Burnout caused entrepreneur Reuban Buchanan to sell his magazine Wealth Creator. He tells AMANDA GOME about the struggle to build the company, lessons learnt and why his new ventures are all online.
By Amanda Gome
Burnout caused entrepreneur Reuban Buchanan to sell his magazine Wealth Creator. He tells about the struggle to build the company, lessons learnt and why his new ventures are all online.
Get business news first
Sign up to SmartCompany’s daily newsletter
Reuben Buchanan is the founder of the magazine Wealth Creator. He started the magazine in 2002, not because he was interested in publishing but because he wanted to be an entrepreneur. Three years later, burnt out and exhausted, he sold it to wealthy investors.
But he did not quit publishing. Instead, he has become involved in several other magazines and websites and working in investment banking. We are going to talk to him today about the online environment, what it is like selling and leaving his baby behind and what is next for him.
To download this mp3 file and listen to it later, right-click this link and “Save target as…” to your computer (Macs; option-click).
Amanda Gome: Wealth Creator was quite a successful magazine; what was your background, why did you start it, and what happened?
Reuben Buchanan: I first started in property and then I moved into sharemarket trading and education with a firm in New Zealand. And then I just really wanted to move out into the business world and become an entrepreneur. I had seen so many people on the BRW Rich List who had done it, and I was just really keen to do the same sort of thing.
I didn’t have any background at all in publishing or media; I just had a sales background and had an understanding of the investment, wealth creation landscape. So I just came up with the idea, I thought ‘Wealth Creator, no one is doing that, it’s a good name’, and literally just did it all by the seat of my pants.
What was the hardest part? Learning the art of publishing is hard. You are up against very experienced companies.
Yeah, I think the fact that I didn’t know much was really advantageous, I think if I had of known what I was getting myself into, I probably wouldn’t have done it.
So many entrepreneurs say that.
But it was just incredible. I never went to university, it was really ‘business university’ for me.
The hardest thing?
It was really difficult for me to make the transition from working as an employee, to actually trying to start a business at the same time. I was working incredible hours the year before it started; it took me 12 months to get it going. And selling the advertising is always a massive challenge because the magazine had no credibility. I had no background, it wasn’t like I was coming from a Fairfax or an ACP. It took me a year to sell enough advertising to actually kick the first issue off.
Really? How persistent.
There were so many opportunities for me to just say no, just to let it go. Every week, every day, I was just faced with different challenges, but I was just so determined to start my own business and I just wanted to get the first issue over the line.
What package did you put together for the advertisers that made it attractive?
I just did any deal I could with them. Whatever they were happy to do, I was happy to accommodate them and I was trying to convince them that they should just give it a go for the first issue. The key thing that I learnt is that I had to do something that was different. And I knew obviously what BRW was doing, I knew the various different competitors.
I really researched them a lot and understood their price points and what market they were targeting. I was trying to appeal to a completely different market that wasn’t already appealed to. I was obviously explaining that to advertisers and they believed me and they came on board.
I did quite well in the first issue in terms of advertising, and the advertisers that were in it did really well, so when the mag actually went out they got a great response and it went from there.
What worked, what was the success of Wealth Creator?
I think really the name and the area that it targeted wasn’t being covered. The mag has been going for six years and it still going strongly under the new owners. It owns that wealth creation niche. We didn’t try and be all things to all people.
Also you’ve got to fit within the sector and you’ve got to work with them. I still speak to the people from Dynamic Small Business today and I got to know Tony Featherstone when he was at BRW. You have to try and collaborate and try and bring visibility to that sector and help everybody.
How did you go about marketing on a small budget?
Well, my marketing was mostly through joint ventures. I’d find companies that had databases, they were mostly my advertisers, and I would then do some kind of a deal with them where I was able to give them magazines, or access to databases, or subs offers. I didn’t have any money for marketing, and I think over the three years I only spent about $100,000 to promote the magazine in actual paid marketing. A lot of the advertisers in Wealth Creator were different event companies and so on, so I’d always give them mags and give them free subscriptions.
