The accidental entrepreneur

Who’s talking: Christine Christian

Talking to: Amanda Gome
Company: Dun & Bradstreet


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Christine Christian is the chief executive of Dun & Bradstreet Australia and New Zealand, which provides business intelligence, credit reporting and collections. She is not officially an entrepreneur but she’s acts like one.

In September 2001 she launched a successful management buyout of DBA with some of her staff and just recently they sold 90% of DBA to investment bank Carnegie Wylie & Co, leaving Christine and her staff with 10% of the company.


She talks to Amanda Gome

Amanda Gome: You’d been with DBA for about seven years and you’d done a lot of operational business development role. What made you want to move into that ownership role in 2001?

Christine Christian: We were considered by the D&B corporation as really not strategically important. Australia and New Zealand comprised about 1% of D&B’s revenue so really didn’t get a lot of focus.


There was also a significant change in the Australian economic climate. GST had just been introduced and businesses were now focusing on cash flow. They needed to generate sufficient cash to meet their tax obligations. This is following the dot-com boom, where it was all about revenue so it was like two worlds had collided. On the one hand we, as management, saw an incredible opportunity to significantly grow the business.


In order to unleash or have the ability to truly unleash the opportunity here in Australia, I approached the executive of D&B corporation, who gave us a very good hearing. It was put forward as a win/win. A solution for them: they could monetise their asset here and reinvest the proceeds in other parts of the world; and we, as an Australian management team, could find a local investor who truly understood the opportunity here in Australia.


What was the major business you were in and why did that mean that you could see possibilities?

Well the D&B Australia and New Zealand business, D&B Corporation Worldwide is primarily involved in credit risk assessment and debt management. It’s very much a growth industry, very much focused on helping our customers improve their cash flow. It was a unique opportunity in that we were just moving at that stage from a dot-com boom, where most businesses were focused on revenue, so profit and cash wasn’t as important. But with the introduction of GST, with businesses needing to meet their quarterly tax obligations, that meant that they had to be a lot more clever about improving their cash flow and that’s where we came into our own as an industry.


And you obviously had some really good staff that you felt that you were comfortable doing a management buyout with?

Yes. One of the key attributes of this company is that we have got a lot of very smart and committed people working for D&B. They certainly saw the opportunity and got right behind the buyout. They have been instrumental in taking this company from where it was to … as I said earlier, we’ve more than doubled the size of the business.


And so you’re $80 million revenue now. What are the major strategic steps you took from 2001 to now to double the size of the revenue?

Well, we were certainly very clear about the opportunity that was lying latent in the business. There were a number of industry drivers that created that opportunity. First, we are currently in an amazing credit economy – outstanding consumer business – and government debt continues to grow at phenomenal levels. The industry’s also witnessing historic levels of M&A activity … number of transactions. Offshoring is certainly reshaping our industry. Technology is allowing us to be a lot more effective in terms of assessing risk with a high level of predictability but also collecting outstanding debt with a lot more certainty, so the industry has, in a word, evolved and has become quite sophisticated.


And what were the major strategic steps that you took though. And where did you get that advice? Did you do anything overnight that enabled you to have a big boost in revenue?

Yeah, look there were probably two key areas that led to the value-creation in this business. First, we established a consumer credit bureau. We knew that this was an opportunity and particularly our major customers had been urging us for some time to create some competition. Up until then there was only really one player – the consumer credit area was really managed by one company. The market was looking for competition and given our pedigree was in commercial credit reporting, it made sense that we would enter the market and create competition. So that has proven to be significant initiative on our part and we are well ahead of plan three years after establishing this venture and continue to receive support from the major lenders.


The other area that we established was our receivables management outsourcing area, with offshoring pressures on smaller companies offsetting growth and a lot of businesses looking to continue to create efficiencies in terms of managing their debt. That created a unique opportunity for us to start what is called first-party collections. That is when companies outsource their credit department to us and we collect in their name. However, we use our own know-how and our technology to deliver the results that they’re looking for.


And how is your industry changing? In the United States, for example, there’s a move towards people being able to access their own credit files and things like that. Is that an opportunity you’re looking at here, how are you seeing your market changing and where are you going to take Dun & Bradstreet now?

