2024…A year like most in business has never seen before.

To be fair, I think none of us have lived through a year such as 2024. It wasn’t like the Global Financial Crisis (GFC), a banking crisis that tipped through into asset prices, confidence and transactional business activity. It was not like 1987, when asset prices collapsed, which destroyed confidence and liquidity, causing bank defaults, including in New Zealand (NZ). The BNZ, our biggest bank listed on our stock exchange after being privatised in 1984, was bailed out by the government and then sold to the National Australia Bank (NAB). But for that our economy would have lost its largest bank. It’s also not like 1929, as it has not followed a typical bull market either.

What shaped 2024?

Firstly, a global pandemic. 2020 was the start of this. Stock markets dropped suddenly but not across the board. Travel, tourism, hospitality and retail stocks all tanked. The world’s response massively increased debt, just as do bull markets, weakening the banking systems’ ability to respond to further shocks. It also dramatically decreased human collective psychological resilience, in a different way to 1929, but had the same result.

2021 was characterised by printing money and creating new debt to pay for the economy to be put into hibernation globally. Cheap money drove crazy asset inflation through from 2021 to 2022.

Productivity and incomes per capita were relatively flat and declined in real terms everywhere. Whether we knew it or not, we have been in a depression since 2020.

Households loaded up with cheap debt, businesses took subsidies and loans and stopped paying their taxes, which the government allowed them to do to save jobs, etc., and government debt continued to climb.

By 2023, inflation had peaked in the real economy, bringing on a cost-of-living crisis, compounded by flat incomes and rising interest rates. The dystopia of discontent increased allowing the radicalisation of politics with massive political changes globally.

In February 2024, the party stopped, confidence evaporated, interest rates remained high to combat inflation, and retail and construction spending stalled. Liquidity evaporated in everything, shares, business sales, property sales, everything. If you needed cash you had to be prepared to sell at deep, deep discounts.

Those that had to did, losses and misery compounded,
and disputes and arguments increased.

Unemployment rose, but skills shortages persisted, with the largest migration loss of skills in 40 years occurring in NZ and other weakened sub-scale economies. NZ is now one of the top countries in the world for the portion of its citizens living outside of its borders.

Geopolitically, the year ended with Trump winning the trifecta. Now, he dominates the US politically and the world. He intends to bring peace to Ukraine. In short, he sees himself as the biggest gorilla on the world stage and intends to play that way. Domestically, he has packed his administration with ‘yes’ men and intends to restructure law enforcement, the judiciary and the fundamental governance structures of the US itself.

Does this sound like anyone you read about in 1933? The only thing he hasn’t done yet is burn down the Reichstag and declare martial law.

Regardless, the radicalisation of government is now underway, with protectionism, nationalism and socialism for some, and persecution for others likely to be a global trend. But don’t fret, ‘all things pass,’ and we can be grateful for being a long way from everyone else, and almost invisible and certainly irrelevant in little old NZ. Our weakness is now our strength.

So cheer up, we are now at the bottom of this cycle and, hopefully, we will speed out of it without a World War.

In NZ, Seymour provoked a debate on The Treaty, which has sparked racial unrest. We all have to suffer our own unique response to the misery of the last four years, this is ours. It could be worse.

What did I see at the coal face of business and investment?

These four things marked out those that are thriving:

1. Alignment and self-confidence.
2. Calm leadership that kept walking with a clear strategy.
3. Great teams of people who are engaged and loyal.
4. Low/no debt and/or cash war chests.

Those that had all four grew market share and were able to increase their debt levels to do so, because they had banks and shareholders who believed in them. They had high team retention rates and engagement which allowed them to execute their strategy.

They were led by leaders who believed in themselves, were curious, resilient and agile in pursuing the opportunities created by those who did not possess the necessary resources. Leadership, cash, and engaged teams.

Those that lack all four are failing and fast. Some just disappear, and their business is absorbed by the strong. That trend was evident in 2024.

What also emerged in 2024 was that many baby boomer owners and leaders of business have made the call not to back their businesses any longer, i.e., keep their separate cash as security for their old age, and let their businesses fade away. Some are attempting to sell them—hard when there are no buyers—some are just handing the keys over to the team and saying, ‘Here you go,’ and some of these teams are not ready or willing for that challenge.

Those who lack one of the four are surviving and holding their own; those who lack two of them are shrinking, provided it is not the first two on the list, as miss those two, and they won’t hold on long.

There are a number of businesses running on vapour with no access to cash and high debt levels.

