We’ve got a number of really large contracts but probably our longest, biggest contract would be with the Repco. We first won their business in the late 90s. We won their business by being really innovative with the way that we were going to help them use laser printers to do all of their deliveries and invoicing.
They were another one of those companies that had a fairly antiquated means of managing their paperwork. What was unique about them was that they did have and still do have a very old, antiquated computer system that they keep wanting to get round to upgrading but never do, and we were able to make our software solution work in their old environment rather than needing them to change it.
We’ve never won a really big contract overnight. They always take months and months and months of work. I was having this discussion with one of our sales guys the other day. It’s almost a sense of relief rather than a sense of celebration. You’ve worked for a year or two years, you’ve gone to so much effort to try and get this customer to a point where they’re going to engage with you. And it all comes down to this point of make or break, and when you have them it’s kind of a relief, because you’ve just invested so much of your heart and soul and effort.
With smaller deals there’s much more of a sense of celebration because they don’t actually matter as much. So we actually prefer to have 10 medium-sized customers than one big one. I think you can get held to ransom by the big customers.
One of the best decisions we ever made in our business was not to work with really large companies. I learned this from two companies; it was Coles Myer and Telstra. We worked so, so hard to win some business from both those places. They both told us that they were really loyal, and once we’d won their business they’d be great long-term customers. They both lied. Big companies are not loyal. They have these tender processes and you can absolutely bend over backwards, turn yourself inside out to do the right thing by them, but they still are intent on screwing you over for the best deal.
So quite early on in our business, I got really frustrated and I said, “We are never going to sell to an organisation like that again.” And we actually came up with this term we called a “slag”. A slag is a super large and government account, and to this day, we don’t sell to Coles Myer or the government or big banks, because they have no loyalty.
I’d much rather do business with people like Repco who are large customers but they’re not huge customers. They’re much more loyal and they’ve been loyal to us for many, many years. We’re signing up another customer tomorrow that we’ve resigned for the fifth time over 12 years of doing business with them.
So I think that’s a great tip. I can’t tell you the number of young businesspeople that I’ve met that have got themselves into such a compromising position because they’re relying on one or two big customers or government departments for their business. Then they get screwed over to the point where they’re damned if they do and they’re damned if they don’t.
We like to grow the company, but I’ve observed a lot of companies when they get to our size, they get this sort of adrenaline of growth for growth’s sake, and so we’re really cautious about acquisitions. We have made some fantastic acquisitions, but they really do have to be the right fit for us. I think it’s really easy to convince yourself that this acquisition you’re going to make is going to be great for you strategically because you can cross-sell your services and products into their customers and vice versa. I think that fails more often than it succeeds. If that opportunity really exists then maybe you should form a strategic partnership with another company and try cross-selling with them first before you go and acquire someone.
So the first lesson from me is be absolutely convinced that the customers of the organisation that you’re going to acquire are a good fit for your business, and that the value of the proposition that you present is going to be good value for those customers. Don’t underestimate how powerful organic growth is. If you concentrate on doing a really good job for a really good niche, you know, it’s pretty easy to generate organic growth. We like to think that we could grow organically about 10% each year, and if you’re really lucky you can maybe match that with acquisitions as well, but if you look through Australia’s best list of great entrepreneurial companies that ended up failing, so many of them are linked to making foolish acquisitions.
Always. So basically our model is that we have a smorgasbord of organisations we’re looking at, but we’re very cautious and slow and want to be viewing an acquisition like a marriage. You’re going to be married to those people for a long time, to those customers. It’s not like an affair or a one night stand, you’ve got to be very careful about it and so we’re always looking. Companies that we’re looking at vary from us, just doing a bit of research through to people that we’re involved in discussions with. And we’ve walked away from more deals than we’ve done.
That’s scary. I think that it’s a real quandary; if you’re looking from an Australian point of view you’d say pursuing Asia makes sense as it’s a high growth marketplace, it’s close to Australia and it’s in our timezone. I’ve always found it difficult and I think that Australia is quite advanced as a marketplace. It’s far more European in our industry in terms of how it deals with technology and value. I find most of the research we’ve done into Asia is that it’s a far more commodity-based marketplace. So I think that the words that describe my view on international expansion would be ‘interested but scared and haven’t found a good way to do it yet’.
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Cara Waters is a former SmartCompany editor. Previously, Cara was a senior reporter for the Financial Times’ website and worked for The Sunday Times in London.