Well, certainly we’re now looking to take Dun & Bradstreet to the next level. As our industry continues to evolve it’s now a much more sophisticated industry and poised for continued growth and we see that growth coming from our consumer credit business. Consumers in this country are becoming a lot more savvy about the need to have a good credit rating. More and more credit is being used as really the major form of currency, so we’re seeing not only our industry growing and becoming sophisticated but we’re also seeing consumers in general becoming more sophisticated. Many of them are looking to purchase their own credit file and certainly many are seeking more competitive rates for credit and as a result of that we’re seeing more transactions.


So you can purchase your own credit file now? How much does it cost if you’re a small company?

Well if you’re a small company, a small business, you can purchase your credit file for as little as $50 to $100 depending on the depth of data, and having a good credit file is very important because it’s almost like building collateral. The better the D&B credit rating is on your business the greater ability you have to negotiate good credit terms.


And the purpose of actually accessing your file is just to know where you stand and how can you then improve it?

Exactly. It’s firstly how you stand because there are many businesses, particularly small-business operators, who just may not be aware that there is a credit file. A credit file does exist on their business. If a business is a registered business and is actively trading in any way then there will be a file sitting on the D&B database and there is a great ability to improve that credit rating by supplying good positive information about the business’s past performance.


So do you have to provide figures to you? What sort of figures would you need to improve a rating?

Well, trade reference information, so names of major suppliers. That way we can verify whether a business meets its obligations on time. That plays a very very big factor or part in a business’s credit rating or score: not defaulting, ensuring there are no judgements or defaults on the file and also providing us with the right of reply to the data that we already have, so there is a great opportunity for small businesses to improve their credit rating.


And what percentage of them actually do that?

Quite a large percentage do. A growing percentage. Certainly the big end of town are well aware of that and that is at a very great level, but we’re starting to see the emergence of small business owners taking control of their business. Many of them start their businesses as a result of a profession. They may have been involved in the construction industry, for example. They may be very good at construction but have not a great understanding of the financial implications of their business, but we’re starting to see small business owners become a lot more savvy in this area.


What are some of the other trends that are emerging here from the United States in the credit area, and where do you see your greatest revenue increase in the coming years?

What we’re seeing in the States is that more and more businesses are relying on a score to determine whether they should extend credit or not, and those scores rely less on human intervention. So in other words we’re seeing our data, our commercial credit information, being delivered down distribution channels as opposed to texted reports. So the need for our data to become machine-readable, which means lenders and business owners will be able to use D&B data or credit information before entering into any transaction, as opposed to the top 20% which is what we were seeing a decade ago. It’s a lot more affordable.


And what would be the cost, say, for an average small business to do that?

There are many small businesses who invest as little as $2000 to $5000 per annum to risk assess all of their new customers and their existing customers, and more often than not it prevents one bad debt. You can prevent one bad debt of $2000 and the service can pay for itself.


Just out of interest, how many bad debtors are there. We talked about debtor days … is it 60? Where are we at this stage?

We’re around the late 50s, so most businesses take 50 days to pay their bills and the problem is, when you’re a small-business owner and you’re at the end of the food chain, that 50 days can be the difference between profit and not or reducing your banking costs.


And what percentage actually don’t pay, end up defaulting or simply not paying bills?

It varies depending on the state of the economy. During a benign economy as we’ve seen in the past couple of years we have seen … we saw a reduction in the number of defaulters, if you like … commercial defaulters. We’re now starting to see a real shift. We’re starting to see increases in the levels of default, which means all the more reason why collecting your overdue debts and staying on top of debt management is just so vital, as we’re starting to see a change in the credit cycle.


Have you seen a shift in small business being more active about collecting their debts and more willing to tackle big business over late payment?

Unfortunately not. We really do believe that small business should act more like big business and many small businesses often feel intimidated. There’s no reason why they should not call in their overdue debt just as readily as the big end of town.


What’s the most effective way of getting someone to pay at the big end of town?

Ensuring that when you enter into a new arrangement, you sign on a new customer – it’s at that point that you state very clearly what your credit terms are, and the implications of the big end of town not paying. So that way you’re just managing expectations right from the outset. So when the account is overdue they’re already aware that you will be picking up the phone and reminding them to pay. So we believe that if you do a credit check right from the start, which is very inexpensive, to ensure that you’re not extending credit to a potentially insolvent company and you get a completed credit application, which clearly states your terms of credit. That’s going to stand you in very good stead.


Do you ever have bad debts?

Dun & Bradstreet?


Yeah. Have you ever had one?

