Andrew Northcott

andrew-northcottIn just six years, recruitment entrepreneur Andrew Northcott has transformed $800 of start-up capital into LSA Recruitment Group, which had revenue of $10 million in 2009-10 and has just launched a new franchise owner-operator model that is helping the company expand around Australia.

And amazingly, Northcott is just 26 years old.

Today he talks about surviving his first downturn, building a franchise model and how he’s avoiding burnout.

It’s been another bumper year for LSA. Are there sectors of the economy that are driving things for you?

Look, I think we are fortunate in that the business covers a range of sectors. We are certainly seeing that agriculture, which doesn’t get talked about much, is certainly moving ahead. Mining is certainly building momentum. But I think construction in the northern states it is still struggling a little bit, although I know Victoria is going quite well.

What is your sense of skills shortages? Are they starting to re-emerge or did they never really go away?

Good people are always hard to find, and while skills shortages are certainly not at levels seen previously, you can see it coming through now. I believe it has started beginning the first quarter of this financial year, you could see the impact starting to flow through.

Does that mean you’re starting to sense the sector as a whole picking up?

Yeah absolutely. We’re quite positive about the sector now. It was quite difficult there and there were a lot of minor companies that downsized significantly or didn’t make it through the GFC. The stats that I have heard are that 70% of the recruitment industry in terms of staff numbers and number of companies left during the GFC.

So I think it sounds a bit strange, but I do honestly believe that the GFC was the best thing that happened for us. In the business we spent a great deal of time focusing on efficiencies and developing our IT systems and support and we are a far, far better business for it.

This was your first downturn, how did you handle it. What did you do to make sure you stayed positive when you needed to?

In two words: hard work. I was fortunate enough to have some very experienced people around me and that made a huge difference. We saw the GFC coming quite early and reacted quickly to position the business to weather the storm. But from a personal perspective, I think I was quite fortunate to see a downturn at a young age. There were a lot of lessons learnt and to be able to learn them, you wouldn’t get that in a university degree.

What were some of the big lessons?

Run a lean business, that was number one. I think a lot of businesses, and probably it’s the reason why some aren’t around today, got fat and lazy.

I think another lesson is to maintain overheads as low as possible. You look at the business model with owner-operator model now, that whole business model is structured to pull all the overheads out of it. We centralise that in the national support office, we’ve got national operations, so all the owner-operators are not replicating the same systems. And that is an example of why I made that comment that this was probably the best thing that has happened to us, because we developed a model like this.

Take us through how the two sides of the business differ now. You started with very much the blue-collar focus, but what made you want to expand into the white collar area?

Well, the group, now LSA Recruitment Group, consists of Labour Solutions Australia, which is the initial business that focused on the blue-collar as you said, and LSA Recruitment, which is the owner operator white-collar professional recruiter. I guess I’m very passionate about providing the opportunity for professional recruiters to come on board and run their own business. I caught up with one of our franchisees or business partners in Sydney and I didn’t have to pay her to say this but she said that she was so fortunate to come across it and I get a real kick out of that personally. And look, the decision to go into white-collar recruitment was also off the back of demand for professional placements.

Using a franchise expansion model is also a way of expanding that allows you to manage your risk.

Yeah, absolutely. The idea came from looking at the finance or travel professions, and we have developed a unique model that really hasn’t been done in recruitment before. You look at a number of other professions, they operate on a partner basis and that is what we are doing. Yes, it minimises the risk in growth, but more so we see it as a unique opportunity in an industry that hasn’t had an owner operator model. I guess that is why we developed this.

How did you put the franchise model in place? Did you go to franchise specialists to get the model right? It is not easy to come up with that from scratch.

No, look we have been working on it for three years now from all aspects, whether that be legal or strategic, the structure of it. Then we really went to the industry’s best people. In terms of the legals we had Norton Rose, they’d be considered certainly the number one in franchise law. We had Troy Hazard, I know him through Entrepreneurs Organisation, he worked with a number of systems like Eagle Boys and Subway Australia, so we had him help us. That was great and now we have people like Damien Morgan, who help us with our marketing. All the professionals, contractors, suppliers, they have all had exposure to franchising and I guess that has been the key.