How long did it take before you were profitable?
It took about 18 months before the business made any money. I suppose the business was never really that profitable because I didn’t take the salary that I probably should have. That is very typical of most small businesses.
What did you end up taking?
I was only ever on $50,000 a year. And that is not really what I would be worth and certainly if I had brought in a publisher, an external publisher to run the magazine, I would have at least had to pay them $100,000 or a bit more.
What was your revenue after a few years?
We were doing about $1.5 million. We got to that fairly quickly because you just have to hit a certain amount of revenue per issue in order to pay your costs and so on. But it wasn’t just the mag, we had events. We had a whole event business running, that did about 70 events a year, different seminars and we had a wealth networking club. We would invite different presenters and we did the entrepreneurs course. We also had the TV show and a radio show as well, so Wealth Creator was about six or seven different business units and that all collaborated together to promote the brand.
How did the seminars go? What was the model that worked best for those?
Everything was about promoting the Wealth Creator brand. All the people that read Wealth Creator wanted to really meet and touch and feel the entrepreneurs that were in the mag. So I would really nicely ask these entrepreneurs to come and actually do a talk, and it wasn’t about the money because they’ve got plenty of money but because they had the relationship, because they had exposure in the mag, they were happy to come along and do a half hour talk about their key to success and that sort of thing.
Then I would invite the subscribers and the readers to come along, and actually listen to it and then off the back of that we did other events as well, so we did a two day entrepreneurs course and some other bits and pieces too. And that was the model.
Now, what happened in the end? You took in a venture capitalist and then they ended up owning the company?
I consciously wanted to exit the business and get involved in more of what I am doing now, which is investment banking. If you remember, I didn’t start the magazine because I wanted to be a publisher or own a magazine. I started it because I just wanted to get into business, so once I was in the business of being a publisher, it wasn’t really me. I didn’t really enjoy it.
It is a very hard game. What is so hard about it?
You have to meet those deadlines. With most businesses you can let things drag on because you are not actually meeting a deadline. But in publishing you have to meet the newsstand deadlines. So there is no relaxing. As soon as you have nailed an issue, you don’t even celebrate, you are thinking about the next two issues and what you are going to put in there. It is very deadline driven, but it really makes you work really hard and I have learnt a lot of disciplines and so on, out of running that magazine. It really has taught me everything in terms of business and what I am doing today.
Who bought the business?
It was a group of investors who are in the media space, and they invest into various different media assets and they were adding it to what they were actually doing.
I can’t talk about the actual details of the actual transaction.
You can name who it is?
The gentleman was Nick Assef and a bunch of his investor friends.
Did you approach them for private equity and did it go from there?
Initially I was looking for a sale, and he was referred to me through a contact. He basically is an acquirer; he’s not someone who wants to take over a business completely. I initially approached him to take the business off my hands and he decided that it was a good asset and we could actually build it up, to maybe acquire other businesses. The deal that we ended up doing was they injected capital into the business for equity, for a controlling stake, and I retained a certain amount of equity and I stayed on as the CEO.
We were going to work together to actually buy other media assets and build it up into a bigger beast so we could eventually sell it. That happened for about six months, and I went from being an entrepreneur into being an employee and it just wasn’t working, so I decided it was time for me to leave.
What is so hard about that?
I am basically incredibly unemployable. I can’t work for other people; I have to do my own thing, and the reason why I jumped out and started a mag was because I wanted to be an entrepreneur and control my own destiny and make my own decisions, and make my own mistakes. Going back and actually working under a board type structure, just didn’t suit myself. We just decided that the best thing was for me to move on.
Did you sacrifice money then because you would have done a deal based on an earn out?
Look, anyone who sells a business for the first time always looks back and thinks they can do a much better deal, and of course I could have done a lot better.
