The $1.95 million penalty imposed on Energy Watch last week is unlikely to ever be paid with the company $8.6 million in the red but former chief executive Ben Polis says ongoing financial mismanagement is to blame.
Polis told SmartCompany that the failed utility broker, which he started in February 2009 with high school friend and business partner Luke Zombor, was brought down by mismanagement and his own Facebook comments.
Energy Watch made its money from at least $150 commission for each energy customer it switched and it embarked on a massive advertising campaign in 2011 to convince consumers to change suppliers.
Polis claims Energy Watch was profitable until he was asked by the general manager Andrew Barton and subsequent chief executive Luke Zombor to stay out of the business from January 2011 to October 2011.
Polis says Barton and Zombor shut him out on the basis he was “unprofessional and erratic”, but it was during this period that Polis says the business started to unravel.
“This is why Energy Watch went broke; we set up an office in New Zealand to cut down on wage costs because you don’t have to pay penalty rates on a Saturday and Sunday.
“For people who want to call Energy Watch on a Saturday and Sunday, at $42 an hour it is not profitable for us to run, so we opened in New Zealand.
“But they did not get rid of the people in Australia so the business was $100,000 a week over rostered for a five-month period and, in turn, lost $5 million.”
Polis says he became involved in the day-to-day running of the business again in October 2011 and moved swiftly to make a large number of redundancies in an attempt to save the business.
“I wiped out the entire business, I had to, because if I didn’t the business was trading insolvent and we could not pay our bills, because the business was $100,000 a week over-rostered,” says Polis.
“When people say ‘Ben Polis came in and fired everybody’, 100% I did, I reduced the costs of the business by $6 million in four weeks because the business was losing hundreds and thousands of dollars because the general manager Andrew Barton was not running profits and losses in the company.”
Polis claims that in October 2011 Barton did not know how many people were employed by Energy Watch and staffing levels had got out of control.
“We had 200 staff for a business that only need 75 so they were professionalising the business but what nobody actually did was get rid of staff which were not good at selling,” says Polis.
“We ended up with a full Energy Watch in New Zealand and a full Energy Watch in Australia which was total madness.
“When I went into that business I actually had to walk up to everyone at the company and sit down with them and say ‘What do you actually do here?’”
Polis says he set about trying to make people redundant, and he claims “we did not get rid of people brutally or dishonestly.”
“What happened was the staff knew that we had built in New Zealand so they joined the unions to fight for their jobs, so we were forced to keep these staff on even when the business was losing hundreds of thousands of dollars,” says Polis.
“In 10 weeks the business lost $2.2 million, so I put in my own financial people in October to report on the information back to me so I could find out what was going on and we could trade out of it.”
Polis claims Energy Watch did start to trade out of what was now $4.4 million in debt, making a profit in November and December 2011 and a $450,000 profit in January 2012, but the company was plagued by financial mismanagement.
“No one had been running profit and losses and the bookkeeper was running a business turning over $20 million on a cash basis instead of accrual – so it was like we were running a bloody milkbar,” he says.
“The tax return was put in and said we made $1 million profit but when we went back through the details, we did not make $1 million, we lost $2 million.