On Your Own

The writer is an entrepreneur who hopes to share his experience and insights with readers who want to take that giant leap into business but are not sure if they should.

6/2019 – Good and bad news about airlines hog the headlines

Over the last two weeks, we have had so much news about airlines. They include the crash of the Ethiopian Airlines’ Boeing 737, Cathay Pacific announcing its results on its latest turnaround plan and Prime Minister Tun Dr Mahathir Mohamad’s announcement on the possible closure of Malaysia Airlines Bhd (MAS).

Cathay Pacific has announced its latest financial results for 2018, with the airline making a profit of 2.1% on a sales revenue of HK$111bil. In only its second year of a three-year turnaround plan, it has reversed its losses incurred in 2017. Net profit margins are thin, though, almost like the hypermarket retail business.

Meanwhile, back home, AirAsia X Bhd has been incurring losses for five consecutive quarters. AirAsia Group Bhd, however, turned in a profit for its full-year 2018 despite incurring a loss in the last quarter of 2018.

The airline business is notoriously tough, with high capital expenditure (capex) , volatile fuel prices and stiff competition driving down ticket prices. Airline operators need to drive down CASK – cost per available seat km – while at the same time driving up RASK –revenue per available seat km. Operating profit can only be achieved if RASK is higher than CASK. Simple as that.

Low-cost carriers (LCCs) like AirAsia survive because they keep CASK down as low as possible by filling up the seats on every flight ( high load factor). That is only possible by selling the seats at prices low enough to attract more passengers to fill up the seats. Even if RASK equals CASK, the airline would still make a profit from ancillary income, through the sale of food, beverages and baggage space.

While LCCs are set up with lean operational costs, full-service carriers (FSCs) have legacy issues of high operational costs built up over the years. FSCs like MAS, Cathay Pacific and Singapore Airlines have a higher CASK and thus a higher RASK, as they have to sell tickets at a higher price due to the full service provided.

MAS has been fully owned by Khazanah Nasional Bhd since December 2004. To understand what Dr Mahathir as chairman of Khazanah has said about the unknown fate of MAS, one must go back to the day when a series of unfortunate events affecting MAS started.

Back in 1994, Dr Mahathir approved the sale of a controlling stake (29%) in MAS to businessman Tan Sri Tajuddin Ramli (Naluri Bhd) at RM8 a share. MAS was reported to have a cash hoard of RM600mil at that time.

hen the Finance Ministry (MoF) bought back the same stake in February 2001, it was reported that MAS had accumulated RM9.4bil in losses.

Despite the huge losses, MoF still paid Naluri RM8 a share. That was the first major bailout of MAS by the government.

The second period of losses for MAS was from 2001 till June 2014 where the accumulated losses came up to RM8.4bil. During the same period, the government and Khazanah extended an additional RM9bil via Penerbangan Malaysia Bhd (PMB), which took over aircraft assets and liabilities, loans, redeemable convertible preference shares, rights issues, sukuk bonds etc. The total funding came up to RM17.4bil.The third episode was from August 2014 to 2018 when Khazanah announced the MAS recovery plan, where subsequently another RM6bil was spent on the airline and lost. From 1994 to 2018, a total of RM32.8bil had been spent on bailing out MAS over 24 years, or an average loss of RM1.38bil a year.

So, should Khazanah divest MAS from its portfolio of investments? Divestment could mean selling MAS, selling PMB with its assets and liabilities or closing down MAS if there are no buyers and selling off its assets and paying off its liabilities. Both exercises could cost Khazanah a few more billion ringgit. The last option is to launch another turnaround plan, pump in another RM6bil and restore national pride that we have kept our national airline flying again. Looking at the burn rate of RM1.38bil a year, this RM6bil might just last another four years and four months. Then what?

Then, there is the sensitive issue of MAS’ 14,000 employees. I am sure the government will be able to find places for these employees, or Khazanah can find them employment in their many GLCs. Just leave the unions behind.

Khazanah should divest because the airline business is not sexy anymore. High capex, low margins and low-cost competitors all around. Investing further would be like good money going after bad.

What price to pay for national pride? RM1.38bil a year can do wonders for our economy. Bringing in tourists is the job of the Tourism Ministry. There are sufficient airlines with spare seating capacity.

