52 entrepreneurs share their real life tips
Wednesday, 28 May 2008
Last Updated: Friday, 30 May 2008
By Amanda Gome
SmartCompany turned one on 1 February 2008. Phew! As every business owner knows, it is a great milestone to reach your first birthday. But we have had a secret weapon.
Every day, as my great team researched, wrote and produced SmartCompany, we would uncover many gems that could be applied to building our business.
Week after week, as many of Australia’s best entrepreneurs have generously shared tips, trends, ideas, leads and opportunities, I would find myself completely distracted. What a great tip, I would think, when interviewing yet another top Australian entrepreneur. And I would lose my train of thought as I considered how the tip could be applied to making SmartCompany bigger and better.
So for our special first birthday issue, I wanted to show my appreciation to you for your loyal support through our first year. Many of you visit every weekday, responded to our polls and research, supported our awards, regularly provided feedback and wrote in with suggestions on how we could improve.
And what better way to thank you than to collect a few favourites from the zillion of tips from the SmartCompany community that have personally inspired and motivated me.
Here are 52 tips – one for each week of our first year – from Australia’s top entrepreneurs. (To read the rest of these entrepreneurs’ stories on SmartCompany.com.au, click on the links.) So read, learn, enjoy and spread the good news by passing it on to your colleagues, friends and family.
1 On recruiting the right staff
The most crucial part is attracting the right people. I look for people that have been involved in successful global starts ups before. They are often in safe jobs. So I present to them the vision and the dream. I say: “You are smart. A person like you can get a job any day of the week, but you will never get an opportunity to be part of a global business in such a short period of time with an invention so simple.” They come on board and salary sacrifice and in return they get share options. I also tell them what do you have to lose? You are in a safe job, you will go back to a safe job. And it is compelling; they are attracted to the challenge, the kudos of being successful – and the money from the share options.
Martin Chimes, Universal Straws
2 On managing sales staff
Finding good people in the sales area has been the biggest challenge. I’ve been burnt a few times where I’ve found someone who’s a hot-shot sales person who looks like they have the right experience. They’ve got good background in the industry, but when you put them on by themselves in a far away country they don’t perform and just use up a lot of money. So I’ve found that in order to do things properly in the biggest markets here, in America, I’ve got to be there myself, working day-to-day with the sales professionals to get it going.
We are investigating a couple of sales channels for markets where we have challenges to get into. We’re negotiating with a group in Japan and in Korea at the moment who have a large sales force and we don’t have Japanese or Korean language abilities so it makes sense to use channel partners into those countries for both the language and the existing contacts that they have.
But for English speaking countries and those who speak English relatively well like Americans, [we see doing it ourselves] as being the way to go.
Justin Simpson, PCT Filer
3 On overhiring
One of the most important things I did to take the business from $35 million to $135 million was to overhire on the financial roles globally. We’d always employed people that would either come up through the ranks and you’d give them the next chance to take the next two or three steps operationally. It wasn’t until 2001 that I took that view to overhire. It was more money than I wanted to spend on finance, but I wish I’d done that 10 years before.
We didn’t get it right the first time. Three years ago we bought a group CEO into our business. The guy only lasted three or four months. His role was to take over the data and operational guidance for the business on a global scale, which is a position I filled myself. When we got it wrong it would have been the easiest thing in the world to say I’ll do it myself. But we went back and found a guy with 20 years of experience in the service industry that really did understand driving the day-to-day profits out of a business.
Craig Lovett, Cleanevent
4 On making a profit
Our philosophy on profit is to charge at least what it takes to recover costs. It is not rocket science and you might think it sounds obvious, but our industry is littered with examples of people who did big deals with big numbers and then they hope the contracts are going to happen.
We sit down with interested parties and we know what the systems are going to cost and what we can recover comfortably after covering our costs. It is the founding philosophy of the company, to be profitable every year of operations. We made this part of our founding statements and it is in our annual reports and in our prospectus.
We can build the infrastructure, get the contracts to break-even on sales, and then beyond that we get a fairly good margin. We do try and minimise our costs. We have a strong ethic; work hard, play hard. It is more that we keep everyone focused on the fact that every deal we do has to make money. But if you want to do something big on limited means you have to be very focused on costs and do very good deals that make money.
The profit ethos was reinforced by our wives. Both our wives told us we could only have $50,000 each for the new business (PIPE Networks). Neither of us could put our houses on the line so we were very focused on making a profit from day one.
