A clean sweep
Tuesday, December 11, 2007/
Craig Lovett’s company Cleanevent has transformed the venue and events cleaning industry. He talks to AMANDA GOME about how he took the company from $35 million to $135 million in six years.
Craig Lovett’s company Cleanevent has transformed the venue and events cleaning industry. Craig talks to Amanda Gome about how he took the company from $35 million to $135 million in six years, and he discusses the lessons he has learnt along the way.
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Amanda Gome: Tell us how it all started.
Craig Lovett: I started from a catastrophe. After 10 years of studying business from scratch and believing everything you do is fantastic, we hit a wall in 2001 when a prominent banking institution pulled the financial platform from underneath us at the absolute 11th hour and we very much nearly lost the entire business.
We had a platform of global funding from an Australian bank, one of Australia’s top four banks, that was banked on cleaning the events like the Australian Open Tennis, US Open Tennis, Wimbleton, Nascar across America, the Royal Ascot – whatever it might be. But at the end of the (Olympic) Games they decided they wanted to head in another direction and just pulled the platform.
Now what did you learn from that?
Well my Mum always said to me “trust the police, trust the clergy and trust the bankers” and I guess for all sorts of reasons I don’t trust all three of them.
So what did you do after that? You went and got equity?
I spent the next 18 months banking cash. I put everything I had in my life – my house, a few other assets – into the business. I didn’t liquidate the house but I borrowed as much as I could on it – put it back inside the business after 14 years of business. I only had it out for 12 months. I put it all back in again.
A fabulous friend, without being asked, double guaranteed my house, created another million dollars for the cash flow for me. I traded cash basically for the next 19 months while I searched for the right equity platform to be involved in and allow us to go to the next step.
I’m a Western suburbs boy from Sydney, and I always said I’d never allow my lack of cash to stop the growth of the business, but I nearly did that. I nearly screwed that up in 2001.
The overall lesson was, sometimes you’ve got to think about what the next steps might be. I should have taken equity in late 1999 early 2000, when we were as large as we possibly could be at $22 million annual revenue.
Maybe I should have taken a bit off the table and given a bit away, then but you know, I’d had an advisory board in place. Some of them had come from very prominent Australian business. They weren’t advising me then to do that.
No one ever expected the bank to pull its platform. This is a bank that came and chased us. I mean I had banked with National Australia Bank all my business life and this bank dragged me away from there with a deal that National could never do for us, and three years later we were in trouble.
What percentage of business do you know own?
Are you happy with that?
So who are your basic shareholders now?
The major shareholders are the Liberman family through Boris and Justin Liberman in Melbourne. They’re been the most sensational partners ever since they joined us in 2003. They’ve got 60% of the business. They’ve never stopped reinvesting in the product. They’re quite involved in our business at the board level. They stay in the helicopter, they don’t get too micro. They’ve been great value all the way through.
So what other tips to take your business from $35 million to $135 million?
Find the Liberman family. Overhire on the financial roles globally.
It’s people first, people second and people third – and if there’s enough time for anything else let’s think more about people as well.
So therefore you wish you could pay everybody everything you want to pay them. You can’t necessarily do that. But I employed them because if I’d looked at what the business was going to do in the next 18 months or the next two years, they were the right person at the time at the right money at the time. But where was the growth in that person?
On the operational side, we’ve 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 and employ them directly to be able to take that next step. 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.
You often hear entrepreneurs saying overhire on the accounting and finance side.
Overhire, overhire, overhire. But you mightn’t get it right first time.
Three years ago we bought a group CEO into our business, and to be honest we got it wrong the first time. 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. I wasn’t all that comfortable in the first instance with it, and then 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.
What was the mistake you made with that first gentleman?
Culturally not quite right. He saw himself as a bit of a rock star. A bit bigger than the business himself. Had a couple of personal health issues which didn’t help. And all that sort of cumulated in him being the wrong guy.
