Burning passion: How Gillian Franklin created the Heat Group, a $130 million consumer products empire
Wednesday, April 8, 2015/
Gillian Franklin has always been passionate about encouraging young women in business. As a managing director of cosmetics giant Revlon, Franklin developed her own program to encourage young women to be financially independent and it was this program that made her leave her high-profile corporate life to start her own business.
The now 58-year-old Melburnian established The Heat Group in a coffee shop in 2000, taking on her first client – Proctor & Gamble – in just three weeks. Fifteen years later, the consumer products wholesaler sells 11 million pieces of stock each year, has 170 employees and generates an annual turnover of $130 million. One Heat product is sold in Australia every 2.8 seconds.
The Heat Group distributes cosmetics and beauty brands Max Factor, COVERGIRL, Bourjois, essences and Elite and licenses three Warner Bros Consumer Products brands, as well as selling its own brands Ulta3 and Billie Goat Soap.
I’m originally from South Africa and I started my career working for Revlon in SA. I married an Australian and worked for Revlon again in Australia.
I worked for 20-odd years in a number of major companies in Australia. I was very fortunate to be made the managing director of one of the divisions of Revlon in my 20s and so I spent a long time as a managing director.
In the 1990s, brands were being challenged as to what kind of ethics they wanted as a company and one of the brands I looked after was Australis cosmetics.
I developed a program to teach young girls about financial independence called Australis Self Made Girls. After running the program for three years, I realised I needed to practice what I was teaching.
I was encouraging young girls to go out and make it happen but I was sitting there in the comfort and security of corporate life. It was the catalyst for me to start my own business.
It was scary but also very exciting. There was a huge amount of anxiety; I had been in a very senior role for a long time, with the salary package and comfort and security of corporate life.
I learnt very quickly different skills and expertise are needed when you own your own business. I had a lot of experience as a general manager or managing director but the difference with your own company is the number own priority is cash flow.
When you work for a major corporation or international subsidiary of one, you don’t have to worry as much about cash. You are responsible for managing it to the best of your ability, but it was always available.
All of a sudden I had to learn about prioritising cash flow. People say you can go broke while still being profitable and that’s true.
I raised $3 million in capital and found a fantastic board of people who would be willing to come and support me in this business.
The plan was to have a portfolio of brands and so I couldn’t name the company after just one brand name.
I thought about what kind of company I wanted. I wanted a hot, dynamic, bold, strong company. But I couldn’t call it the hot company. So I thought about heat. You can’t survive without heat. And it has a positive message of a dynamic company.
My business plan was to develop my own brands and within three or five years, have $10 million in turnover. But a few weeks after I started Heat I got a phone call from someone in the industry who told me Proctor & Gamble was changing its model in Australia and shifting to a distributor model. I was invited to tender for the Max Factor and COVERGIRL businesses and I shocked the market by winning.
I was literally a startup that had accounts worth $26 million.
I describe the first year as organised chaos. I had to hire 35 people very quickly, find premises, install a computer system, everything had to be organised. We worked unbelievable hours; you can imagine the sense of energy and focus.
We went from a startup to a reasonable size SME very quickly.
Acquisitions are an important part of our strategy for the next five years. The Australian retail market is very competitive and having your own brands being more in control of your own destiny. You can choose how much you invest and there are export opportunities.
Our strategy has four pillars: our domestic business, export, online and acquiring and developing brands.
We have bought quite a few brands. Acquisitions are very exciting, as is the completely different skill set it brings. You need a very good legal team on the contracts, negotiations skills, financial judgement to know what a business is worth, and of course business skills.
What keeps me awake at night varies from time to time and over the years it has been different as well.
At the moment the Australian dollar is a big issue. It has deteriorated from around 92 US cents at the time of the last budget to now 76 US cents. That has a massive financial impact on my business.
People also keep me awake at night. You are only as good as your people. If someone doesn’t support our culture, I don’t retain them.
For the past 12 or 13 years I have surveyed my employees every six months. It is completed anonymously and it is a valuable tool for management as they tell you how it is. I’m proud to say we score 4.9 out of 5 on culture.
I have learnt a lot from the survey too. One question is about whether employees feel they are supported correctly with their IT requirements. We were getting a low score and I was able to deal with that.
I’m passionate about promoting diversity in the workplace. Diversity works. So many studies prove that. And it is not just about male and female diversity, it is also about age and background.
If you can accept uncapping diversity opportunities will increase a company’s bottom line, it becomes a no-brainer.
But we need to change the language. Instead of talking about the cost of flexible workplaces or the cost of maternity leave, we need to change the language and talk about the benefit of diversity.
My employees are rewarded based on KPIs instead of hours in the office, both men and women. My executive team all have young children and they all want to go to their children’s school concerts. Sometimes it feels like a train station with people coming and going all the time but they make up the time.
I also give my female employees three months paid maternity leave. It is paid when they come back to their jobs so it is a return-to-work incentive. All the male employees get “New Baby Week” – one week of paid leave to take when their new baby comes from the hospital.
All employees have their life insurance and loss-of-income insurance paid as part of their salary package and we pay staff for two days a year to volunteer for the charity of their choice.
You don’t come to work if it is your birthday and you get a half day off every Friday to attend any appointments you need to.
It is the small things and people just love it.
I can’t imagine starting another business but I am really enjoying the boards I sit on; it is a great opportunity to contribute and to learn. I’m a mad golfer and I love keeping fit. In the next three or five years it may swing around as I work less hours.