SmartCompany is turning one-year-old. We have learnt a lot in our first year, and hope you have too. Here are 10 of the best lessons entrepreneurs have shared. By AMANDA GOME.
By Amanda Gome
What a milestone. SmartCompany is one! So how do we get to the next level, think creatively and carve out a new direction in 2008?
The same way you do: By gathering the best brains around us on a daily basis. Every day Australia’s best and brightest entrepreneurs share their tips, leads, opportunities and warnings with the SmartCompany community. It is akin to having a giant board of advisers for free and at your fingertips every day.
Here are 10 of the tips that have motivated us this year from SmartCompany entprereneurs. And why not share the good advice with a friend or four. Use the “Send to a friend” button at the top right of this page. They’ll thank you for it.
(To read the top 52 tips from real life entrepreneurs, join our community and sign up for our email alert for your free copy.)
The most crucial part is attracting the right people.
I look for people that have been involved in successful global starts ups before. They are often in safe jobs. So I present to them the vision and the dream. I say: “You are smart. A person like you can get a job any day of the week, but you will never get an opportunity to be part of a global business in such a short period of time with an invention so simple.”
They come on board and salary sacrifice and in return they get share options. I also tell them what do you have to lose? You are in a safe job, you will go back to a safe job. And it is compelling; they are attracted to the challenge, the kudos of being successful – and the money from the share options.
Universal Straws, Martin Chimes
Our philosophy on profit is to charge at least what it takes to recover costs. It is not rocket science and you might think it sounds obvious, but our industry is littered with examples of people who did big deals with big numbers and then they hope the contracts are going to happen.
We sit down with interested parties and we know what the systems are going to cost and what we can recover comfortably after covering our costs. It is the founding philosophy of the company, to be profitable every year of operations. We made this part of our founding statements and it is in our annual reports and in our prospectus.
We can build the infrastructure, get the contracts to break-even on sales, and then beyond that we get a fairly good margin.
We do try and minimise our costs. We have a strong ethic; work hard, play hard. It is more that we keep everyone focused on the fact that every deal we do has to make money. But if you want to do something big on limited means you have to be very focused on costs and do very good deals that make money.
The profit ethos was reinforced by our wives. Both our wives told us we could only have $50,000 each for the new business (PIPE Networks). Neither of us could put our houses on the line so we were very focused on making a profit from day one.
Bevan Slattery, PIPE Networks
One key lesson came from the early days of Microsoft. They taught me one thing and it was called leverage. There were presentations where Gates would stand up and talk about partner channels and reseller channels and those sorts of things, and the word that came out was leverage, leverage, leverage. That’s something that we applied in the WebCentral business where we developed strong partner programs. You can increase your sales people but you have to seek the ability to create channels, which can in turn leverage your sales people on to more customers. That’s been the number one lesson.
To develop the channel? You need to think how do I make the partner look better to his customer, so how do I build my products that he can sell and he can use, that make him look better.
In the case of WebCentral we allowed our partners to rebadge everything. We didn’t have a problem with it and that was a case of making the partner look good in front of their customer.
Lloyd Ernst, WebCentral
If you are going overseas don’t pick a country where the market is too small and vulnerable. We went to Indonesia, and it proved very successful until the financial meltdown in 1996. Going to Indonesia was like adding the state of Queensland to your marketing plan. Same with New Zealand. It’s like adding 15% to your market size.
And don’t bother with India either. It’s too bloody small to worry about. Everyone talks about the size of its middle class, but they are very poor by our standards.
We went to Taiwan and that was the same size as Australia and didn’t work out either. What we learnt was to stop fooling around and go straight to the US. We went in 2003. We employed a vice president who is an American and whom we had known for many years. Then we built a big sales team. The US is now responsible for about $5 million of our $14 million revenue in 2006-07. It cost $6 million and it’s still not profitable. But we don’t care about profits. We care about the volume. We are going for growth, not profits.
