Survival of the fittest
Wednesday, May 9, 2007/
IT solutions entrepreneur Dave Stevens found a niche that was underserviced, and has grown his business out of that to a $33 million success. He shares his story with JACQUI WALKER.
IT entrepreneur Dave Stevens started Brennan IT and Secure Telecom in the late 1990s. He survived the dot-com crash, and in less than 10 years has built his business into a group that employs 120 people and turned over $33 million in the last financial year. He shares his experiences with Jacqui Walker.
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Jacqui Walker: Dave you founded the first business in 1997. What was the niche you found and how did that come about?
Dave Stevens: The niche we found was around the supply of IT solutions to the smaller and medium size enterprises. What we found was that the majority of mid-market firms were really not satisfied with the IT that they were getting.
They were essentially being sold to by resellers who were just interested in selling PCs and servers and kind of connecting them all up and then running out the door. The only business objective achieved was that the PCs could talk to the server some of the time and that they could perhaps print. Sharing accounting systems and making productivity gains weren’t realised.
And what were you offering that was different?
I found that I was training a lot of the senior network engineers around the country and in 20% of each of my classes along with these professional network engineers was secretaries and accountants and whatnot who were coming along to become an expert in five days as to how to run these networks they’d just been left with.
What we started off with, Brennan was to offer really a business solution for our clients. So we would understand what their business requirements were, build them an IT system, implement it and then go on to manage it for them. And that was something that was a huge niche in the market.
And so you grew very quickly. Can you tell me about how you did that?
It’s all kind of word-of-mouth and referral and organic growth for us, especially in the first few years and all around being located in Sydney. The real essence to the growth and success of the business has been around referrals and its been around recognising what the real [long term] value of the client is and making sure that we do what we can in order to get through the short-term hurdles and challenges that pop up with clients from time to time, and just making sure that we lose very few clients.
We have a very referenceable client base that they’re happy to refer us on to other clients, which they do regularly, and it’s just meant really good profitable growth for us.
So it sounds like the business is built around your staff and relationships, so what’s your philosophy in managing staff? How have you done that?
We subscribe to the Harvard Business School’s theory as far as this goes, that the relationship that we have with our staff and the satisfaction that our staff are feeling directly corresponds to the satisfaction that our clients are having in dealing with us. And that has an absolute hard-wired effect on our profitability as well.
So we’ve been very good and we’re getting better all the time at keeping our staff satisfied and developing them and giving them avenues to grow and engaging them really.
How do you do that? I guess if you’re growing you can offer them more opportunities, but specifically how do you do that? I have read that you have an up-or-out mentality in your office. What does that mean?
We absolutely have an up-or-out mentality, and that’s either onwards and upwards and improve and get bigger and better etc, or perhaps this may not be the right environment for you, and that’s the out component.
That’s a philosophy and the way that that works into practice is that it’s about achieving satisfaction for an employee – which is not about happiness and the size of their pay cheque. It’s about making sure that we find employees that really want to deliver the sorts of service that we deliver and who get real satisfaction from that.
Does that mean that you pay more than your competitors pay in salary?
We generally pay slightly above market, but to be honest I don’t think that’s the real reason why people are attracted to us or stay with us either.
What is it exactly?
It might sound like an odd thing to be passionate about, but we’re really passionate about delivering on these business solutions for our clients and making sure that when their service goes down at two in the morning that we’re there to bring them up and they don’t lose productivity.
We’ve got a set of values and culture that we hold really dear and that we promote really strongly, and the people that work for us are really proud of those things.
When they move on from us and go into other organisations they’re very proud of the fact that they worked for Brennan and they’re very technically skilled. They’ve worked really hard and that’s really good for us.
That’s great for your clients, but does it make it hard to offer things like workplace flexibility, which people talk about as being something that you must offer these days to keep good staff because there’s a skills shortage.
Look it does. It makes it hard to offer the work-life balance lifestyle features and it would be fair to say I suppose that our culture really isn’t strong on work-life balance features for our employees.
But the important thing for us is that the employees that really thrive and prosper in our organisation. They’re much more interested in career advancement and working really hard and delivering results and being successful and that sort of thing.
In the early years of growth, what challenges did you face? I understand that you eventually bought one of your early business partners out. Can you tell me about what happened there and what you learnt from that experience?
I learnt from that experience not to have a business partner, I suppose.
Having a business partner was I think a good thing in the early years and it sort of allowed you to share the load and derive motivation from each other, but in my case I found as we achieved some early success that that was really perhaps providing my partner at the time the satisfaction that he was looking for.
He was perhaps happy to keep the business the size that it was at the time, and that was definitely not my motivation and not what I wanted to achieve.
So as those paths diverge it’s really a matter of either (a) learning to live with it or (b) doing something about it, and I choose the latter and made him a good commercial offer and purchased his shares in our business.
Was that a tricky process?
That’s not an easy process really, because you’ve worked together for a long time, you know each other really well, you’re both kind of aware of what the prospects of the company are and it’s a matter of (a) deciding or convincing both parties that it should be done and then (b) settling on a price.
If you had your time over would you have started on your own?
I would have to say without any disrespect to my partner at the time that I would. I would do it by myself.
