Welcome to 2022 - Executive Chairman's Message

Happy New Year and may it be a successful 2022.

We wait in anticipation on how COVID-variants throughout the year impact people movements, spending habits and the workforce of small-to-medium sized businesses.

However, there is a greater sense of optimism that this year will see the cemented shift to the ‘new normal’, which features a combination of the “business as usual” routine we knew from beforehand and the ‘best bits’ from what we have learned from throughout the last two years. But it will also present the ability for continued innovation and opportunity.

While last year was deemed a more ‘normalised’ year for business, it still had its own challenges in how we managed our teams and resources as we adapted to different ways to combat the pandemic. As such, I believe we, as a business community, are now even better prepared for what this year may hold, especially in continuing remote working and how our teams interact in these circumstances.

In anticipation for the year ahead, I wanted to take a moment to put together my thoughts on the business landscape for the next 12 months and a few remarks that I hope hold you in good stead throughout 2022 as we continue our journey together.

What trends we are reviewing in 2022

Will the office come back? Seems to be a hybrid model, rather than all back in the office or working every day from home.

A major consideration for businesses is how they continue their evolution and development whilst maintaining its culture for existing team members and new additions.

For workplaces, like hybrid working, there will be greater confidence in remote hiring and virtual on-boarding as businesses look to attract new talent into their organisation. A larger emphasis will be given to a shift in work culture, catering employee experience, and ensuring growth opportunities and renewed focus on ‘hiring for potential’.

Similarly, when safe to do so, we’re hopeful of the return of in-person networking and larger corporate events. It’s not to say that the virtual event won’t go away, but there is greater belief many businesses will offer ‘hybrid’ networking, allowing attendees to attend in-person and online.

Not only does the hybrid working model impact the above, but it is also having an impact in other areas as well, from businesses providing services to office workers, to public transport movements, to greater numbers of people constantly in suburban areas. This tread is still playing out, so 2022 will provide more data and commentary.

Supply chain issues and inflation are causing concern among many commentators and business leaders. Not just in Australia but across the globe. Strategies to combat are difficult. The big decisions are whether inflation is transitory and whether the increased costs can be passed onto consumers in the form of higher prices? Higher prices – does this not make transitory inflation more permanent anyway?

Businesses need to understand their customers and their propensity to pay higher prices for goods or services. Businesses cannot absorb input cost prices forever otherwise they will not be in business.

Interest rates will rise as a response to the current environment. In the US as well as other countries like Australia. Some central banks around the world have already commenced raising interest rates. The US may commence this process as early as March 2022 and then continue with further interest rate rises throughout calendar 2022. This course of action may not be the strategy or timeline that Australia’s Reserve Bank will follow, but businesses, consumers and investors need to consider what impact this will have on their strategies and objectives for this year and beyond.

With supply chain issues, cost increases and potential interest rate rises how will all these elements impact the current bull market in the property sector? Renovations and new builds are more expensive than they were in recent years and project timeframes are blowing out. The phrase “profitless boom” has even been banded around in the Building & Construction industries.

How will interest rate rises impact cap rate calculations (discount rate) which assist in the valuation of property assets for commercial, industrial and retail buildings?

Rising interest rates impact bond yield/pricing which impacts pricing of company shares on the share-market.

No asset class will be immune from interest rate rises, so keep in touch with your advisor/s to make sure decisions are made proactively.

The calendar year will continue to see more discussion around ESG, EVs, the supply of food and water, green technology, and green and blue hydrogen. Even nuclear power has snuck back into the energy debate. Energy costs impact households and businesses, so an efficient supply of energy and a cost-effective supply is essential for the growth of the economy and for controlling inflation.

Likewise, this calendar year will also see increased commentary on Cyptocurrency as there continues to be a global adoption of “cryptoassets” and a more ‘mainstream’ view given to the platform.

When discussing the Management Rights industry, sentiment remains that the industry will host several similar trends to 2021, with transactions moving slowly and subject to drawn-out bank processing.

However, this year should see an increased interest in short-term complexes because of the very recent domestic border reopening – but this will be dictated by tourist movement. There is likely to be a rise in ‘short-term accommodation’ sales, however a five-to-six month grace period should be expected before this occurs, as existing owners look to review more accurate data and develop an indication of their selling price.

As many permanent MLRs look to purchase additional complexes into their existing portfolio and with the expansion of property syndicates, a detailed exit strategy will have an increased value proposition. As an increasingly important trend arising throughout the year, this is something we will discuss in greater detail through an upcoming Insights article specifically for MLR operators.

Being 2022, Australia will have an election in the first half of the year and an early Federal Budget. Historically, things slow down as the Election looms. Look out for what is on offer from both sides.

Throughout the year, we will continue to provide our thoughts and commentary on the above topics, plus other matters important to you as leaders and business owners. We are excited to do so via a combination of preferred content platforms, such as our regular Insights articles, podcast episodes and on-demand resources.

Please keep an eye out as they are released, as they will assist in providing the important information you need to know and business advice to support your journey.

Business Advisory – foreseeable future

Across the foreseeable future, strong leadership & accessibility with team members, suppliers, and stakeholders will be essential in ensuring your business continues to move forward.

It is essential in this regard that you communicate your “why / True North”, what is going on within your business, what the next 90 days are about, or whatever is the current COVID-impact cycle you are working within. This month and the next are always a suitable time to gather your team together and highlight these. In doing so, will help to inform and empower employees to look to achieve these goals.

Listen to those who reach out to you as well or consider who you can approach as a mentor. It does not all have to be about finding solutions, sometimes just listening and being present can have tremendous benefit moving forward.

Make sure balance is kept – whether it is the work/life balance mantra or similar, a lot of people are dealing with things on many different levels. As leaders we need to sometimes suggest to people to “catch their breath”, but leaders also need to follow their own advice and take some downtime.

Importantly, keep in mind that cash-flow budgeting is difficult in the current environment as many plans and strategies are tweaked with each COVID-variant impact. With cash levels – continue to monitor closely. Continue to forward plan as best you can. Control your debtors. Manage suppliers and inventory levels. Supply chain issues will impact to a certain degree for some businesses.

Marketing – still a very important component of a business. Have a strategy and an executable plan whether it is a direct approach, via social media or a combination of the two. You still need to tell the world your story and that you are open for business.

Final Remarks for the Year Ahead

Thankfully, it’s not all doom and gloom. There is a FIFA World Cup, Rugby World Cup, and the Winter Olympics which will keep some entertained. Hopefully live theatre, ballet and music events get to have their time for entertaining the masses as well.

It is also important to look after ourselves. Technology is playing a greater role in our lives, so it is very important to take time away from screens and find a work/life balance to maintain a healthy mind and body.

I read an article over the summer by Claire Coleman titled “38 small things that are better than a new year’s resolution”. One such suggestion was to call, text or email a different family member or friend each day. Something that does not take long but makes a massive difference.

With the current work-from-home recommendations, please keep in contact with your team members regularly, reach out for a chat with a client and just see how they are doing. Drop into your local shops and buy something, we just need to keep the wheels turning.

All in all, it will be a year filled with a lot of noise. Keep focused on your strategy, listen and adjust where appropriate.

Ian Walker

Written by Ian Walker

As Executive Chairman, Ian is a trusted Professional Services practitioner with over 25 years’ experience within the Accounting industry. Working closely with his clients to form long-term partnership, Ian provides high-level strategic advice across all areas of Accounting, Business Advisory, Superannuation, and Taxation. Ian is proud to partner with many SME & Family-owned businesses to provide comprehensive and bespoke strategies to help address the challenges and complexities they encounter through day-to-day operations & management.