Look at Amazon. At the start you are not interested in making a profit. All great online businesses are not interested in making profits. You focus on multiples of revenue and that turns into profit the moment you want it to. The idea is to force the growth, so you grow at 50% by pouring money into sales and marketing, and if you don’t force it the revenue still grows by 20% and then when you want it to, the money pours out like a jackpot.
One of the things we would have changed is we would have done more PR. PR is more effective than above-the-line advertising, which is so expensive in the US. You want to make sure every business journalist knows we exist, and we have a list of 60 to 70 publications; radio, TV and print.
Phil Ruthven, IBISWorld
I heard Gillian Franklin (entrepreneur who founded The Heat Group) at a talk and asked her if I could talk to her. She has been my mentor every since.
When I was really struggling and thinking I wasn’t going to make it, I would ring and ask her if she had five minutes and I would walk out 10cm taller. She gave me advice, but it was never sugar coated.
We had been doubling revenue every year but I was really struggling and at the end of my energy. Gillian said to me you need a mentor group.
It was great, because you get so tired you can’t see the business with fresh eyes. They identified that I needed a cash injection and that I also needed a finance person who could help with managing everyday cashflow, but also run operations. We had had a part-time bookkeeper and when we had five stores I was comfortable doing it all. But now we had 20 stores. The cash injection and taking on a finance guy were the answers. The cash injection from an equity investor helped add products to the range, helped me employ more people and open more stores in 2005.
Kristina Karlsson, kikki.K
I always believe in being honest with people who work with me and it becomes obviously very quickly when staff or senior management are not marching in the same direction. The important thing is you cannot let the situation go on for long. You must tackle it quickly and talk to them about it and offer them options if they don’t also recognise the situation as well.
John Ilhan, Crazy John’s
We took on board a business partner. This proved to be an error of judgement on our part as they tried to take over and run the show. We severed our relationship very early on. We realised that we had undervalued our own natural talents at the time, thinking that we had to have someone with business experience to assist us.
We have discovered that we are natural entrepreneurs with good solid marketing and business sense. With the growth of the company and the fact that we have grown it into the largest dog training company in the world with just two directors making the business decisions, we are so grateful that we took that direction. We will never again give anyone control over our company.
Sylvia and Danny Wilson, Bark Busters
Run a “thankyou” program, to thank all of the word-of-mouth people who are your PR army out in the real world. There is nothing like being appreciated, particularly if you are not expecting it.
Carolyn Creswell, Carmen’s Fine Foods
What I failed to do and I always point a finger at myself, was really search for the proven success and the achievements of the person that you are going to bring on board… to look at their credentials and look at what they’ve done in the past so that you are confident that, you know, this person can take it to the next level.
To check they have done it before: Well, that’s what I failed to look into and I owed every business owner who’s worked so hard to build a business to really understand what the business needs and the kind of people that their business require and that skill that the business required.
Sue Ismiel, Nad’s
I also do something I shouldn’t in an interview. I always ask about their families. I lighten up the interview and get them to talk about their values and their lives. I want to hear their thoughts on politics because I want people who can express an opinion and are not afraid to do so. I don’t want people who try and tell me what I want to hear.
I also hire people who haven’t worked in the industry. For example, when I started CTS Travel, I was a frustrated business traveller and felt I could start a company that was very professional and understood the needs of business travellers.
I didn’t hire travel agents, as usually their motivation for taking jobs in the travel industry was to get cheap travel. Instead I hired secretaries who were organised, had a nice manner and who knew the repercussions of bad travel management because in their past lives it meant their bosses had to stay overnight somewhere.
We pay market rates and I give them a budget and when they exceed the budget, they get profit share. I had people earning over $100,000 when their counterparts in the travel industry were getting $35,000. Too much salary and they don’t succeed.
Philip Weinman, Vitamin Me
(To read the top 52 tips from real life entrepreneurs, join our community and sign up for our email alert for your free copy.)
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