The current management team seems to be clueless as to any other turnaround strategies, missing all the conditions set by Khazanah. Khazanah perhaps has set too high a CASK and RASK target for MAS to reach.

MAS has always been subjected to political interference to the point that no capable manager can operate on their own. Old habits die hard.

Dr Mahathir was in some ways responsible for the sale of MAS shares to Naluri. He was the prime minister at that time. His decision led to the series of bad fortune caused by poor management. So, it is his karma that as the chairman of Khazanah, he now has to decide on closing down our once iconic airline.

I hope his decision will be the first of many that will move the government away from managing businesses, as otherwise, we will continue to hear about billions of excuses for mismanagement for the next 44 years.

Published: https://www.thestar.com.my/business/business-news/2019/03/16/good-and-bad-news-about-airlines-hog-the-headlines/

Advertisements

5/2019 – Identify your target-market mix

Last Sunday, I met up with two professors from the Medical Faculty of Universiti Malaya.

These two effervescent ladies want to save the world. Their dream is to eliminate cervical cancer by providing free cervical screening services to Malaysian women, prioritising the under-screened population – the B40 group.

They plan to set up a foundation to raise funds from donors, corporates and individuals. My only advice to them was that it would be difficult to rely only on donations year after year. They would have to identify the different target segments, and charge those that can afford to finance those that are not able to.

They need to understand about different target segments, a logistical model to deliver their services and set up a viable financial model for the foundation.

I agreed to help them with their initial set-up because of their passion for the mission, their holistic values and their contribution to help Malaysian women, irrespective of race and religion.

With limited funding, social enterprises and young entrepreneurs must identify the market segment that they want to serve. Market segments based on demographic criteria like age, gender, income, education, nationality, ethnicity and religion.

Once you have identified your specific target-market mix, you need to devise a practical action plan based on your financial resources and organisational capabilities. I always advise small startups to focus their main competitive advantage on a narrow and specific target market in a small geographical area.

Only when they have been reasonably successful should they expand to another area whose population mirrors their target segment mix.

After building market share in one market, make sure you keep your gains and then only move to another market. This is a simple steady growth strategy, building block by block. You cannot grow your market share by losing what you have gained when you spend all your resources to fight in another market segment.

Always gain, retain, gain in another market, retain and repeat this exercise until you have achieved market leadership.

Even in politics, understanding market segmentation (voters) is crucial in ensuring long-term success for the political parties. The recent Semenyih by-election is an example.

The Pakatan Harapan candidate lost by 1,914 votes to the Barisan Nasional candidate who had the support of PAS voters. The Pakatan leaders blamed the loss on the swing of Malay voters to Barisan/PAS.

In the 14th general election (GE14), Pakatan had 23,428 votes whereas in the recent by-election, its votes went down to 17,866, a shortfall of 5,562 votes. Barisan/PAS, meanwhile, saw their combined votes going down from 21,430 in GE14 to 19,780 votes, a shortfall of 1,650 votes.

The total registered voters in Semenyih was 54,503, with Malays making up 67.7% of the voters, Chinese 16,7%, Indians 13.7% and others, 1.9%. The total non-Malay voters was 17,604.

The voter turnout was 73.3 % (39,218) in the by-election versus 87.4% (46,572) in GE14, which is a shortfall of 7,354 voters. It was reported that the Malay voters turned out in high numbers, as they were more motivated to vote. So, the shortfall in voters in the by-election was mostly due to the non-Malay voters staying away.

If only an additional 11% (1,936) of the non-Malay voters had voted, Pakatan would have won the by-election. Statistically speaking, Pakatan was let down by the non-appearance of the non-Malay voters who had voted for it overwhelmingly in GE14.

From a political viewpoint, why did the non-Malay voters stay away from the by-election in such big numbers? What had caused such a big shift in sentiment within 10 months of Pakatan’s rule?Open protest

Is it because in the last three months, Prime Minister Tun Dr Mahathir Mohamad and Parti Pribumi Bersatu Malaysia have taken on board ex-Umno MP’s despite the open protest by its coalition partners? Is it because of the change of Bersatu’s strategy to champion Malay rights over the original Pakatan manifesto of multi-racial policies?Or is it that the non-Malay voters are disillusioned by the non-recognition of the ICERD and UEC certification? Or are the Chinese voters disappointed with our Finance Minister for cutting allocations to University Tunku Abdul Rahman, or has DAP simply become arrogant because it is now in power?