That said, we are not really promoting it as a franchise, we really are promoting it as an owner operator model whereby people can buy their part of LSA Recruitment. So for example, you can buy banking and finance in Sydney and you would own that territory exclusively. That is what we mean by owning your part of LSA recruitment.

Although you still have to abide by the Franchise Code.

Absolutely, and we chose the franchise model from a legal perspective as it gives each of the owner operators flexibility. They are creating value in their own business and they can sell it at some point.

What has been the toughest part of getting that business right and getting it off the ground? I guess perhaps managing the expectations of a whole new set of owners?

Look, it has certainly been a learning curve and I guess if you could pick one thing it would be getting the offering to truly reflect what professional recruiters are looking for and you know, we have made a number of changes along the journey to ensure that it is. An example of that would be we’ve now implemented a guaranteed earnings clause for their start-up period to take away that risk of shifting from employee to business owner. Just little things like that make a big difference to someone when they are looking at going out on their own.

And have you found yourself having to get more involved in coaching and a bit of mentoring yourself?

I enjoy that side of it. You have to be able to get involved in their businesses at a strategic level and help with implementing strategies that have allowed us to grow quite quickly. We are the fastest growing recruitment company in Australia. And we have engaged trainers and business coaches to help at an operational level. They get a hell of a lot of support and combine that with the IT systems they really hit the ground running and do what they do best.

What have you found challenging about managing the pace of that growth?

I guess in the early years, years three and four of the business, we had similar levels of growth and I learnt a lot from that period. Look, I think if you picked the top few it would be that the right people are critical. A lot of people say that but it is absolutely true. Having the right people on board and the right systems to support them, that’s the key. You can support rapid growth if you have got those two things right.

In terms of managing your personal work load, what have you done to make sure that works?

Look again, probably having the right people around me to support me. I guess that would be key.

Have you had to concentrate on time management or have you had to get better at saying ‘no’ to things?

Yeah, definitely. And ensuring my time is spent at a decision-making or strategic level, that has been critical. If you get dragged down to an operational level – and sometimes you have to understand what is going on in the trenches – but you have got to be careful not to get bogged down in the operational side and really ensure that the strategy that has been decided upon has been implemented and maintained.

Looking ahead at the next 12 months, what are you looking at planning to focus on? Is it really building the owner operator side of the business up?

Yeah, absolutely. That is our core focus over the next 12 months, to really build the owner operator side and it is exciting in that no one has done it before.

How hard is it to recruit recruiters at the moment?

Well, a lot left the industry so given that there is a lot of momentum in the industry, we are seeing some of those recruiters come back in. And a lot were sick of the KPIs and the management structures under the traditional model, and I guess that is why we are seeing an increase in applications. The people that want to get back in the industry are saying there is money to be made but they don’t want to go back to the KPI driven model so they are looking to go out on their own and I guess get that support.

And I guess that is the big lesson from all these franchise surveys we have seen of late – where disputes occur it appears to be where support levels are low and communication levels are pretty poor.

Yeah, and we have got a lot of processes that create that throughout the owner operators. Certainly having myself and general manager accessible at all times, and we are putting processes in place to ensure that that is maintained at all times so as the growth comes I think that’s critical. That is our role – to support our business partners – that is all we have to do.

Now you are 26, what are you doing to ensure that you aren’t burnt out at 30? Is that something that you have to keep in mind every now and then?

Yeah definitely. It has been very hard for awhile now and particularly through the GFC it was hard work. I really love what I do but I think it is important to maintain some balance. You are never going to have the balance that a nine-to-five job has, but I would be bored if I was doing that. So I think ensuring little things like exercising, eating properly and making sure I have a beer with my mates, I think they are the really important things.

Absolutely. Do you think about an end date and what you would like to be doing in 10 or 20 years?

Yeah there will be an end at some point but I very much see myself as being involved in the business for a long time. I have got a lot of years left, so while I guess my role will transition as time goes on, I want to maintain involvement even if it is at a board level.

We should stop talking like you are going to retire…

I think I have got awhile to go yet!

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