Eliminating threats and debts

As boss of a family group of small companies, you become the recipient of the minority "good ideas" people and the dumping ground for concerns of the majority of those around you.

As a good leader should, I learnt to discern whether these concerns were, or could be, a threat to the company or indeed the family.

However, many years ago, my instincts were not good enough when my first economic storm arrived. This was the imposition of a "Recession We Had to Have" by the Labor Prime minister Paul Keating, which led to 18% interest rates and 22% overdraft rates.

We were production building a series of small commercial vessels 25-40 metres long and had successfully secured six orders via the Federal Government's Export Finance Program (EFIC), where if an overseas client was approved, the client would pay us the 20% deposit and EFIC would pay the balance on the agreed schedule of progress payments. The six clients were approved.

The contracts were worth $15m in total, and now in our 13^th year, we had a modest asset base of industrial waterfront land, buildings, offices, etc., worth another $12m and a $2m overdraft facility. Despite high overdraft rates being applicable, we raced towards 2^nd stage payments by EFIC.

Mistake number 1, assuming an Australian Government department was efficient.

We kept getting letters from EFIC saying that the paperwork process was slow due to our clients having banks in strange low tax places like Bermuda and the Isle of Man. We passed all vessels stage payment number two with no progress payments from EFIC. Seeing the enormous bills coming in from the Bank for the overdraft every 2 weeks started to concern me, and despite many calls to EFIC I detected that they were not going to perform in the short term.

To try and speed up EFIC, I rang the Minister for Trade, John Button, whom I had helped in a project in Tasmania and "he owed me". He responded later the same day, apologizing for the CEO of the NAB, Nobby Clark, saying it was "wholesale slaughter of middle and small business" and he could not help me in the short term.

Two weeks later, the funeral directors of the banking Industry, "The Receivers", marched in, as we had passed the 24 hours allowed on the Overdraft's Notice of Demand. They took all the keys of the property which included our house, they took over our bank accounts, the cars and laid off the entire staff of 300.

All this because I hadn't recognized the threat emerging in front of me, despite a successful order book, but with time demands and an inept Government bureaucracy. I took little solace in watching other companies fail, due to dealing with EFIC and most others falling over due to the crippling high interest rates, but as Captain of my ship, I was responsible. One friend, Neil, losing his company, suicided leaving his wife and family distraught.

Four weeks down the track and my wife and I were unemployed, in a rental property in a low socio-economic area with a borrowed dual cab ute, four sons at Christian schools, and a big dog that ate more than the four boys. I didn't mind being beaten by competition, but I did object to being beaten by a bank, so we chose the hard path, instead of getting a comfy job within Government.

With the benefit of hindsight, my wife and I working 85 hours a week, we slowly rebuilt the business without any debt or overdraft facility. My overseas trips funded mainly by frequent flyer points, were 2- 6 weeks long, travelling the globe in economy class and low budget accommodation, trudging through remote airports in the dead of night like some modern day version of Monssarat's Master Mariner, Matthew Lawe, whose indestructible soul was driven by guilt, while my driver was the hot sting of poverty on my tail. My wife did the even harder yards at home book-keeping, feeding four boys and the dog. We were stoney broke and it all happened so fast!