How I recovered after a tax change nearly wiped out my business

geoff-austen-100The Scotney Group was founded by Geoffrey and Stephen Austen, and Chris Simon, back in 2007 when the trio noted a gap in the market for providing food services to corporate clients. The business links employees with customisable online menus which allow the business to reduce waste.

It’s been a success – the company is turning over $1.4 million a year. But it suffered a major problem back in 2009 when the government got rid of a tax exemption that was a massive foundation of the company’s business. Geoffrey says it took away 90% of their revenue, but with some effort they’ve managed to come back.

So how’s the business been travelling this past year?

We’re in a growing space, no doubt. It’s a business that requires patience, but it’s also a business where you get these one-off wins and you’re in a bubble for a little while. But you just have to make a commitment about it and be consistent. It’s a good business to be in, we’ve never lost a client, and that’s what keeps us bouncing along.

Has the downturn in hospitality hurt you?

Sure, but in many cases for us, at least, it’s a marginal thing. We have some supplier clients in the corporate or school side and they feel that turnover is down. But we have lots of suppliers, and while we’re aware of it, it doesn’t impact us. We’re still experiencing growth.

So describe what happened in the lead-up to this devastating tax cut

So we launched the concept after identifying there was an opportunity to create more efficient systems for providing meals in the corporate space, and whether that’s in things like business parks, or what have you, or with food trucks, or a trolley of sandwiches with cafeterias full of people.

But like anything else, when you launch anything it requires a hook, and the hook for us at the time was that if an employer provided meals there were fringe benefits. Your employer could buy this for you tax free as a pre-tax salary deduction. It was a nice little hook with an HR focus.

The important thing was it was tax free, and our marketing hook was within the HR departments. They were always on the lookout for a fringe benefit, and the nice thing was that it was an unusual benefit.

Everyone could get access, anyone in the company, so it was quite popular, and it was picked up reasonably rapidly by a bunch of banks and insurance companies. It was growing quite quickly.

And when did the tax cut occur?

It was around 2009. We continued to grow, we were talking to companies and they were able to do all this ordering through in-house cafeterias and so on. And there were people asking us why we couldn’t do similar things in schools, so we started looking into the schools space and having discussions there.

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