And have you taken on other investors or equity investors over the years to keep growing at this pace?
Not at all. We’ve been really focused on not diluting it all. The only exception to that is that we are in the process of implementing an employee share option plan and we’ve moved 10% of the ordinary stock into that, and that’s going to be a motivation and retention tool but it worked really well for us, but no, we’re not finding that it’s difficult to raise capital.
We’ve got a very good relationship with our bank and they fund us into acquisitions and fund us into cash we need to grow.
And you survived the tech crash. Was that a difficult time and what did you learn from that?
It was a difficult time… it’s the time that we sent the pot plants back basically. We had some cash flow issues and it really snuck up on us without us realising the way that cash worked. I think it’s an easy thing to get wrong especially for a young business, so we immediately took as much costs out of the business as we could.
Have you kept that mentality even now?
We’ve definitely kept the focus on cash and the understanding of how that works. But no you learn that these things can be a little bit short term and that you can ride over these speed humps. Especially the bigger your balance sheet gets the more able you are to cope with things like that.
And so what have been some other challenges that you faced as you’ve built the business?
Cash flow was a significant one. Learning how to employ and how to manage staff I think has been a real challenge for us, and that’s not something that I don’t think ever really changes. It’s a continual challenge and it’s one of the real differentiators in business I think, so that’s been a really rewarding learning path for me especially.
Are you into all that 360-degree feedback and do you go away off-site? Do you do that team building stuff or is it a one-on-one style that you have with managing staff?
We use a variety of things like off-sites and 360-degree feedback and competency frameworks, and there are lots of really good tools, but at the end of the day it’s about being able to have a one-on-one relationship with a person and getting to know and understand what motivates them and what gives them that source of satisfaction.
You also need to be prepared to either be able to deliver it or be honest with them that you can’t deliver it. And I think that just that general understanding of how people work and being genuinely interested in them I guess is probably the number one prerequisite.
And so what’s next for the company? You’ve recently rebranded as Brennan. What are your plans? You plan to increase your turnover significantly in the coming year. How do you plan to do that?
We’ll do both organically, so we’ll grow by up to 40% organically, and then we’ll do some other acquisitions as well and that may yield another 40% to 50% growth for us. We could post anywhere from 80% to 100% growth for the current year that’s just closing.
So what acquisitions have you done to date, and what have you learnt through that process?
The most recent acquisition for us was a firm which was one of Brisbane’s largest corporate data providers, a company called I-Exec, and that was our first large external proper acquisition. Key learnings from that?
Probably that integration is always going to take you twice as long as you think it will and cost you twice as much. And that you shouldn’t under-estimate the challenges involved with the merging of two cultures is probably the two keys, but it’s been very financially rewarding for us and we’re very happy with our investment, and it’s absolutely a growth path that we’re going to pursue into the future.
And in terms of IT, you’re still servicing small medium sized businesses?
Yeah, absolutely. And will continue to always do so really.
What are you seeing at the moment? What’s the trend among small and medium sized businesses? Are they using technology as well as they could be?
Probably not at all really. There are two trends that I think that we’re seeing from our interactions with our clients and that we’re always seeing out of the IDC research that we recently sponsored.
One is the real drive by small to medium businesses around a single source supplier so they want one company that provides their voice, their data, their IT services, their business applications and they want a really cohesive and strong relationship with that company.
The second really substantial thing to come out of that research was also that the majority of small to medium enterprises are really focusing on IT as an efficiency cost reduction kind of play, where it’s about doing perhaps more with the same amount of assets or it’s about stripping some cost out of the business.
There’s about 25% of businesses that focus on creating a competitive advantage for themselves using IT and that’s something that I think is going to change significantly. In the corporate area the focus on competitive advantage from IT is much much higher. It’s like 75% and above, so we’ve really got the reverse happening in the small end of town if you like.
So a lot of room for improvement?
Absolutely, and I think that my personal take on that is that the reason why we’re here is because there was such a dearth of talented companies providing service to the mid market, that I think there’s a lot of bad systems delivered.
There was a lot of broken promises and I think the mid market is still a bit cynical about IT and that over time – and let’s hope that that accelerates –they’ll welcome IT as a source of competitive advantage. They’ll invest in it a little bit more heavily and they’ll get what they want out of it.
And what about web 2.0, things like blogs and the other ways that companies are embracing web 2.0? Do you see much of that among SMEs?
I see the staff of SMEs reading them during the day. There’s a lot of web activity that’s not productive, and that’s generally on the increase from the reports that I see and the anecdotal evidence.
But the one that really stands out in my mind I think as adding some particular value are the Wikipedias. I think that’s been a real… or is starting to be used as a source of funded knowledge capture and as a source of intellectual property. A place to store it for a business. That’s a really clever use of it I think.
And that’s where a group of people in a business work on the same documents together and they can all amend them and so on. Is that right?
Yeah, it’s kind of like a database that allows everyone to basically put in or to capture their experiences for the day so it might be around ‘I had a tech support call where this happened and that happened and this was the outcome and the customer’s really delighted with that’ and it allows the database to be indexed and searchable using natural search terms so you can… it’s basically about building up an encyclopaedia of your business and it’s a really great way to capture your intellectual property.