Close Calls: Business Lessons from the Brink

In 2000 the founders of a loss-making DVD-by-mail start-up called Netflix flew to Dallas and, by their own account, offered to sell their company to Blockbuster for a reported US$50 million. Blockbuster said no. This episode follows what happened next: the late fees customers hated, the bold Total Access plan that nearly worked, a boardroom fight, a billion dollars of debt, the 2010 bankruptcy and the one store still trading in Bend, Oregon.

You'll come away understanding why profit that comes from your customers' frustration is fragile, and what Australian Consumer Law expects of any fee you charge; how to look at a small competitor or a cheap offer with fresh eyes instead of laughing it off; why being willing to replace your own best product is a survival skill; how debt quietly takes options off the table just when you need them; why a strategy that lives in one person's head can vanish with them; and how a business at the end of a trend can still find a profitable niche.

A first step: list every fee, penalty or surcharge your business charges, note how much profit each one brings in, and ask how you would replace it if a competitor stopped charging it tomorrow.

Close Calls is brought to you by Kinsoft, managed IT, cyber security and AI for Australian businesses. Visit kinsoft.com.au or call 02 9064 2663.

Sources: CNBC; Fortune; Blockbuster Inc. press releases; NBC News and Associated Press; state attorneys general (Washington, California); ACCC; SmartCompany.

On 27 December 1996, the company that owned Spider-Man, the X-Men and, by its own count, more than 3,500 characters filed for bankruptcy protection. Marvel's sales had doubled in two years, but it was carrying hundreds of millions of US dollars in debt, a speculative collector boom had collapsed, and a string of borrowed-money acquisitions had gone sour. This episode tells how Marvel got there, how it came back, and how it eventually built its own film studio and sold to Disney for about US$4 billion.

You'll come away understanding why sales to retailers aren't the same as sales to customers, how speculative demand can disguise a weak business, why debt secured on a share price or a boom-time valuation is so dangerous, the risk of buying your way into growth with borrowed money, the difference between licensing your best assets and owning the upside, and why Australian directors need to act early when the numbers turn, including the safe harbour and small business restructuring options that ASIC describes.

A good first step: this week, compare what you sold into the market with what your customers actually bought, and list every debt that would fall due if your business had one bad year.

Close Calls is brought to you by Kinsoft, managed IT, cyber security and AI for Australian businesses. Visit kinsoft.com.au or call 02 9064 2663.

Sources: Marvel Entertainment Group and Marvel Enterprises annual reports filed with the US Securities and Exchange Commission; Marvel's 2005 film financing announcement; The Walt Disney Company; Associated Press via Deseret News; Comichron; ASIC.

On Saturday 29 October 2011, Qantas chief executive Alan Joyce grounded the airline's entire mainline fleet in the middle of a long industrial dispute with three unions, stranding tens of thousands of passengers. Within about 48 hours an industrial tribunal had ended the dispute, and the planes were flying again. We walk through what happened, what the tribunal actually found, what it cost, and what owners of much smaller businesses can learn from it.

You'll come away understanding why it pays to put a weekly dollar figure on a long-running problem before you choose a dramatic fix; why a "nuclear option" often hands control to someone else, such as a tribunal, a regulator or a bank; why the people who can help or hurt you deserve warning before the press does; how the small operational details of a crisis, like switching off ticket sales, decide whether it looks planned or chaotic; how timing and fairness shape the way staff and customers read your decisions; and why a backup plan for a supplier you can't do without belongs in every business.

A first step: write down the three suppliers, systems or people your business could not trade without for 48 hours, and what you would do on the day each one disappeared.

Close Calls is brought to you by Kinsoft, managed IT, cyber security and AI for Australian businesses. Visit kinsoft.com.au or call 02 9064 2663.

Sources: Fair Work Australia Full Bench decision [2011] FWAFB 7444; Australian Aviation; The Conversation; Prime Minister of Australia transcripts; Al Jazeera and Reuters; Crikey.

In December 2013 Dick Smith floated on the ASX at about $520 million. Twenty-five months later it was in administration, and by May 2016 all of its stores had closed. This episode follows what the administrators, the receivers and the courts found, and turns it into plain-English lessons for owners of smaller businesses.

You'll come away understanding why profit from supplier rebates is not the same as profit from customers, why stock on the shelf is cash you can't spend, why the rule is to check the cash flow forecast before paying any dividend or drawings, why your bank must always get the full picture, why growth funded by borrowing gets dangerous when like-for-like sales are falling, and what Australian directors must do when the cash gets tight, including insolvent trading, safe harbour and small business restructuring.

A first step: this week, list the three biggest stock lines that haven't sold in 90 days, and run a 13-week cash flow forecast before you next take money out of the business.

Close Calls is brought to you by Kinsoft, managed IT, cyber security and AI for Australian businesses. Visit kinsoft.com.au or call 02 9064 2663.

Sources: High Court of Australia; Supreme Court of New South Wales; ASIC; McGrathNicol administrators' report (via SmartCompany and news.com.au); ABC News; ARN.

In December 1975 a Kodak engineer built the first self-contained digital camera. In January 2012 Kodak filed for bankruptcy protection in New York. This episode traces the 36 years in between: how a company that sold about 90% of the film in America saw the digital shift coming, kept guarding its most profitable product, and ran out of road.

You'll come away understanding why a "cash cow" (a mature product that throws off reliable profit) can quietly become a trap; why an early warning is worthless without a plan and a deadline attached; how to test a threat to your own business with small, cheap experiments; why being first to sell a new product is not the same as making money from it; and how Fujifilm, facing the same collapse in film, used its existing know-how to move into new markets instead.

A first step: write down which single product, service or customer earns most of your profit, then ask what would have to change in the world for that to be worth half as much in five years.

Close Calls is brought to you by Kinsoft, managed IT, cyber security and AI for Australian businesses. Visit kinsoft.com.au or call 02 9064 2663.

Sources: IEEE Spectrum; Eastman Kodak Company investor releases and SEC filings; Rochester Business Journal; Associated Press; Museums Victoria; ASIC.

In 2003 Lego's sales fell 26 per cent and the family-owned toy maker booked a heavy loss; in 2004 the loss doubled. This episode tells how a growth strategy built on theme parks, video games, new toy systems and thousands of extra parts nearly broke the company, and how a 35-year-old former McKinsey consultant, Jørgen Vig Knudstorp, led it back to profit by doing less, not more.

You'll come away understanding why complexity is a hidden cost (Lego had more than 11,000 suppliers and around 100 brick colours), how to find which products and customers actually make you money, why every growth plan needs a funding plan built on a realistic revenue base, when to sell assets you love but don't need, why telling staff and lenders the truth early buys you time, and why it's fine to reverse a decision that isn't working, as Lego did with its outsourcing.

A first step this week: write down your ten best-selling products or services and your ten biggest customers, then work out what each one really earns you after every cost. You may be surprised which ones are carrying the business.

Close Calls is brought to you by Kinsoft, managed IT, cyber security and AI for Australian businesses. Visit kinsoft.com.au or call 02 9064 2663.

Sources: LEGO Group Annual Reports 2003, 2004, 2005, 2006, 2008 and 2025; strategy+business; Knowledge at Wharton; ASIC; European Central Bank.