As I cross industries to learn and engage with business owners, I find that there are 5 key learnings that are relevant across all sectors.
While funding new equipment is the key driver, uncovering the “why” is fundamental to understanding the business and to being a true business partner.
Learning 1 – the decision to spend $$$ on new equipment comes down to increased revenue or increased margins
Learning 2 – where the key driver is increased revenue, it is often increased units produced per hour due to efficiency and speed, thanks to enhanced technology, which reduces the input of hands on labour. For example: number of beef carcasses per day, number of meals delivered by AGV’s (Automated Guided Vehicles) for hospitals, or number trays sealed for cheese
Learning 3 – increased margins can be measured by less expenses to produce the same unit, or greater value produced in the same unit, to charge an increased price. Often this is reduced labour or redeployed labour to spread the cost base (especially in Australia) or the value chain is increased to charge a greater price. For example, AGV’s in beef processing plants, reduce labour, create efficiency and streamlines the packing process. Labour can be reallocated (without reducing head count) to increase margin. At the same time, beef processors can produce ready made products for retail consumption I.e. Roast Beef and Pork at Cols and Woolies hot to eat.
Learning 4 – Energy and labour costs are the two key talking points across industries due to the impact on margins and the frustration of managing staff.
Every client that I engage with has the same challenges in these areas and while the impact may vary, often the decision for new equipment or technology is driven across these areas i.e. co-gen plants for beef, poultry, sugar mills, as well as PV solar and bulk energy storage for cheese, hospitals, schools and manufacturing.
Learning 5 – by drilling into the problems with new technology, you often find shared learnings across unlikely businesses that when identified, can provide significant benefits I.e. AGV’s for beef processing and hospitals have the same issue, they both make grooves in concrete floors that over time create problems for automation and longevity.
As a laymen within their industry, asking the stupid questions in a professional manner is the key to engaging with a client long term to understand the industry, understand the drivers and therefore paint the right picture to our funders.
Author – Matt Corkin Head of Broker Atlas EF