Look at our expenditure lines, not just our income lines. Those two guys put a different discipline to our business and together they’re a great foil. They make things happen I guess on a controlled perspective.
At the same time we’ve been out there going for growth, but controlled growth, and not building it in big lumps. We continue to look for acquisitions and we’ll buy a business if it fits, but I think what we have learnt is we don’t need to buy anything. We can organically grow anything with a good enough resource, putting the right resource to it.
How do you build the business globally?
It’s our major events strategy. I mean Atlanta Games, Sydney Games, Salt Lake City Games, Manchester Games, Asian Games last year, Commonwealth Games last year and Manchester in 2002, Salt Lake City Games, Winter Games in the middle of that. And all of that gets you great profile. And then it was just sold off the back of the profile. In fact we just had a little ceremony in the office today. Two weeks ago we won the Governor of Victoria export award. Now that would just be impressive, but we’ve won that four times. Four times in seven years.
We’re not selling a commodity, so we win these fabulous awards and then if we use those awards correctly and talk about our achievements on a global scale or a local scale to go global – and you know what, we just somehow seem to make it happen.
We’ve been involved in the major events business for many many years; it teaches you to go and create a solution.
Last year we went to Darfur and there was no labour on the ground. It was one of the worst labour markets in the world. Most of the labour comes from offshore, Bangladesh, Nepal, whatever it might be. We had to create a solution for 800,000 man hours of work.
And how did you do that?
We looked at what was available in the labour market. We decided that for the first time ever we’d subcontract everything and not use our own labour. We’d find a different way to do it, but what we would do, is not just subcontract every piece of the business, we’d manage and supervise ourselves right down to the area management area of 42 venues and then we’d employ labour.
They could be a cleaning contractor or a service contractor or whatever, we just took them all on board and trained them ourselves, inducted them ourselves into that training, made them work the way that we work, and then delivered a solution.
How do you keep an entrepreneurial culture when you are running a global business?
First you need a grounding, and that’s where key people like Mavro (Nicholas, Group CEO) and Dalla Costa (Ivan, Chief Finance Director) come into our business.
Let’s keep it grounded and let’s understand what we’re doing on a day-to-day – what comes in and what goes out. And then you empower people inside the organisation to make decisions in their own right. But if you’re going to empower them you’ve got to give them every piece of the empowerment. You’ve got to give them what we call inside our business the ARAs – the accountabilities, the responsibilities and the authorities – that go with it. Because you can’t empower anyone unless you give them all three.
So what do you give them? Do you give them all the figures? Are they accountable for budget?
Right down to the local level, so our day-to-day manager at Flemington racecourse, the foundation client we started with 21 years ago (we just finished our 21st Melbourne Cup), the guy that runs our venue for us has a day-to-day accountability; he runs his own business.
Has he got equity?
No. He’s got bonuses though. I’m not saying that’s not what we shouldn’t do and there’s no doubt that that’s where in future years we’re headed to, but you know, somehow you’ve got to maintain the control of the business.
We’ve grown at such a rate that the options of giving away little pieces of equity earlier at the local account level, we sort of went past that. And the next step for us is to look at, as we move forward with our business, to look at the top 20 or 30 people in that business and work out how we give all of them equity in our business.
Are you talking float?
That’s the dream. That was always the dream 21 years ago. I can’t imagine anything more exciting than starting a business and sending it to market, especially if some of that market took up offshore options.
Is that available? I mean is that what you’re looking at?
We’ve just got so much scope at our business at this point in time. Our business development sales funnels are bigger than they’ve ever been before. I think we’ve got sensational people in our business that are ready to take the next step to help us grow the next level. It’s not on today’s horizon.
If you’re at $135 revenue this year, what are you planning to do next year?
$175 million if we just grow organically, so on growth I guess $200 million.
What’s your last tip to grow from $35 million to $135 million?
Give yourself enough space to continue to dream.