So what would you have done it differently, taken a loan?
It actually worked out quite well for both of us. And they have taken the magazine to the next level, I think it looks really good, and they have obviously increased circulation and so on. They did close down the events and the other sort of bits and pieces that I was running because that required a lot of Reuben. I was at the events, I was hosting TV shows – it was hard for them to maintain that, but I think the testament to the success of a company is that if you sell it, it actually keeps going because I know a lot of people who own a business and as soon as the founders walk away the business falls over. And that is bad for the buyer.
You know you don’t want to sell a business, then exit and the buyer is left with a bad purchase. I’d feel that the whole exercise was a bit of a failure if the magazine wasn’t still going today. And I hope that it is round for the next 10 or 20 years.
What was your next move once you left there? Were you exhausted?
I took about six months off. I worked seven days, 24/7, for like three years. I didn’t take any holidays – I mean the business was like the ball and chain, I couldn’t leave and I was also in Melbourne as well.
How many employees did you have?
About 12 and we all worked a lot, no one worked as much as me, but we probably did the work of 24 people. Of the 12 people that were there, I had incredible staff working for me. Most of them moved on now but they were a really good team. After that, like most business owners, I just got on a plane and took off overseas for a couple of months. One day you are working like crazy and the next thing you are sitting on a beach in Europe somewhere; I just had to do that to work out what I wanted to do next.
And what were you thinking about over there?
The first thing I thought about was actually getting involved in the UK or the European publishing market, and I actually went and met some publishers while I was over there and did a bit of research on the market there. I mean the European market I think is quite a bit harder than the Australian market, that’s what my research told me.
Why is that?
Australia has a really nice distribution for magazines through the newsagent system. You can go through one distributor and get to all or 80% of the market place through the newsagents. Whereas the UK and some of the other areas are very fragmented and you have to go and get all the various different groups on board. There is a lower barrier to enter here. In an area like the UK there are higher start-up costs and I thought that that was probably too risky to do.
Plus I knew that I would be back in the trenches again, probably for another five years working that hard and I wasn’t too excited about doing that. So I really took a bit of time to work out what I wanted to do next, and then I came across the group, that I am working with now, Integral Capital. They do mergers, acquisitions, corporate transactions, capital raising; and that is what I have been doing for the last couple of years, raising money on behalf of other companies.
How have you found that?
The market is just awful at the moment for any kind of capital raising, but I’ve learnt so much in terms of corporate strategy and how businesses grow and IPOs and capital raising and so on. I should have known this stuff before I started the mag, but you know that’s what happens when you jump into business.
Looking back now, what might you have done in recasting your strategy for Wealth Creator?
I was always under capitalised and I would have probably raised money earlier on, raised a larger amount of money and that would have got us to be a bit bigger and spent a bit more money on marketing. I really didn’t utilise the network that I built through the mag. I mean I was in contact with some of the wealthiest people in Australia and I could have used that to actually raise capital for the magazine and I could have engineered probably a lot better exit.
But I tell you, you don’t know that sort of stuff if you are in your first business. Because you’re so busy, you don’t really have the time to learn. So that’s what in hindsight I could have done. And probably I think I spread myself a bit too thin. We should have just stuck to the magazine and the events business. Diversifying in to the radio shows just spread my energy too thinly.
Did you burn out?
Yeah, definitely. I was in the office every single day until 10, 11 o’clock at night, trying to drive the business forward and you can only sustain that for so long, it was affecting my health and I didn’t have a lot of social time and that sort of thing. If you do that for long enough, the reason why you burn out I think is because it becomes unenjoyable and you lose the enthusiasm. For me, those three years were enough.
What are you running of your own now?
It sounds like I am absolutely crazy, because I’m involved now in two other magazines but these other business are really websites. The online space is where it’s at, obviously as you know with what you are doing. Everybody’s now online and you have to build a really strong online model. And the magazines that I’m involved with, one is a personal development magazine called Think Big magazine and the other one’s Wholesale Investor. But we use the printed publication just to really get people on to the website and get them registered.
