Credible success: How Colin Porter’s CreditorWatch is helping SMEs get their bills paid on time
Tuesday, January 20, 2015/
As a magazine publisher, chasing up unpaid invoices from advertisers was an all too familiar experience for Colin Porter. But it was a desire to reduce these risks that led the now 46-year-old Sydneysider to establish CreditorWatch, a credit reporting bureau aimed specifically at small businesses.
Founded in 2010, CreditorWatch is just one of three credit reporting bureaus in Australia. The company employs 17 people and turns over approximately $5 million each year.
My background is in publishing. I started a publishing company called Loyalty in 2000 and I later acquired the publication Dynamic Business. I grew that business but I could see the future of print publishing was not looking bright.
As a small business owner I was getting hit by advertisers who weren’t paying me, so I thought about how I could reduce my risk in the future and what I could do about recouping my money from companies that had defaulted.
The legal advice I was usually given was to get a directors’ guarantee, which of course no one would do. Getting cash up front was not achievable and it was often not worthwhile pursuing a company because of the legal costs.
There are three credit bureaus in Australia: us, Dun & Bradstreet and Veda Advantage. But if you look at the others, they are designed for big corporates and banks and don’t facilitate for a small business.
The entrepreneurial side of me thought why don’t I start a small business credit bureau that was easy to use, access and understand?
The credit reporting market in Australia is highly profitable but the barriers to entry are significant. For a long time there had been a duopoly for credit risk information.
I approached the Australian Securities and Investments Commission, which holds the core database of companies in the country. I told ASIC I wanted access to the same data as Dun & Bradstreet and Veda to create a bureau that was affordable to all businesses.
ASIC was very supportive. They receive hundreds of applications a year but in 2010, they had not issued a new licence for seven years. It was a remarkable feat for myself and my team.
I funded CreditorWatch myself. I decided to raise capital in 2012 to grow the business and the market. We had the product but we needed to invest in marketing and building the membership. We also wanted the support from another organisation.
Credit reporting is a negative-style business and when we first went to market to raise capital, no one was interested. It was difficult for me because I could see the clear benefits for an investor.
A firm called Nightingale Partners came along and approached me about investing. At the same time, they had a relationship with the previous chief executive of Dun & Bradstreet, and part of my pitch was to present the company to her.
She was well-versed in the industry and asked me a lot of interesting questions. With corporate bureaus there are only so many thousands of those customers, but our model was available to 98% of all businesses. The opportunity for growth was far higher than Dun & Bradstreet and Veda.
She nodded and thanked me for my time and then decided to co-invest in CreditorWatch personally. It was a big vote of confidence for one of the most credible people in the industry to co-invest.
The $4 million we received in capital was used to market the business and the money was spent wisely. We met our objectives and targets and the business is now self-sustaining. We are achieving a growth rate of 100%.
CreditorWatch now has more than 25,000 customers nationally. They range from major blue chip companies who want to find out the risks within a small business, down to small print companies that run out of the suburbs in Sydney and Melbourne.
We plan to grow CreditorWatch by launching other products and into other regions.
Once you’ve started one business, you know how easy or hard it is. You know the obstacles so it is a lot easier the second time around.
When you’re an employee looking at starting your own business, it is hard to give up your job and wage. But if you’re already running a business, it is easy to share your resources, share some costs and test the business model. I did my research and I didn’t blindly go in.
In many ways, CreditorWatch is just a publishing business. We collect data, we reformat it and we publish it. So I see a lot of similarities with my first business.
The other skills I have brought to CreditorWatch are an understanding of finance and what risk is about, and I know CreditorWatch customers. I know how they think and the problems they have.
Everyone from big corporates to small business suffers the same problem: cash flow and waiting for customers to pay you. We offer entry risk reports and monitoring of your clients, as well as information about any adverse changes to their business that you might not know about. If you know the early warning signs, you may be able to offer a discount for them to pay upfront or convince them to pay sooner.
Often small business owners are great at displays and merchandising or managing staff, but finances are just left to a bookkeeper. They don’t spend time looking at what they can do to improve cash flow. We encourage and help all our members to make sure their invoice is paid sooner than another supplier.
I don’t think people should do a business plan in the traditional format. Even if you start with just a few pages with the financials and key goals, next month you can add a page and refine your plan.
In the early days I had a visual map of what the business would look like in my head. I wrote part of a business plan but it wasn’t complete. After raising capital, we still didn’t have a complete business plan. What we had was very high level with little detail.
I had this idea that I and the other managers in the team would go offsite for three days and stay in a hotel in Queensland. I envisaged we would spend time preparing a strategy for the next one, three and five years, while also having some fun. But that didn’t happen. Our heads were in the right frame of mind and we walked away with what I call a living business plan that grows and changes.
I’ve got pages from the business plan around my office and on my desk. The managers and I all aim to read that plan once a month on our own and I see them scribbling notes and crosses and ticks on the plan. That’s what we want, we want to be flexible.
The culture in our company is based on loving what we do. The whole time I have been in business, my motto has been to work hard but love your job. The day my staff don’t love their job, I’m more than happy to help them find a job they do love. If they are not happy, they talk about it and we try to find out why and then change it.
If you did a survey of my staff I’d hope you would find that 100% of them enjoy coming to work every day. We don’t have Mondayitis and we have so few sick days. I try to always be flexible and generous, not just financially but with time.
I have a goal of owning four businesses in my life. I don’t know why, but I do.
I don’t think any entrepreneur can ever keep up being satisfied with their growth. Even if we were growing at 200%, I would be thinking about what else we can do.