What do you mean by that?
Well there’s nothing wrong with dreaming. And dreaming sometimes wakes up with a nightmare. You need to get enough space in your life to dream about where you go next.
In my wildest dreams, if someone had said to me two years ago what do you think about your opportunities of carrying out the entire service of the World Cup Cricket in the Caribbean in 2007, I would have said not a chance, we’re not anywhere near that.
But earlier this year we carried out 74 events in 12 stadiums in nine countries throughout the Caribbean, and we don’t even have an office there. So one end, to do a project, deliver the project, manpower, logistically – not as big as an Olympic Games, an Olympic Games is somewhere between 1.4 and 2 million man hours of work, so it’s nowhere near that _ but in terms of tough logistical works, it was tough. It was a tough place to do work. And we pulled it off.
And why were you were there?
I went over there from a business development perspective. Put on my corporate board shorts and a bit of white zinc on the nose and a couple of dreadlocks and set up myself in the region. But I wasn’t there from an operational perspective. It’s just having belief in people that have been with you for some time.
Another key point is looking at what you can do with scale. I mean we had a good look after Sydney (Olympic Games) on how we continue to grow our business in Australia and/or offshore. And we focused on the shopping centres. Now at that point of time, back in 2001, shopping centres across Australia were very prescriptive contracts. Someone told the provider how many staff to provide between what hours and the provider just gave an hourly rate for us.
We took our Cleanevent philosophy of fixed price qualitative cleaning services into shopping malls in Australia. And we were immediately rewarded with a couple of contracts. I guess a memorable day in our business was 1 July 2006 when we started 16 shopping centres on one day for the Gandel Group, now the Colonial Group, and they were like ‘well why don’t we give you these contracts over a few months?’ and we said no, we’ll taken them on one date.
And we did. Right across the country. Now a couple of years later, we’re doing 63 shopping centres across the world.
Scale and belief in the scale, while at the same time staying very niche focused on a qualitative solution, is the key.
Do a different market but stick to the same disciplines.
Calder Park Raceway. It was just an event that for numerous reasons got right out of control. I’d quoted Michael Gadinsky $35,000 to do the job. It cost me about $70,000 to do the job – at a time when $35 grand would have hurt. We finished the job properly and it was just terrible weather conditions, 42 degrees one day, 14 degrees the next. On the 40 degree days I’ve got St John Ambulance out there picking up people off the deck and rehydrating them in an ambulance four days after the event.
Anyway, at the end of the gig, I sent Michael a letter and said ‘look thanks for the opportunity. I just wanted you to know, that while I quoted you $35,000 it’s cost $70,000, and here’s the breakdown of whatever. But give me the opportunity, I’d like to do more work with you. I’ll get it right eventually but I hope you’re happy with the way we done the job.’
Later I got a cheque back from Michael for $70,000 and a $1 coin. And there was a note inside of the envelope and it said ‘Don’t let it ever be said you can’t make a buck out of Michael Gadinsky’. So while I might have screwed one up, I didn’t actually get it all that wrong because I reckon I picked the right guy to do work with.
OK, one more tip and we’re done. What’s your last one?
My last one would probably be the most important. I’ve one brother working in my business. I’ve only got one brother, I have no sisters, but having said that we’ve always had a very family approach to business.
I would think that people who are engaged in that business, if not all around the globe, would still acknowledge that the business is focused, as big as it’s become, it’s still very very family orientated. I’m sure there’s people from time to time wish they could be closer to the family elements of the business, but everyone can’t be everywhere.
We do have lots of brothers, lots of sisters, lots of siblings, boys, girls, daughters, brothers, whatever it might be, working inside the business and we do very much embrace people inside the business culture because that’s the [back] of the business we are, and if I could have it all over again, I wish my mother had been just been a little more promiscuous and I had half a dozen brothers and we could be in six more countries right now.
This is an edited transcript.