How one employer was saved from oblivion

Mark Star was able to provide umbrellas as many cafes and restaurants set up outdoor dining areas. Picture: Gaye Gerard

For two key reasons Australia has achieved the world-beating economic recovery that Josh Frydenberg is now confirming.

We controlled COVID-19 and we “snap froze” our major employers — smaller and medium sized enterprises — via JobKeeper. Most thawed out rapidly and emerged far more vibrant and productive than before COVID-19. And as I pointed out earlier this week, many now want to invest and, as Josh Frydenberg sets out, they will drive employment.

Today I will go behind the economic numbers and illustrate what happened on the ground.

Let me introduce Mark Star – the self-confessed owner of a 2020 snap-frozen “zombie” business. His recovery has not been enjoyed by everyone but it was duplicated on tens of thousands of occasions across the land.

Mark Star owns and operates a business that sells marquees, flags, canvas partitions and awnings around Australia under the Star Outdoor banner. A major part of the business is events.

Last March and April Star Outdoor came to a screaming halt as almost all orders dried up – there were no events. In a letter thanking me for my small business comments, he describes his dire predicament this way: “Last year our business was a ‘zombie’ business – to use your term – as we entered COVID in an already poor position with too much debt and lack of talented staff.

“Reading your articles certainly made our position clear — we were headed for oblivion.”

Mark had a debt of about $350,000 from a very nervous banker, Westpac, which had been funding his trading stock. As COVID struck, his warehouses were crammed and more stock was arriving. There were no buyers. Had that happened at any other time then Mark Star would have been bankrupted because he couldn’t pay staff and the bank would have sold him out.

But Josh Frydenberg’s JobKeeper “snap froze” his business and enabled him to hold his staff together. Mark actually paid them their full salary, obtaining the extra funds by cashing in part of his superannuation and via his wife Helen’s teaching income. She also accessed superannuation to help save the enterprise. The business might have been dormant but they did not just sit around and, like so many other enterprises, they tried to use their skills in other directions. In Star’s case it included meditents for COVID teaching, automated sanitiser stands, first aid tents and “back to business” flags and frames. Star confesses that “all were pretty much failures except for the energy and positive mindset that each opportunity gave my team and me”.

“They gave us the boost and helped us carry on although one employee exited because he couldn’t handle the expectation and pressure followed by the failure.”

A large number of “zombies” tried new things in the pandemic and many succeeded. Whether these new ideas succeeded or failed entrepreneurs thought deeply about how to manage their future operations and they were ready to fly as soon as the economy thawed.

For Mark Star that thawing came via an amazing new market which began to emerge as cafes and restaurants set up outside dining areas. They needed umbrellas, wind barriers and many other Star Outdoor products. And Mark Star had a warehouse jammed to the rafters with stock to supply them. The “thawed out” business that emerged was far more alert to opportunities and how to do things better.

Mark Star says: “Now, as events and sports are returning we are achieving higher sales than 2019 and a lower cost base due to reduced staff (two high-cost staff left before the crisis and have not been replaced) and we negotiated lower rent.”

There are also much lower air travel costs.

And Mark Star will not forget who saved him. “I’ve always been a cynic when it comes to government support but I have to say the JobKeeper and the cash flow boosts were amazing.

“They made all the difference to our business and we were able to receive JobKeeper all the way through to the end of December.

“So for me — well done Josh and ScoMo.”

For countless other small entrepreneurs that have been saved by JobKeeper, Josh and ScoMo are also heroes.

I don’t think the goodwill created by JobKeeper in the small business community is understood in many areas of the population.

Soon the new fast payment rules plus the end to unfair contracts will add further prosperity to the employment generators. Collectively this is probably the biggest boost small enterprises have ever received in Australia.

The role of banks again comes into question. Individual experiences can be isolated and represent an unfair portrayal of what actually happened over the breadth of bank customers. But Westpac was clearly nervous about its relationship with Mark Star’s “zombie company”.

He says: “I would rate our bank, Westpac, two out of ten and that is being generous given the mental strain and financial pressure we have been put through.”

The resurgence of business has boosted cash flow and Star has been able to repay two thirds of the Westpac trade finance.

Early in 2021-22 Mark Star will be able to put together strong cashflow numbers and small debt as a result of his recovery from “zombie” land. He will be one of many businesses next financial year that will be looking to fund their operations with cashflow loans, either from a bank or a non-bank.

The recovery of Mark Star from “zombie” land to prosperity has been duplicated countless times.

As a result Josh Frydenberg is now telling a remarkable Australian growth and employment story.

I don’t believe the current opinion polls reflect the power of this small business community transformation, but that view will be tested when it comes to the 2022 election.