Are the voters disillusioned with the PKR leadership infighting? Will Datuk Seri Azmin Ali cross over to Bersatu? When will Pakatan fulfill its manifesto?

From the marketing viewpoint, Pakatan won GE14 with the solid backing of the non-Malay and moderate Malay voters. Dr Mahathir did convert a few per cent of Malay voters that caused the tipping point to cross over the 51% popular vote.

The multi-racial manifesto of PKR and DAP appealed to the target market mix. Bersatu and Dr Mahathir were used to nullify Umno’s strength. Amanah was up against PAS, and Warisan was up against Umno in Sabah. Great marketing strategies which were well deployed.

However, instead of consolidating its gains from GE14 and earlier by-elections, the Pakatan alliance seems to have gone one step forward and two steps back. The change of direction to outdo PAS/Umno in championing Malay rights has backfired, as Pakatan will lose its core base of non-Malay voters.

Pakatan should consolidate its gains from its previous victories before going into enemy territory. Just pure marketing sense.

Counter the Malay agenda with the Malaysian Agenda and your core voters will be back with their full support. The Umno-PAS marriage is gaining momentum, drawing Pakatan into a dog fight in their home territory.

It is never too late to withdraw from the target market that you have no chance of winning. Play to your strength, regroup and revert to previous successful strategies. Reorganise your alliance. Remove the deadwood that do not support your holistic philosophy.

If you need to hire brilliant marketing minds, I would recommend that you hire these two medical professors that I have just met. Their passion to build a better Malaysia might just provide you with the right dose of energy to retain your market share in GE15.

Published: https://www.thestar.com.my/business/business-news/2019/03/09/identify-your-targetmarket-mix/

4/2019 – Time to do some soul-searching

As you grow older, you tend to appreciate quiet moments to reflect on the past, present and future.

Even though I enjoy such solitude, I always look forward to chatting with families, friends and business associates. I have a preference for small gatherings as it is a great opportunity to re-acquaint old friendships and make new friends.

I attend corporate events and seminars because of business commitments but I do have the opportunity to meet up with friends whom I seldom meet. It is the same with weddings and funerals, meeting up and catching up with friends and families that you seldom meet.

The last few years, weddings and corporate events have been held on a larger scale and require event planners to put together an entertaining programme for the evening.

At the last wedding I attended, the decor was magnificent and the mood in the ballroom was properly lit with romance and love in the air.

The single MC could switch from English to Mandarin with ease and she was well-dressed in her gown, looking as good as the bride. Just like in all Chinese weddings, the bride would change from her wedding dress to an evening gown usually after the fish dish which is normally the fourth out of eight on the menu.

To announce the re-emergence of the bride in her gown, the MC herself appeared dressed in a new gown to the surprise of all present. I was suddenly confused as to who the bride of the night was. This was the hijacking of limelight which should have been accorded to the bride on her most memorable night. I was not impressed at all with the event organiser and the MC.

Just a few days ago, I attended the annual customer appreciation dinner organised by my old relationship bank. I had looked forward to meeting up with old business friends and the bank’s senior management whom I normally meet once a year.

My wife and I were greeted with loud Chinese New Year (CNY) songs at the packed reception foyer. I met some old acquaintances and we started shouting at one another to be heard.

I went into the ballroom and was seated near the stage. The same CNY music was broadcast with the amplifier working furiously.

To complement the noise level, the two MCs were equally loud bantering back and forth, doubling my misery by translating the bantering in full from English to Mandarin.

It was as if they were the stars of the night and the event organiser was paid by the amount of decibels they could output. Despite requests to tone down the amplifier, the whole act continued.

Maybe my recent chemo treatment has made me rather sensitive to continuous loud noises. I was feeling highly distressed. Finally after 2½ hours of loud pounding noises and after the second dish, my wife and I decided to leave and we had a quiet dinner in a restaurant in the vicinity.

I was disappointed beyond words. It was the first time I left an event early and most of all the lost opportunity to reconnect and chat with some really old friends. Such irony as the theme of the night was Timeless Reunion. It was more like chat-less reunion.