This year I helped two businesses deal with debt levels, two others have successfully transitioned to the next generation of family leadership, and we managed to sell one as well. So far, we have not had to face any liquidation.

Our five largest clients are thriving and have grown.

Where we are seeing pain is in our property clients and assets. Our largest property clients have strong balance sheets and are resilient, but those with weak balance sheets require fundamental restructuring or debt moratoriums. So far, the banks are not panicking, and that is because we and they are communicating well and articulating their plans well.

Also, of course, trying to find a buyer for a large commercial property is like looking for a needle in a haystack; thus, we are all in this together with the hand of cards we have been dealt.

It has been a busy year.

At the coal face of GS.

As I signalled at the beginning of the year, Gilligan Sheppard (GS) is transitioning its leadership to Joshna Mistry. That is going well. She was well prepared; she believes in GS and its people. We all believe in each other. She is smart, curious, and challenging, but calm in crisis.

She has focused on building scalable systems and processes for our human capital to scale and perform. Through my network, I found a resource in Melbourne’s Chris Regan, who was chief people officer for Xero in Australia from its very beginning. A class Act. She and Joshna have worked hard to build out our team’s capacity. We hired seven new people this year, and four moved on.

One of these was a partner-level hire from William Buck, Arran Boote. A gutsy call in a recession, but it has widened our networks and capacity, especially in international tax and global corporate structuring.

We also invested in building an Artificial Intelligence (AI) tool. This was motivated by the lack of skills available to junior and intermediate tax professionals (thanks, brain drain). Humphrey Hart led that, and from what we can see in the marketplace, it is better than its comparators.

How did we do this, you might ask? Collaboration. One of our clients and one of my personal investments is a bitcoin mining operation founded by two smart guys. One of those guys is a lead consultant in AI which we are deploying in the bitcoin business in a number of ways. Humphrey asked him to help, and he did. It underlines how connected communities can and do help each other.

MasterJack, our now separately branded marketing business inside GS, has expanded its presence winning global business in its specialty areas, and its team are now recognised as leaders in content-led marketing and social media distribution of that content.

Lisa Garrud was also invited to join the Director Consultants group of BNI, a global network of business-focused networks. This is the first time New Zealand has been invited to join this group.

We also initiated our own podcast channel Boxers and Briefs this year with guest speakers from all walks of life.

We also ran several strategy tools sessions during 2024 for clients and our networks, including our bank, Westpac.

Through all this change and expansion activity, our core team held together and focused on juggling the various balls of client needs in a resource-constrained labour market and delivered that which was needed when it was needed, admittedly almost at the last moment in many cases. But we got there, just!

We supported our suppliers and clients and, as a consequence like most of our business clients, our working capital investment expanded, and cash bled out. The reinvestment in people and tools to be ready for 2025 and 2026 pushed profits down considerably at the same time.

As a consequence, a considerable portion of our reserves was spent this year, but I am pleased that we spent the last five accumulating those reserves for just such an opportunity. Yi Ping who is now fully responsible for the financial management of GS handled the 2024 year exceptionally well.

It has been a tough year, if looked at in the single dimension of profit and cash, but in a holistic sense one of the best in the last 40 years. The future of GS looks great as we head into our 41^st year of continuous business under the same name in the same premises.

Certainly, I could not have supported our client community and our ancillary businesses without having Joshna co-lead this year.

For the avoidance of doubt, though, I am not retiring. I love what I do, and I care about GS and our clients succeeding and I will remain part of those stories for some time yet.

Have a great break; we have all earned it.

And to get that optimism for 2025 going how about a song from the 1930’s:

When the red, red robin comes bobin bobbin along….

I heard a robin this mornin’
I’m feelin’ happy today
Gonna pack my cares in a whistle
Gonna blow them all away
What if I’ve been unlucky
Really I ain’t got a thing
There’s a time when I’ll always feel happy
As happy as a king…

When the red, red, robin comes bob, bob, bobbin’ along, along
There’ll be no more sobbin’, when he starts throbbin’ his old sweet song
Ah, wake up, wake up you sleepy head
Get up, get up, get out of bed
Cheer up, cheer up, the sun is red
Live, love, laugh and be happy

What if I’ve been blue now I’m walkin’ through fields of flowers
Rain may glisten but still I listen for hours and hours
I’m just a kid again doin’ what I did again singin’ a song
When the red, red, robin comes bob, bob, bobbin’ along….
And keep going until you are happy!