Look, it’s like most businesses. Do you ever see a plumber’s tap drip? We get caught out every now and then but we basically factor into our overall bad debt provisioning a small factor for unforeseen events. Some businesses will go under regardless, but certainly we know, given the level of defaults, that we do a pretty good job in collecting our overdue debts.


One would hope so. Now what was it like going from being an employee to running a business?

Well it was a major shift, from supporting someone else’s strategy to having to create the strategy and deliver on it and it was very empowering. It also allowed us as a management team to become a lot more productive because being owned by private equity, focusing on the key financial metrics that they used to measure a business certainly helped us sharpen our focus and become a lot more productive and with a very strong focus on achieving the right rate of return on any investment dollar that we deployed.


So in 2001, was it difficult to find the equity support back then or were you approached by … ?

No, surprisingly not. We sought out our equity partner and surprisingly it wasn’t difficult. I mean given I had had no experience in this area at all, my initial reaction was that that the hardest part would be to find the capital. As it turned out that was the easy part. There was a lot of capital around so it sort of debunked that myth in my own mind. What was important was finding the right private equity partner, where there was a good alignment of interests. That was probably the most difficult and, as it worked out, we were very happy with our first private equity partner. They believed in our story.


And they were?

AMP Capital.


And then Carnegie Wylie has just bought them out?

That’s correct. We always knew that we had a horizon of about five years from the date that AMP Private Equity purchased the business and the exit, and we successfully exited and AMP were very happy with the outcome. We’ve now got a new private equity backer, if you like, being Carnegie Wylie and we’re now moving into the next phase of our business.


And how do you see the challenges going forward, as CEO and running the business compared to what’s past?

Well it is going to be different. The next phase I would characterise as probably being harder than the first phase. The first phase was about ensuring that all the right fundamentals were in place, that we achieved the efficiency gains that we were looking for in the business. The second cycle is where you’ve got to put your plans or agenda for growth into action and to ensure that there continues to be very good alignment and that you read the market very well. So the first phase was about financial engineering and getting the efficiencies right. The next phase is all about growth and committing to a new vision and harnessing the opportunities that continue to evolve in our sector.


And you would think the next stage for you you’d float?

Potentially. I mean that’s always a potential exit option but the good news is that in the current climate – and who’s to say what the climate will be in three years – but in the current climate the good news for entrepreneurs and businesses is that we just have so many options available to us, to ensure that we deliver the right liquidity strategy to our current owners we can float, we can sell off again to another private equity. We can be part of a larger group. There’s still a lot of consolidation that will take place in our sector so the good news for me is that the options have never been greater.


Now you’ve just had Adrian Giles from Hitwise being bought out by one of your competitors. What’s going to happen there? How is the market changing?

The most exciting thing about this sector is that it is a growth sector and it continues to change. Technology’s changing. The fact that credit continues to grow at such a high level means that industries such as ours need to continue to invest in good analytical tools to determine how to best extract the most from the outstanding debt, but also in this revolving credit cycle. So I was not surprised that a company like Expiron would want to buy a company like Hitwise that has very good analytical tools. We as an industry will continue to deploy analytical tools and technology to ensure that we extract the most value from the portfolio that we manage.


And just looking ahead, Christine, what do you see as the hardest challenge for you as an entrepreneur? Is it finding good people, especially young people to staff the company with or what is it?

Anyone can buy strategy. You can rent a strategy. You can bring in a consultant. Strategic plans are not hard to come by. What is hard is making that strategy come to life. It’s all about execution and I’m a firm believer that execution is a function of leadership and having good people, clever people, committed people being able to execute effectively. So for me people come first – bringing the best people into the business.


And with this skills shortage, how are you going about attracting them?

Well, certainly clever young people like to feel as if they’re making a contribution, that they have an opportunity to help create a strategy and deliver on that strategy, and recognising the importance of having extremely smart and highly creative people. The only way to attract them and to keep them is that they’ve got to feel as if they are making a difference so as a result of that we ensure that they play a major role in the business, in shaping the strategy and delivering on it.


And what’s the best way of getting them?

There’s a lot of ways of getting them, but having a company that is focused. We’ve got some very strong guiding principles, which many young people are very attracted to. There’s a lot of proactive empowerment in our business. We’re focused on results, on personal accountability. Ensuring that they’re very proud of what they’ve delivered. A lot of straight talk with respect. We don’t spend a lot of time politicking and that’s all very attractive for, particularly, Generation Y, who don’t want to just be a passenger; they do want to feel as if they have some involvement in a business.



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