The MCs have hijacked our opportunity to converse with their loud, incessant and self-important bantering and music.

Event organisers and MCs must understand the objectives of hosting an event.

If it is a wedding, then the stars of the evening must be the bride and the bridegroom. No one else. It is not a gig for you to look good so that you can get new jobs. Same with the loud singing wedding bands.

If the corporate objective is timeless reunion and customer appreciation, create an evening that allows the guest to mingle and chat with their bankers and among themselves. MCs should stay in the background and ensure the evening moves along smoothly. The guests did not attend the event to listen to your bantering nor super loud music. We normally go to a night spot or concert for that.

Similarly in business, startups will only be successful if they stay true to their original objective of building a sustainable and profitable business.

The reason nine out of 10 digital startups fail is because they have veered from their original objective of building a profitable business to one that is unprofitable but built for an exit sale based on a large customer base. As soon as the venture capital pumps investment into the startup, they will hijack the original business model which can be profitable to one that suits their need for an early exit in five years.

Nine out of 10 entrepreneurs exit in disappointment having wasted five or even shorter productive years, taking down with them many disappointed employees who had believed in their cause. To me, it is a massive misuse of financial and talent resources. Pure wastage is the name of the game.

Our local politicians share similar problems of veering off from their original objectives. The Pakatan Harapan coalition was voted in by a decent majority based on the objectives of replacing a corrupt government, reinstating the rule of law, rebuilding the independence of the judiciary and reforming the economic, education and human rights issues.

It must be noted the two main parties, PKR and DAP, are multi racial in composition and control 75% of the winning seats in the coalition. Lately, Tun Dr Mahathir Mohamad has started recruiting former UMNO MPs on his outdated belief that political parties based on race would eventually rule the country again.

Our dear Prime Minister has hijacked the electoral success of Pakatan Harapan to rehash the political system of yesteryears of which he was the main architect. It is the same chemo treatment for new voters recommended for the old cancer that will reappear.

The voters of Pakatan Harapan are now feeling highly distressed. It is like hiring the same organiser and MCs which screwed up your last event.

If PKR, DAP and Warisan do not wake up, their voters will leave them before the next general election.

These parties will be organising parties without any guests present and they will just be listening to themselves talking at the top of their voices amid the loud background music of “Don’t leave me this way” by Thelma Houston.

Maybe it is time for these politicians to step back, enjoy some solitude and reflect on some soul-searching. Just don’t talk too loud when you can’t keep promises.

Published: https://www.thestar.com.my/business/business-news/2019/02/23/time-to-do-some-soul-searching/

3/2019 – Of mistakes and bloopers, and emojis

The year 2019 is starting to look interesting. After a boring January where nothing much happened, the pace is picking up both in business opportunities and political activities. After getting the New Year and Chinese New Year celebrations out of the way, entrepreneurs and politicians have started planning and strategising for the year ahead.

For both young and old entrepreneurs alike, the hope is to make more good decisions and minimise the silly mistakes. Politicians in power are hoping to become more popular and are trying to reduce the bloopers so as not to be portrayed as incompetent on social media.

My favourite emoji on WhatsApp is the facepalming one. It reminds me of the many mistakes and bloopers that I have made throughout my entrepreneurial and personal life. How I wish I could retract those bloopers whether in the spoken word or irrational actions – the not-too-smart moments that I have lived to regret. These are the many humbling experiences that show that we are human after all.

The latest saga that caught my attention involves a not-so-young bumiputra entrepreneur who had alleged on social media that our very young Youth and Sports Minister had broken his promise to help him promote his brand of bottled drinks. He alleged that after sending drinks worth RM192 to the minister, the drinks and his company credentials were not presented to the Cabinet. The minister did not promote his drinks on his personal Instagram account and as such, the minister was called a pig in our not-so-young entrepreneur’s social media posting.

He eventually took down his posting after the minister came out with his explanation on how he had tried to promote his drinks. The minister had met Tan Sri Vincent Tan of Berjaya Corp Bhd to get his assistance in listing the “drinks” in 7-Eleven outlets – 1,905 stores in total. The minister had also brought the drinks to the Cabinet meeting but I dare guess that the presentation of the company’s credentials was not made to the Cabinet, which I presume was too busy fending off the supposedly rising popularity of former Prime Minister Datuk Seri Najib Razak’s “Bossku” campaign and debating on the on-off East Coast Rail Link project.

