David Haymes is the chairman of iconic paint maker Haymes, which this year celebrates its 75th birthday. The company, which is now run by Haymes’ two sons, his daughter and his son-in-law, has produced strong and steady growth since Haymes took over in 1974, despite operating in three of the tricky areas of Australian business – manufacturing, regional business and family business.
Today Haymes talks to SmartCompany about the secrets of steady growth, the right value for the Australian dollar and the art of handing over a $40 million business to the next generation – and keeping the blood off the walls!
I believe you’ve been away so it’s good to catch up finally.
I’m retired from the operational side of the company so I use the retirement time to be away a lot.
First of all, happy birthday. What have you guys been doing to celebrate?
We had a publication that we put in our local Ballarat paper which I think was excellent actually. One of my boys organised it and I had to jot down a lot of stuff for him, it details a lot of the history of the business. We’re having a dinner in November and there will be 200-plus staff, all their partners and then the rest will be key people that have either been employees that have been with us many years and have retired, some of our major suppliers, and the people that have helped us, gone that extra mile for us that we have very fond memories of.
As you reflected on the history of the company, was there anything that stood out across the generations of the business that have always been done in the same way?
It’s hard to say. I started with the company after I was married. I joined in the warehouse and then eventually applied for and got the position of managing director of the company. In those early days I had worked in shoe manufacturing so I had a fair knowledge of manufacturing and how all that sort of worked, but I guess my father in-law was probably the greatest mentor I had.
I looked at his business - he was in shoe retailing in Ballarat – and I used to think, well why is he so successful and why does his shoe shop sell more shoes than the rest of them combined? And I just observed and talked to him about it and I guess it really comes back to doing the basics better than anyone else. We can get carried away with all sorts of fancy things in business, but if you do just the basics of business – in other words you’ve got the products and they’re good, and the service levels are excellent and you’re prompt in everything you do and you don’t make promises you can’t keep – you will be successful.
And it sort of evolved from there. I think we always thought that our products were at the quality end of the paint industry. We’ve only ever had one brand, we haven’t sort of taken over other companies and then tried to position different brands in the market, which can be very confusing to a lot of customers. So we’ve really only focussed on the Haymes brand and that’s sort of been our core philosophy, just do the basics better than our competition. And how do you measure that? Well I guess your customers are the ones that ultimately tell you whether you’ve been successful there.
You just alluded to your entry to the business, your father was the founder but it wasn’t a straight inheritance.
No, sadly he died when I was only 12 years of age. Back in the 1940s and the 1950s and even in the late 1930s when he started, to get capital in to grow your business you didn’t go to the bank as you probably do today and borrow money. You went to your family and friends and anyone else who’d buy shares or invest, and he did that. And when he died, his equity in the company was around 20-25% and the balance of the ownership was in the hands of a number of people, his brothers being two of them and many, many others.
So when I joined the company that was the situation in terms of ownership. It wasn’t until I really got on top of things with the management of the company that I suddenly realised that my God, we didn’t have any money, we couldn’t pay any bills. And I had to live in Ballarat and everybody knows your financial situation when you’re in a smaller town. So there was real incentive there to get the respectability back into the organisation by being prompt with our payments. That’s something else I learnt from my father-in-law, that if you pay your bills, it’s amazing how supportive people are and that’s so true in business. If you’re a good customer of somebody’s, you get good attention and good service and nothing’s too much trouble.
So I focused on that and eventually we turned the company around and I guess it started to generate a reasonable profit. But sadly this money went to all these different people and as the years rolled on many of them were in no way connected with the business, they were the children and even in some cases the grandchildren of friends of my father who had invested. The shareholding was getting bigger and bigger and being spread even further afield, so I decided really for my future, the fact that I’d given so much to the business, I needed to buy back the farm.
Because we had one public listed company as a minor shareholder, that meant I couldn’t just approach people willy nilly. I had to do a proper, formal takeover of the company and that was a pretty traumatic time for me because I had to borrow a lot of money. We had the shares independently valued and we sat there and waited in great anticipation. But we were fortunate that all bar three small shareholders agreed to sell which meant that we could compulsorily acquire them and that brought the business back 100% into our family or my family.
What are some of the ways you’ve driven growth, given that as you say you have one brand and you focus very tightly on the quality end of the market?
Well I guess one establishes first, what is the market? You look at the broad market and you say, where’s our niche in that market, what can we do in that part of the market better than anyone else? Obviously we can’t go out there and be all things to all people and we identified, I guess being a family-owned or an Australian-owned business that we could relate to paint shop owners, they had the same issues as we did, with unfriendly bank managers at times and people that don’t pay you and all of the things that you go through in business. So we focused on that part of the market which is certainly not a huge growth market but you can grow in other ways within that.
We focused on that, we did it well, we offered the basics better. The service was brilliant – if a stockist placed an order today, it left our warehouse the same day. So we just tried to be better at those basics than the big boys and from that the word-of-mouth spread throughout the paint specialty industries with the different groups that we were dealing with.
But growth was planned. There were two things we had to work out. You’ve got growth in terms of volume and you’ve got growth that you’ve got to be able to finance, and we worked out the ratio of what volume could we grow each year to enable us to generate sufficient return to finance the future growth. Because if you grow too quickly, suddenly you’re trying to make product and you get behind in your manufacturing plant and before you know it the wheels fall off, the logistics and the whole show. So you’ve got to plan your growth that you can physically and logistically cope with that increased volume.
But it’s also got to go hand in glove with the financing of it. Now, so that you don’t have to go to the bank every five minutes to get more finance, you’ve got to be able to generate certain margins or certain percentages to have that fall out as profit, which is ultimately what you put back in to finance your growth. So we did in a very methodical way right through perhaps the late 1970s, 1980s and 1990s.
You know, a lot of people think we’ve grown a lot in more recent times but I think a lot of more of that in recent times is growth by recognition. We embarked on some very successful marketing strategies and TV campaigns and suddenly people assume that our growth has been astronomical, but the growth has been constant and steady. And that way we can keep it under control, we can finance it without having to increase our borrowings and all those sorts of things.
Over a period of X years and if you have a 15% growth per annum, that means you double your business every five years. Well that’s fine when your turnover is a couple of million but when your turnover’s up to say $40 million or $50 million you have to trim those numbers and become more realistic.
You’re also in one of the tougher sectors of the economy, manufacturing. How do you stay in front in that sort of industry?
Look it’s difficult, we’ve just got to continue to focus on what we do and do it well and hope that our marketing strategies will have people seeking out our product in preference to others. Often it’s not so much the product, it’s the people that they’re shopping with or dealing with. There are still a lot of people that like the thought of supporting an Australian-owned business and a family-owned business. I didn’t think there would be that many in this newer generation that would seek that out, but it’s amazing how people still have that belief that they want to support locals rather than pour money into multinationals that purchase products from all over the place. So we’re exploiting that and we get good support.
When we look at our five year plans, we think that in five years we may have to look again at manufacturing. But at the moment we’re committed to being a manufacturer and we’ve got a great team, and of course being in Ballarat there’s advantages.
We all live in a community so no matter what one’s job is in the organisation, when we leave work we’re part of the community. One of the guys we may have employed to work as filling tins or running a line or doing something like that, he could be the president of the budgerigar club that I’m a member of, or whatever it is. So there’s more of an awareness of live, let live, work together and all of that sort of thing.
I think that’s a distinct advantage to any organisation to be in the bush, providing you’re not to far away from your market. And being an hour from Melbourne makes it that much better.