Do you need to have a magazine to do that though? Given that so many people find things through Google search?
With Think Big magazine, the actual majority shareholder is a group called Universal Events and they have a database of 120,000 to 130,000 people across Australia and the UK. And because they do physical live events, you want to put the magazine in their hands, and it also makes the online magazine a bit more tangible. In terms of distribution, it is distributed to about 100,000 people, through their database.
The actual printed component is quite small in comparison, only about 10,000. So it gives that tangibility and part of the strategy was to actually put it in their hands while they were actually attending these events, because they see about 25,000 people a year. You are right though, it depends on the actual model.
Did you buy into these businesses? You said you can’t work for anyone.
No, there are three of us, we’re all shareholders, and we all work at the same level, so we meet every month and we make decisions about where the business is going to go.
What is that aimed at? What is the market niche there?
Well the niche there is actually personal development, so people that want to improve their lives. And they are the sort of people who will go out and seek education for it, so they might go to things like Tony Robbins and Chris Howard events and so on. We can claim to be Australia’s largest personal development magazine because there actually isn’t really any other one.
There was definitely a niche; and the other thing to, I mean even if we didn’t have the newsstands, it goes out to the newsagents, even if we decided not to do that, we would still have a pretty strong distribution because of that database. I’d never start a magazine without some kind of distribution base, because you really need that in order to attract advertisers. You would know, a lot of people approach you and say ‘I want to do this magazine and that magazine’ and they are really focused around the content of what it is going to be and they forget about distribution, but distribution is absolutely critical.
It is the same in every business, they think I am going to do this business without thinking of how they are going to market it and raise the money and as you said get through distribution channels.
Yeah, on top of Universal we are actually in partnership. Over the years Universal has built relationships with other event companies in Australia and overseas. So we are distributing Think Big through the online strategy throughout the UK and also into the US as well. It is all about joint venturing and partnering and what benefit can you add to the joint venture partner.
And what is the model for Think Big?
Think Big mag is very much online; we have an online version of the magazine, which sort of looks like the actual printed one, and it is just to really get as many people to the online version as possible. That is really the model.
So you’ve got advertising on the site?
We are eventually going to get advertising on the site but initially people advertise in the magazine and the online magazine goes out to that subscriber base, so they are getting to those online subscribers anyway. And there are lots of benefits to the online subscriber as you know, while people are looking at the ad, they can just click through to the website or respond to an offer and so on so.
But look, a lot of the advertisers still aren’t really seeing the benefits of what you can do online. They are still a little bit old school in that they like to see the tangibility of a page in a magazine. I am with you, online is the way to go, that’s for sure.
How is your life now? Are you over your burn out?
It is more diversified. There’s Think Big, there’s Integral Capital. Integral Capital has been a huge learning experience for me, working on larger corporate transactions. So, we work on deals that are between $10 million to $100 million in size and working with small listed public companies as well, so that has been a great experience.
Is there still money in the funds?
Integral only focuses on transactions that can be funded by private equity. That’s it. So we are not trying to go to a retail market or even individual investors because the size of the deals, you know, we are looking for one investor to write a cheque for $20 million or $30 million, and the only people that have that sort of money are private equity groups.
What are you hearing from them? How reluctant are they to invest?
Private equity funds are really excited at the moment because last year they were competing with the listed companies. They had options a couple of years ago, they could go public and raise money from the public through an IPO, or they could actually get money from private equity. But now they don’t have the public markets as an option and they can only go to private equity. So the private equity guys are being offered assets at half of what they were a couple of years ago, so they are really excited.
They are snapping? They are not waiting?
No, they are much more conservative, they are really taking their time, they are picking through and picking off the very best assets they can for the best price. They are in a prime position; if anyone is excited about what is going on at the moment it is private equity groups.
And the insolvency groups…