that directly relate to accountant’s services to small and medium-sized enterprises and Crowd Sourced Funding Equity Raising.

Question 1: Traditionally private companies had only section 708 of the Corporations Act or IPO (Initial Public Offer) that they could utilise to raise capital. What do you think of the opportunities for capital raising that are now available for small businesses and medium-sized enterprises with turnovers up to $25 million?

Andrew Geddes’ answer: “Traditionally SMEs could have found support from angel investors, but their investments usually came at quite an expense in terms of equity required and for the fees charged. Smaller companies have had difficulties in obtaining finance.”

“Now we have a process with Crowd Sourced Funding Equity Raising and the appointment of Intermediaries by ASIC.”

“I particularly like the requirement for companies, which wish to raise capital, to have:

• business plans that are well documented
• budgets and cashflow forecasts
• identified a structured business
• identified a senior management team that have been allocated functional responsibilities
• goalsetting has been a priority
• documented their vision, purpose and goals 
• looked at what will happen in their business in the next 3 to 5 years
• documented their strategies
• identified who their ideal customer is
• thought about brand, promises and guarantees
• established how they are going to execute the pattern of meetings and who will be involved
• identified the targets that they are going to set
• utilised the process to plan and document”

“All of this forces directors and senior management of companies, seeking to raise capital, to have identified what they have done about these matters if they are going to be able to raise capital.”

Question 2: As a former top 200 ASX company chair (Greencross Limited) what impact do you expect Crowd Sourced Funding Equity Raising will have on the number of companies seeking to utilise IPOs in the future?

Andrew Geddes’ answer: “It costs about $500,000 minimum but more likely $1 million to do an IPO. There is a heavy emphasis on:

• due diligence
• special accountant's reports
• auditor’s reports
• and there are significant costs each year to remain a listed public company”

“Too many small companies have done IPOs because they didn’t have alternatives to raise capital – but now they do they can utilise Crowd Sourced Funding Equity Raising which is considerably cheaper. This might be a first step – later on, if the company wishes, the company could move into the public environment and they will be better prepared to do that efficiently as they have been through the Crowd Sourced Funding Equity Raising process.”

“I think there will be a lot less IPOs and more companies using Crowd Sourced Funding Equity Raising because of the cost differential and the amount of work that is required to become a public company and then to remain a listed company.”

“Some listed companies have been taken over by private equity and removed from the Stock Exchange. I think there will be more Crowd Sourced Funding Equity Raising companies and a lot more companies will remain private because they are in control and there is a lot less cost and scrutiny from institutional investors, proxy advisors and shareholders. For these reasons I think Crowd Sourced Funding Equity Raising is going to grow.”

Question 3: Recently Shebah Pty Ltd, a company dedicated to operating an “All-Female Rideshare Service”, raised $3 million – do you think that Shebah’s success will encourage other female entrepreneurs to attempt to raise capital for their companies?

Andrew Geddes’ answer: "Yes, I think that Shebah’s success in raising $3 million is an example of a specialist niche – why aren’t more accountancy firms targeting as their preferred customers, businesses controlled by women?”

“This obviously illustrates that women have a need for secure transport for them and their families – why can’t that be extended into trusted advisory industries as well?”

“AICD (Australian Institute of Company Directors” has just announced that the top 300 ASX companies have all achieved their target of 30% of their board of directors being female.”

Question 4: Many company directors and business owners do not have a full understanding of the opportunity that the amendments to the Corporations Act now enable companies to raise up to $5 million in capital in 12 months. Is this an opportunity for accountants/business advisors? Should accountants be claiming this space?

Andrew Geddes’ answer: “Yes – why not – people are talking about compliance work contracting.”

“Traditional accounting work has competition from:

• cloud-based accounting and bookkeeping
• outsourcing to offshore destinations some of the basic processing work
• talk of AI (Artificial Intelligence) being directed towards taking over some of the traditional processing”

“If the traditional work is going to contract and there is price pressure at the moment accountants need to be thinking about doing other things.”

“In the past accountants have been busy with clients who come in every year and, in many cases, quarterly for various compliance work GST, BAS, income tax because this comes around every year.”

“If compliance is contracting there are opportunities for accountants to be better advisors.”

“Education is needed – the ESS BIZTOOLS' newsletters to accountants should be utilised to firstly educate the accounting team and then to mail them to clients to assist in the education process.”

“Education is necessary why not use the material prepared by ESS BIZTOOLS?”

“I’d rather use the material produced by ESS BIZTOOLS then try and write the material myself”

“The second aspect is there is a need for greater experience. Accountants need to think about the skills that are needed to be a “broader advisor.”

“It’s just like setting up a financial services division in your practice – you have to learn about superannuation, self-managed super funds, finance, investments, risk management and insurance. It is a specific area of specialisation.”

“Firms need to develop a skills' matrix – look at your professionals and work them through the material to help them prepare personal development plans and career development plans.”

“The same thing applies in the business advisory areas! The requirements are:

• goal setting
• setting a development direction
• looking at articulating purpose, focus, values
• establishing strategies, execution of the business strategies, pattern of meetings and the rhythm of these things”

“Then I think accountants need to be thinking about the raising of finance to assist with the management of cashflow for their clients' businesses – debtors, inventory, work in progress in particular.”

 “Accountants could play a bigger role in assisting clients to raise capital to fund growth.

“Some small businesses grow so fast that to finance that growth they don’t have sufficient working capital.” 

“They might grow by 10% – but their cash needs might grow by 20%.  If they haven’t got cashflow under control it’s when they get squeezed.” 

“Better cashflow planning allows proactive finance raising planning so Crowd Sourced Funding Equity Raising can assist with this.” 

“What I’m trying to say is that accountants and their small business and medium-sized clients need to be educated about the management of finance and cash particularly as a business grows and “scales up” because you can get into trouble from being too successful – growing too fast and you haven’t got the cash requirements under control.”

“I think it needs education of accountants and their clients need to read some of the ESS BIZTOOLS' stuff and do further learning and utilise some of the management tools that are now available that link into some of the popular accounting products and start preparing, not just a working capital forecast, but a “5 year if we grow forecast” and if we grow at 5%, 10%, 15%, 20% what will our cash requirements be?”

 “Accountants should be using some of the 'what if' tools that are now available.  Accountants need to educate themselves!”

 “Perhaps spend 30% of their time learning new things and experimenting with some of their good friendly clients before they start charging for it.”

If you would like further information on the Crowd Sourced Funding Equity Raising Product Package referred to by Andrew Geddes, please click here.

You are invited to participate in our free webinar “All-Female Business Very Popular” which will incorporate commentary on the success of Shebah’s capital raising, a recorded interview with Andrew Geddes and the thought-provoking comments that Andrew Geddes has made relating to services accountants are providing to clients.  The webinar is on Wednesday 15 May at 12:30pm AEST.  To register to participate in this webinar, please click here.

If you are unable to attend but would like to access the webinar recording, please register and we will send you the webinar link.

If you have any question on any aspect of the services provided by ESS BIZTOOLS, please do not hesitate to contact us.

Have a great day!

Peter Towers