Turning text messages into $M$
Tuesday, February 19, 2008/
Impact Data has harnessed a straightforward service – text messaging – and made a successful business from it. Co-founder Lachlan Opray tells AMANDA GOME how the simple concept took off, and what has prompted its sale.
By Amanda Gome
Impact Data has harnessed a straightforward service – text messaging – and made a successful business from it.
In 2001 two brothers and two mates, all in their 20s, were sitting around over a few beers discussing the pros and cons of SMS. What sparked the conversation was an irrelevant text message from a pub.
The four, Lachlan Opray (pictured) and his brother Kurt, Brett Hogarth and Matthew Fitzgerald, began to speculate – imagine, they thought, if the SMS was communicating an offer that people actually wanted to get?
Their subsequent business, Impact Data, was born with a simple concept – to send out the right messages to people at the right time through new digital and new media channels.
The four started by working around pubs and asking customers to fill in likes and dislikes – what they liked to drink or watch on TV – and then send the relevant message of offers to that customer.
The first six years was a struggle to break through the $1 million revenue barrier. By 2007, it was $3.1 million and this year it is expected to hit $6 million. The business has been profitable from year two even though it has been entirely self-funded, with about $2 million spent on development.
Now the boys plan to reap the rewards, finalising a sale to listed company Facilitate Digital Holdings in September, 2007. But the sales price depends on the EBIT through 2009: it has to be seven and a half times the average EBIT for the current and next financial years. This means, with all going well, the entrepreneurs are set to make more than $15 million.
Founder Lachlan Opray, 31, tells Amanda Gome how they did it, and what’s next. Lachlan is happy to answer your questions. Simply email [email protected] before Tuesday February 21.
Amanda Gome: You started the business in 2001. Did you have a technical background in software?
Lachlan Opray: No. After leaving high school, I was interested in an academic career. I did a degree in arts science, a degree physics and philosophy, which prepares you to be objective – a good thing in business.
There are four Opray brothers and you are all entrepreneurs. Even the brother not involved with your business runs a personal fitness studio business. Why?
Don’t know why. When Hamish was five and I was 10, we cut holly and sold it at Christmas. I was supply and logistics, he was the sympathy factor.
It was probably dad; he had a go in his early years before working in the education sector.
How has the strategy changed?
We focused on developing a product that could send out SMS and email to selected people with a tailored message. We then spent the next eight years adding features and flexibility to products. You can now get as complicated as you like, such as supply templates and putting together sequencing and scheduling options.
For example we developed a niche product for retail to manage rostering duties. For (client) Boost Juice bars this combines a weather forecast with a feed of sales data so we can tell it will be hot between 11am and 11.30am and turnover is expected to be $230,000 (people drink more when it’s hot).
We have a list of staff with a criteria like ‘cheapest first’, and with that we create a roster and send out an SMS to offer shifts. It’s a massive time saver for retail businesses.
That’s in the early stages, but people are starting to take notice of it.
Did you patent it?
It’s too hard to do it with software. We also don’t have that approach. We say let’s now look at the next big thing. Software changes too fast.
How does the company sell?
We use two main channels. We do turnkey sales. We sell industry specific products – we say here is a product in a box; take it. The second channel is selling higher end products that involve cold calling and then a first meeting by the sales people before an accounts manager takes over. They manage the relationship and focus on upselling.
Has that changed from the original sales strategy?
Yes. In the beginning it was go and talk, pick a price and sell it. But back then the product was not advanced enough to be sold out of a box.
We also learnt the value of focusing on one specific industry because the small and medium market is not just one market.
Educating the marketplace on new technology. We focused very hard on making the message as simple as possible.
You now have other competitors. What makes your product different?
Other companies make money on SMS. We will not send out a message that is not relevant. We have watched competitors do things in a less than scrupulous fashion, and the philosophy behind us is that we only provide information that is interesting or useful to the participant. That has reduced customer attrition rate and provided us with word-of-mouth.
Have you used networking?
There are not enough hours to be part of a networking group. We used to work six days a week. Now we have every second Saturday off – but it is still 8.30am until 7.30pm.
Your biggest mistake?
We underestimated the costs of things. For example we had always grown organically and used client funding to drive development of products. Someone would come in off the road and say the client is hot to trot if we do this; so we did it.
We also assumed that feature can then be rolled out to other businesses. But we underestimated the commitment of resources required. We learnt to adopt a more formal job specification procedure, which also helped the customer get exactly what they wanted. And we learnt to ask what is the wider client application? We would do that by introducing the question to any clients we were dealing with that week. If the clients all said they loved it, we gave it the green light.
In the early days staff roles were far more bundled together. But nine months ago we had 23 staff. Now we have 47. We hired an HR person to handle the hiring because senior management were not only busy looking for people but also filling in key roles.
We now use recruitment companies, but the first four years we recruited through friends and networks.
Why have you sold?
From a personal point of view I wanted to sell from a risk minimalisation strategy. We have been working on building the business for eight years and we wanted to see something tangible rather than just potential. We had never been in a position where we could take extravagant salaries (more than $100,000), so the thing that kept us going in the early days was the promise of things to come.
From a business point of view, we are interested in securing a deal to fund the growth. Under the deal we have got we can take $1 million in working capital to expand the business, but I don’t think we have used any of that so far. It does mean you can sleep at night, having it available.
What makes you proud?
Making a contribution. Knowing we are building something that assists a large number of businesses. I have always had an interest in education, and after this being a high school teacher is on my list. I love it when new staff come and I enjoy the introduction and induction.