As our Youth and Sports Minister has set up a committee within his ministry to help promote young bumiputra entrepreneurs, I hope my analysis of this saga will help young bumiputra entrepreneurs to decide on the merits and demerits of the case.

The young and good-looking minister had posted his picture on Instagram – hard at work with the drink on his table. 2 thumbs up on successful (free) influencer marketing.

If he gets his products (assuming there are four flavours) listed in all 7-Eleven stores without a listing fee, he will save RM381,000 because 7-Eleven normally charges RM50 per product per store as its listing fee. 3 thumbs up.

There was no picture of the drink on the Cabinet table, especially one with our dear Prime Minister Tun Dr Mahathir Mohamad. This was a missed opportunity, as a previous photo of Dr Mahathir post-GE14 had caused a massive spike in the sales of certain Vitamin C and sandal brands. Just imagine the civil service and the GLCs in their efforts to please Dr Mahathir serving the drink in all their meetings! 4 thumbs down.

The company’s credentials were not presented to the Cabinet. A Face with rolling eyes emoji is now appropriate. Why on earth would the minister promise to present the credentials of a bottled drink supplier to the Cabinet? Perhaps the Cabinet, after 1MDB, is running short of “national interest” topics to discuss. 5 Face Palming emojis.

The minister has promised to pay back the RM192 for the drinks supplied and pray for the success of the drinks. What magnanimity shown by one so young! This was the best return on investment in any digital marketing campaign I have seen in my 35 years of business life. OK Hand emoji.

The drink went from an unheard and unknown brand to a much loved brand now even being promoted by the Umno Youth chief. This is a potential EFFIE (media marketing award) winner! Victory hand.

I fully recommend that all young bumiputra entrepreneurs make a beeline to meet up with our supportive, young and energetic minister. I do believe that in the next Cabinet reshuffle, the ministry will be renamed as the Youth, Sports and Young Bumiputra Entrepreneurs Ministry. The Entrepreneur Development Ministry, on the other hand, might be renamed as the Old Entrepreneurs and Paralympics Ministry since it is fashionable nowadays amongst ministers to cross-promote functions of choice amongst ministries. Rolling on the floor laughing emoji.

To the young non-bumiputra entrepreneurs, I would recommend that you look for a non-bumiputra minister to promote your unknown products. You could benefit a lot from a low-cost social media influencer marketing campaign, provided you supply free samples. Winking face emoji.

I am instructing my brand manager to send our latest lipstick samples to our young and beautiful Deputy Women, Family and Community Development Minister Hannah Yeoh. All we need her to do is to post a picture of her applying our lipstick on her Instagram and Facebook pages. Face blowing a kiss emoji.

We will provide Yeoh with additional lipsticks to be given to all the female ministers and deputies with strict instructions not to mention our company name, as we have no credentials to promote. Just make sure our brand name is properly highlighted in all social media postings, thank you. Folded hands emoji.

If many more cosmetic suppliers approach Yeoh for support, I am sure with the support of her minister, Datuk Seri Dr Wan Azizah Wan Ismail, she will set up a committee in her ministry to work on how she can help young female entrepreneurs. It will then be known as the Young Women Entrepreneurs, Family and Community Development Ministry. Woman gesturing ok emoji.

Just a word of caution to all entrepreneurs who are looking for ministers and deputy ministers to promote their products on social media though. Do not expect politicians to keep to their promises. Just look at the number of unfulfilled, broken promises of the GE14 manifesto. Just be appreciative that the minister has promised to support your brand. Man bowing emoji.

Whatever the results of your digital influencer campaign, please do not call your ministers by any derogatory names. This zodiac year is not the perfect year for name-calling, and neither is the next, as it would be the Year of the Rat. Perhaps, we could rename this year as the Year of the Frog, which might be more appropriate. Frog emoji.

If you are ungrateful to the minister who has tried his level best to help you, not only will you get a facepalm emoji, you might even get a palm to your face, which will garner more likes and handclap emojis.

Some bloopers are just unforgivable. Facepalming emoji.