Bevan Slattery, PIPE Networks
5 On selling more
One key lesson came from the early days of Microsoft. They taught me one thing and it was called leverage. There were presentations where Gates would stand up and talk about partner channels and reseller channels and those sorts of things, and the word that came out was leverage, leverage, leverage. That’s something that we applied in the WebCentral business where we developed strong partner programs. You can increase your sales people but you have to seek the ability to create channels, which can in turn leverage your sales people on to more customers. That’s been the number one lesson.
To develop the channel? You need to think how do I make the partner look better to his customer, so how do I build my products that he can sell and he can use, that make him look better.
In the case of WebCentral we allowed our partners to rebadge everything. We didn’t have a problem with it and that was a case of making the partner look good in front of their customer.
Lloyd Ernst, WebCentral
6 On getting the word out
Make really good friends in the area of search engine optimisation (SEO). Buy them a bottle of scotch. If you get that (SEO) wrong, you will have to spend a bomb to get it right. Build your web pages in ways that are easy to index, have good page titles, key words for each page, all the links you need to boost your Google rankings. We invest in it every month.
Try and cut a deal to reduce search engine marketing costs. To avoid those 15% commission fees on search engine marketing, try and negotiate a deal to grow the fee as you get the results.
Kidspot buys 100,000 keywords (some keywords cost 1c, others a lot more), often buying expensive keywords for a day or so, then concentrating on cheaper, related search terms.
We use contra to build links, affiliates and online partnerships to build links.
Billboards are great. Experience and research tells me this works to build a brand. Cultivate word of mouth. Everything we do, we ask ourselves ‘Can we get word of mouth?’. Anyway to get people to send information about us on to friends and colleagues, we do it — and it’s free.
Katie May, Kidspot.com.au
7 On dealing with competitors
We have had competition from discount shops. We would invest in products and advertising, and create a demand. Then a month later we would find the discount shops carrying an imitation product. They don’t have to pay the marketing costs we pay so they could always be cheaper, especially if it was an inferior product.
Now we want exclusivity from suppliers. Now any product we feature, we make sure we have exclusive distribution rights in Australia. A part of it is committing to volume of stock so they do take you seriously. Three years ago we couldn’t get those deals because we were small and didn’t sell the volumes. Now we do.
Daily Deals, Hezi Leibovich
8 On where to export first
If you are going overseas don’t pick a country where the market is too small and vulnerable. We went to Indonesia, and it proved very successful until the financial meltdown in 1996. Going to Indonesia was like adding the state of Queensland to your marketing plan. Same with New Zealand. It’s like adding 15% to your market size. And don’t bother with India either. It’s too bloody small to worry about. Everyone talks about the size of its middle class, but they are very poor by our standards.
We went to Taiwan and that was the same size as Australia and didn’t work out either. What we learnt was to stop fooling around and go straight to the US. We went in 2003. We employed a vice president who is an American and whom we had known for many years. Then we built a big sales team.
The US is now responsible for about $5 million of our $14 million revenue in 2006-07. It cost $6 million and it’s still not profitable. But we don’t care about profits. We care about the volume. We are going for growth, not profits.
Look at Amazon. At the start you are not interested in making a profit. All great online businesses are not interested in making profits. You focus on multiples of revenue and that turns into profit the moment you want it to. The idea is to force the growth, so you grow at 50% by pouring money into sales and marketing, and if you don’t force it the revenue still grows by 20% and then when you want it to, the money pours out like a jackpot.
Phil Ruthven, IBISWorld
9 On profitable growth
We had $28 million of costs a year and managed to strip $6.5 million of costs a year out of the business. Some came from redundancies and natural attrition (100 people left), there were also duplications and inefficiencies. For example we went through the telephone accounts and found 80 lines that were not used. There were also lots of different accounts that we consolidated.
We looked at the way we ordered from vendors. Now we only order from vendors when we have the contract, so our stock levels have gone down 50% which really helped the balance sheet.
Domenic Martino, ComputerCorp
10 On advice on a mentor
I heard Gillian Franklin (entrepreneur who founded The Heat Group) at a talk and asked her if I could talk to her. She has been my mentor every since. When I was really struggling and thinking I wasn’t going to make it, I would ring and ask her if she had five minutes and I would walk out 10cm taller. She gave me advice, but it was never sugar coated. We had been doubling revenue every year but I was really struggling and at the end of my energy. Gillian said to me you need a mentor group.
It was great, because you get so tired you can’t see the business with fresh eyes. They identified that I needed a cash injection and that I also needed a finance person who could help with managing everyday cashflow, but also run operations. We had had a part-time bookkeeper and when we had five store