Published: https://www.thestar.com.my/business/business-news/2019/02/09/of-mistakes-bloopers-and-emojis/

2/2019 – Stay humble, avoid trouble and your fortune might just double

In the last few months, I have been busy attending weddings and funerals. Many happy moments interspersed with occasional sad news. The circle of life is filled with hope and despair.

Similarly, the various companies that I have invested in, they too have gone through some good moments and some bad moments. Happiness on one hand and anguish on the other.

On Facebook and WhatsApp chats, I have seen logical discussions and I have grimaced at the idiotic arguments. Everybody is either very smart or horrendously stupid. There is no middle ground.

Some of our local politicians have made some intelligent comments though many more displayed their lack of intelligence. More so when they include religion into their thoughtless speeches. Empty vessels do make the most noise.

Some ministers have been working hard and making good progress. Some ministers do no work at all. Some ministers make decisions that cause our country to regress. Many voters are now feeling depressed and full of regret.

Yes, UEC will be recognised. No, it will not be until a holistic analysis is done in five years’ time. No politicians will be appointed to head the GLCs. Yes, it is ok to appoint politicians to GLCs. Broken promises and flip-flop decisions seems to be the order of the day. Trust deficit increasing by the day.

To be or not to be. The eighth Prime Minister will be Datuk Seri Anwar Ibrahim. What was so sure has become unsure. Mentee usurping the mentor it should not be. Just as there are no permanent friends nor enemies in politics, loyalty is not blind when there is opportunity.

There are only good intentions in every religion. Only bad people come out with bad intentions. Hiding behind race and religion, these hypocrites create fear and thus bring shame to their race and religion.

There are good people and there are bad people. Kindness and evil exists side by side. Safety and danger are on opposite sides. What is right for some people, all is wrong for other people. What is fair to some, others will claim it is unfair. Everybody fighting for their rights, most of the time, it does not sound right.

Entrepreneurs have it tough, politicians only know how to play rough. Common people low on cash, corrupt people continue to take cash. MACC having a real bash, many people making a dash.

Chinese New Year is round the corner, Ah Lai the contractor driven to all corners. Old debts not paid, no money the developer said. Bonus not yet paid, some workers have to be laid off. Market not so good, on the table there will be less food.

Goodbye 2018. Hello 2019. The year may be different, to the people there is no difference. The struggle is the same, everyone trying to stay sane. Year in, year out, just smile and try not to pout. Stay humble, avoid trouble and fortune might just double.

Entrepreneurs must stay optimistic, in business there is no mystic. Some will make more, some will make less. Hopefully, more joy than duress. Work hard, work smart until it becomes an art. Use your brain, not your heart or fortune will depart.

People come, people go, moments of high and low. Wish them well, say farewell, only memories left to dwell. Hire well, train them well, it will turn out swell. Keep the bold, cherish the old, advice you have been told.

Market not right, cash flow seems tight, best you stay asset light. Profits here, savings there, for sure bankers will be there. When confidence grow, money will flow, does not matter where the wind blow. Cash is king when you can buy bling bling without having to think.

When the going gets tough, the tough gets tougher. Tighten your belt, stay your course and you will be alright of course. When market down, stay lower to the ground. Stable stance, knees bent, you will last longer till the end. Heads in the cloud, always proud, you will not last through the drought.

Cycles come, cycles go, some business better no go. Timing good, timing bad, sometimes it is just too bad.

If you have saved for a rainy day, everyday is a happy day. If you are highly leveraged, you will surely quickly aged. Advice in, advice out, should have listened and you will never be in doubt.

Life goes on, carry on, offline need to be turn on. Platform here, platform there, now you can sell everywhere. Wifey here, WiFi there, time have to be share. Blockchain here, block heads there, bi coins everywhere. Ponzi here ponzi there, get cheated everywhere. Travel here, travel there, with Internet, you can travel anywhere!

Old advice, new advice, always stay out of vice. Entrepreneurs young and old, just remember you have been told. Wealth with health is better than health is wealth.

Stay healthy, act wealthy and like my contractor friend Ah Lai said…. “Don’t Woli ..Be Happy!”

Have a good year ahead.

Published: https://www.thestar.com.my/business/business-news/2019/01/28/stay-humble-avoid-trouble-and-your-fortune-might-just-double

%d bloggers like this: