Category Archives: Business

I Survived Business With Family & Friends, You Can To


We’ve all heard it before, “don’t go into business with family or friends”.

Well I mustn’t have read the memo too well because I went into business with family AND friends! Overall the experience has been a positive one for over 10 years now but that’s not to say we all haven’t learnt a few things along the way.

In 2005 I went into business with my best mate when we acquired my father’s small, successful business that he ran with a business partner. They were ready to retire and the proceeds of the sale were to be their superannuation.
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Within months my brother and brother in law entered the business. The three of them were to work in the business and each of them having skin in the game made sense to me as I was to be the only passive shareholder.

The first thing we did was put together a Shareholders Agreement to set some governance and protect our collective interests in the case of an exit (read problem). Of course controlling an exit was an important piece but being the only shareholder not working in the business, I also wanted to ensure I had some comfort around governance, things like:

  • What required unanimous board approval like the cap on a capital expenditure item, cap on services to be agreed to, hiring employees or altering salaries over a dollar amount, etc
  • Setting expectations for directors meetings, forecasts, plans, etc
  • Creating the process and rules for an exit by a shareholder

It is one thing to have a Shareholders Agreement and it is another to adhere to the specifics with friends and family. This is where conflict can occur especially when you are the only one of the shareholders not working in the business.

It can leave you with a choice to make – dig your heels in and make sure it was followed to the letter OR suck it up a little since they are doing a good job, making money and was it really worth jeopardizing relationships with family and friends over? I chose the latter potentially sacrificing some money each year for the bigger picture (for all of us I might add).
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What would I have done differently? The easy answer to this question is “don’t go into business with family and friends” but I don’t look badly at that decision. I should have ensured that every detail of the Shareholders Agreement was followed for the benefit of all of us; after all what was the point of it?

A business needs to be run as a business and when you have multiple shareholders you have responsibilities to each and every shareholder to do the best thing by all. A Shareholders Agreement is constructed to ensure this objective was met and we failed ourselves by not adhering to it all the time.
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Would I do it again? Absolutely!

It’s all a state of mind and anything where more good than bad can come out can’t be a bad thing.


Make Money While You Sleep


I saw a quote from Warren Buffet recently that read “if you don’t find a way to make money while you sleep, you will work until you die”.

With Buffet’s background and track record you know that he was most likely referring to investing in businesses via the stock market but it also reminded me of a quote from my Dad that had similar connotations – “you need to find a business with a recurring revenue stream to build on otherwise you will always be limited to the number of hours you can work”.
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He was specifically talking about getting paid an hourly amount to do something. For instance, if you are a plumber and charge by the hour or per job completed, you are limited to the number of hours or jobs you can complete in the day/week/month.

Running a business specializing in road detector loops, he was able to turn his business from purely getting paid per job completed into a monthly recurring revenue business with any work beyond the scope of the contractual requirements a bonus. This gave him scope that was never there previously.

I remember in my early days as a software developer, the goal being to have enough Systems at our clients where the recurring monthly service contracts would cover all fixed costs so that sales were actually profit. Eventually the compound effect of the monthly service contracts would also add to the profitability. This was my first glimpse of what recurring revenue was.
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When we started Digital Motorworks in Australia, obtaining contracts with a guaranteed recurring revenue base was the cornerstone of our business planning. We worked with our clients to find a model where they would guarantee a minimum monthly amount in return for getting exclusivity and/or economies of scale if they secured volume use of our services.

This way if our client failed to sell our services we would have a win in getting a minimum monthly payment. Conversely of the client was able to sell more of our services, there was a tipping point where our profitability per service would be reduced and they would achieve economies of scale benefits for their investment.

The Internet has opened up more and more ways to “make money while you sleep” by allowing to put your goods and services in front of people to transact at all times.
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Whether it be investing in good businesses via the stock market, investing in property or working in a business that is structured around a recurring revenue model, the concept of finding something to make money while you sleep is a very sound one.

Hard to argue with Warren Buffet on anything to do with making money. And I think my father has been pretty successful in his own way to.


3 Alternatives When Acquiring or Starting a Business


Despite my relatively risk adverse nature, I’ve been in the position of successfully starting a technology based business (with a successful exit) and also acquiring a going concern in a completely different field.

In both of these businesses I had partners – in the startup we had a US business (49%), myself (25.5%) and a partner (25.5%) and in the acquisition we have four of us (2×30% incl me & 2×20%).
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Now, imagine the opportunity to buy the company in which you are the Managing Director of a very good, profitable business which is owned by an international company and you have the ability (i.e. access to funds or otherwise) to acquire 100% of the company yourself.

Would you:

a) acquire 100% yourself;

b) invite partners in to split the shareholding evenly; or

c) buy control (51%) and invite your best/key people already in the business to acquire the remaining 49%?
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I know some that would go the 100% option for sure (“partnerships don’t work” is a quote that sticks in my head) and probably most I know would look down the partner angle to split the risk (and reward) relatively evenly.

I believe that the smartest option from a risk perspective here is third one. Not only do you have control of a business with great potential that you know intimately, you would also have your best, hand picked people all with “skin in the game” with a lot more riding on their day to day performance than collecting a pay check each month.

My opinion is based on seeing all three options at work close by me including the most successful business people I know personally and of course weighing in my risk tolerance.
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Owning a business 100% and being able to call all the shots is certainly attractive but you had want to ready to roll up your sleeves and be prepared to ensure you protect your investment. Not that having partners in the business precludes you from doing this but the buck starts and stops with you from a risk/reward perspective.

My risk profile dictates why I love the option of ensuring you have control of the business (the shareholders agreement would need to reflect this) and having key people who you trust and know are good for the business, tied up in the success of the business.

There is no right answer here. After all, we are all different!


What If Your Business Meeting Was Televised?


AFL (Australian Football Lague for my international friends) is now a fully professional sport with clubs turning over in excess of $70m per year and the players average salary getting up to ~$300,000 per year with some over the $1m mark.

You read it all the time that it is a business and for the players it is a full time job.

The AFLPA (Players Association) is always pushing the case for the players to be treated like other industries. The fact is that it is not like any other industry.

The lifespan of the average AFL player is 4 years and the good ones might get past 10. In the whole scheme of a working life it isn’t a big percentage so they should be compensated in line with what the industry is generating, especially since they are the star attraction.
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One argument I don’t get though is the “24/7” argument, that football is with them everywhere they go – they have to look after their bodies, they can’t go out without getting recognised, etc.

Do they not think that other industries are 24/7 as well? Most people I work with are available day and night with my smartphone; something is always happening and in today’s connected world work is hard to get away from. Wouldn’t it be great to sit at home all day resting your body and not getting hassled by email or messenger for work matters?

The scrutiny in the public eye that they come under when on the field is something that (thankfully) the majority of us don’t encounter. Take the example earlier this year when Richmond lost to Collingwood by 1 point with a goal kicked with 4 seconds remaining.
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Richmond were 17 points up with around 4 minutes remaining. Through a combination of undisciplined errors they allowed Collingwood to kick 3 goals and literally steal the game. These players get paid to play and win. The expectation is that they train all year around to execute their skills under pressure, especially when it counts. The Richmond players failed to do this and the media hammered them.

I just happened to sit next to three Richmond players at a cafe in the days after the game I am referring to. I was to into my muesli and the daily paper to overhear anything until I was getting up to pay my bill. “A game goes for 2 hours; we are going to f**k up at some point”, one of them said with the other two nodding their heads in acknowledgement.

I wonder how’d we’d go in business getting a business presentation to a huge prospective client screened live with commentary? Then have it all dissected by the media in the days following.
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You perform well right the way through your negotiations, good body language, assertive, confident and answering all questions with authority. It gets towards the end of the meeting, time to try and close the deal. The client throws in a curve ball that you weren’t expecting. You stutter, not sure where to look. They throw the ball in your court to accept their terms there and then (wasn’t it meant to be the other way around, you are thinking).

You lose the deal. What would be the feedback your boss would give you in the video review? What about the media reporting on it?

Would make the performance review far more interesting.


Leadership and People – Same, Same But Different


Whether it be in life, sport or business, I think recognising and appreciating that we are all different can give you an advantage over those that don’t.

I’m an avid people watcher; I’m fascinated by the way in which we are all different. I love sitting in a cafe or bar in a different country (as I’m usually on my own) and just watching people. What are they doing there? What are they thinking? Are they on a first or third date? What is their relationship? Married, business, selling to a client? What are they talking about?
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I used to describe coaching senior football clubs as “leading 50 blokes who all need to be treated by the same yet all differently”. This is no different to business. Different people have different drivers, different tolerances, different personalities, etc, etc.

Sounds logical doesn’t it? Why then do we get upset when it appears some people seem to treated differently to others?
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That’s more of a rhetorical question. I do not know the answer but I am sure we can all have our opinions. My opinion is simply that we are all different which is why some get treated differently and why most get upset at this. Confusing?

I believe the answer to managing this from both sides is with the leader. In the case of a football club, the coach must give as much time to players ranked 25-40 as they do to the handful of top players. It is just that the time is/should be spent differently.

The key is transparency. To make a general statement like “anyone who doesn’t train won’t be playing this week” is pretty stupid. Let’s get serious here.

Same in business. Should a leader spruik a culture, not actually live it themselves or worse, allow a few to not live it and expect all others to live it?
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I love the quote “the culture of any organisation is shaped by the worst behaviour the leader is willing to tolerate” (Gruenter and Whitaker).

Worse still, what about when it appears the leader(s) are more content to keep a few happy at the expense of many others?

It comes back to transparency and the recognition (or lack thereof) that we are all different, think differently and act differently. It is ok to treat everyone the same but different.


Endurance is More Important Than Truth


I saw a great quote at a hotel a few months back – “Endurance is more important than truth”

We were holding a senior leadership offsite meeting and a few of us looked at each other with puzzled looks on our faces. “What does this mean?”, holding the coaster with the quote on it. None of us realised that it was a great quote from the 1987 movie Barfly – “Anybody can be a non-drunk. It takes a special talent to be a drunk. It takes endurance. Endurance is more important than truth.”.

I reasoned at the time that the meaning of the quote was similar to “the winner gets to tell the story” like the truth will be told by those who are the most enduring (usually the winner).
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This is especially so in business where the winner gets to tell the story of how the company was started and the milestones that made it successful. They are the ones who endured all the ups and downs (more downs than ups early on usually); therefore their story will be considered the truth.

It is amazing how many people have laid claimed to have founded carsales.com.au or at the very least, claim they have been instrumental in the formation of the business – “two men said they’re Jesus, one of them must be wrong”. It makes me laugh because those who lay claim to it (apart from the actual founders of course) are always going to be found out because a) none of them were in the business very long and/or b) have not been involved in the business for a very long time (i.e. no endurance) – therefore their story cannot be considered the truth.
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The origins of Facebook have always been in dispute but at the end of the day who gets to write the truth? Mark Zuckerberg of course as he is the one who has endured the life of Facebook and is the winner.

It’s always interesting to hear Steve Wozniaki’s views on what propelled Apple but at the end of the day Steve Jobs endured plenty, along the way making plenty and it was only his story that became the truth behind the Apple story.
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Eddie McGuire talks about things on the radio that are in his lifetime but he couldn’t possibly remember all the facts he claim. This isn’t a criticism, in fact it is the opposite because he does so with absolute conviction and knowledge that you wouldn’t know. Nobody questions what Eddie says because he is the man fronting all before him (the enduring winner) and therefore what he says must be the truth. I get a small kick out of finding things he says that are not quite right but maybe that says more about me than him…….

Endurance is more important than truth – What a great quote and a great life/business lesson.


Leading in a Global World


Not everyone aspires to be a leader or sees themselves as a leader but I bet in some part of their lives they are leading the way – and are good at it.

I’ve said in other posts and I’ll say it again, I feel lucky that over the journey I’ve enjoyed what I’ve done and what I do.

My role as carsales Director International is multi faceted in that I am a leader in the carsales core business as part of the Executive Leadership Team, I am the leader of our International team and I get to be the leader of some great businesses in other countries.
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I used the word “leader” three times there; not to be egotistical, the word isn’t in my title or job description but because it is a part of my role that I consider the most important; and it is one I enjoy.

So what does a leader mean? No doubt you would have read a few posts defining leadership and comparing a leader to a manager. I see it as setting the vision, the strategy, coaching, being part of the team, making the tough calls, not always being right, listening and sharing your experiences.

Most of all it is about making the right connections with people. I’ve said it before that I inherently believe “people do business with people they like”. This includes the leader and doesn’t mean you don’t make tough decisions that aren’t going to please everyone; it does mean that you need to earn their respect in the process.

I “got out of the way” of the best players and let them play

Leading is something I have undertaken from a business perspective and in my football career. You’ve probably read about how leaders should “hire the best people and get out of their way” and I completely subscribe to that.
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When I first joined carsales I had the task of bringing our LiveMarket product to life. I really enjoyed the first few months of not having to lead a team or worry about anything but the task at hand. This didn’t last long as I soon found out that I really missed leading a company, leading a team. Now I get to lead multiple, diverse teams and enjoy the challenge!

From a football perspective I was never the best player (or second or even third best) in any side I played in but I was able to successfully lead sides from a very young age (senior playing coach at 26) by getting the respect of my team mates and leading by example. I also ensured I “got out of the way” of the best players and let them play.
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This is the way I approach it from a business perspective as well. For instance, we have a controlling interest in Soloautos in Mexico and Chileautos in Chile. The first part of leading these businesses is to get to know the people, understand them and develop a relationship with them. This is essential to be able to lead these businesses from Australia with our carsales International team showing great leadership in taking these businesses along the journey.

it’s not that we are smarter than you guys, we’ve just seen it before

Our two minority positions in Webmotors in Brazil and Encar in South Korea are not too much different because as strategic investors in these businesses, the people inside look to us to show leadership in best practices to accelerate the growth of their businesses.

As a strategic investor in these businesses, carsales is using its experience and intellectual property as leadership pillars but it is all wasted without “walking the walk” after “talking the talk”. As I have said many times to our global friends “it’s not that we are smarter than you guys, we’ve just seen it before”.

If we can’t lead the way with this as the cornerstone, we’re in a bit of trouble (just my opinion).


An Example of Easy E-commerce (the way it has to be)


carsales.com launched tyresales.com.au a few years back as a complimentary market for our consumers and dealers to benefit from.

It differs from our core businesses as it is pure e-commerce as opposed to the marketplaces we run that introduce buyers and sellers. We have learnt that e-commerce is somewhat different to an online marketplace but there is one thing that is the same – they both have to be easy.

carsales.com.au is easy because of its superior search technology, easy design, quality data, the largest, cleanest inventory in the market and most of all because “it works”. We are striving to make Tyresales.com.au “just work” too and here’s an example of it working.
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Last month I had my car booked for a service at Ritter Land Rover on a Friday. From my previous service I knew that I was most likely going to need new tyres so I had a choice – get on the front foot to order them myself ensuring I get a good deal or I could just wait until Ritter called me to say I need new tyres which they would source, taking away my control and most likely costing me more.

So I decided to use Tyresales.com.au to find my tyres, buy them and have them delivered to Ritter in time for my service. This is an absolute plus in buying tyres on Tyresales for consumers and dealers.

One of the benefits of being a carsales dealer is that they have the opportunity of accepting tyre fittings from Tyresales which then provides the opportunity to up sell know a service. For a consumer, combining a service with tyre replacement just makes sense.

The process of finding the tyres I need was dead set easy, even for someone as car illiterate as I am. Not only did I find tyres easy, I found quality tyres that were 22% off retail price which for 4 tyres added up to a $600 saving. The real beauty of it though is that before I paid for the tyres online, I had the option of selecting the dealership I wanted the tyres delivered to.
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So in virtually 1 swoop I found the tyres I wanted, paid for them (with real savings) and had them ordered for delivery to Ritter in time for my service on the Friday.

Come Friday I took my car to Ritter for a service and when I picked it up, 4 new tyres were making their mark on my Land Rover.

The process couldn’t have been easier or more convenient, exactly the way e-commerce should be (and thank you Ritter for the same in service!).


Did I Read The Contract?


Is a contract like a manual for a DIY home item? You have a quick scan and think “how hard can it be”.

How many of us sign up for a build or service at home without fully reading or understanding every detail of the contract? I dare say it would be the vast majority of people and this is where companies can profit.

When you build a pool, the pool company goes into detail about the engineering, layout of pipes, etc in order to provide a quote and plan to follow for the various trades required. Every aspect of the pool is clearly shown in a detailed engineering drawing of the pool build including every pipe from the pool back to the filter/pump area. There can be 20-30 pipes running upwards of 10 metres each.
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Since a detailed drawing is done with precise measurements of all aspects of the pool build including all pipes, the fine print is clearly designed to get you as an extra charge. The pool company know exactly how far each pipe has to run before the build and would be factored in to the price that is agreed on. This is clearly deceptive and designed as a profit maker for the pool company and this is not the only extra that creeps in.

So you can imagine the surprise when during the construction of the pool you are hit with an unexpected invoice for ~$6,000 extra citing “extra pipes”. The fine print of the contract only allows for the first two metres of each pipe and the rest is charged per metre. This is never discussed during the pricing process.

Something that should have been picked up in the contract. Most probably.

Something that is designed to catch you out as an extra. Definitely.

This extra is “cream” to them. Why? Because we don’t read and/or understand the contract.
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It is not illegal but that doesn’t make it right. I would imagine most people would get annoyed, complain, fight but have to cop it to get their pool finished. I would also imagine the pool company think they are extremely good at business to keep getting away with it.

The lesson is to read and understand the contract you are entering, after all that is what they are for.


2 Critical Factors in an Ecommerce Site


carsales.com has made its mark with online marketplaces. How hard can it be to take that into ecommerce?

Like anything, it’s not hard when you know what you don’t know. Simple right? Let’s look at it.

carsales.com.au is an online marketplace connecting buyers and sellers of cars. Tyresales.com.au is an ecommerce site where buyers purchase tyres through the online store and have them delivered to a Tyresales accredited dealer for fitting.
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Put simply, an online marketplace connect buyers and sellers but doesn’t play a part of the actual transaction whereas an ecommerce site is all about facilitating the transaction and providing the goods purchased online.

We have found from a website perspective that changing wording, colors and layout on both sites can move the needle as far as generating leads or sales, vital metrics. Above all, they both have to be easy to find what you want and easy to action.

There are however, two factors in an ecommerce site that are material to success:

Price
Price on an ecommerce site is absolutely vital. Online buyers will shop around to find the best deal so it is ultra competitive. Remember, the price is the price on an ecommerce site, there is no haggling as you are paying without talking to anyone whereas the price on an online marketplace is generally “negotiable”; the marketplace connects buyers and sellers to then make the deal.

A competitive price on carsales.com.au is important to attract buyers but it is not the be all and end all. On Tyresales if the price isn’t the most competitive we will lose the sale to one of the many competitors out there.
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Supply
Once a buyer has purchased something through an ecommerce site, it is imperative that the goods are supplied in the timeframe given. Not doing so ruins all goodwill which effects word of mouth recommendations, could create negative online reviews and most definitely cancels out a repeat purchase.

We have found on Tyresales that these two factors are critical in creating a trusted site that is top of mind when drivers need new tyres.

These are only two differences between the online marketplace and an ecommerce site (there are plenty more) and wow, they take some experience to get it right.


Repeat Customer to Negative Reviewer


I’m not a sales guru by any stretch but this is about a sales technique that I wouldn’t recommend.

We all value reviews on services and products from our friends, the general public and experts, especially in this connected world. I’ve never been one to provide negative reviews but this is a quick story of how I went from a potential repeat customer to a negative reviewer very quickly.

I’m sure a few have been in similar situations and hopefully someone can learn from it. No one likes to be treated like a fool especially when you are the one holding the cheque.
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I was after some shutters on a number of windows at home. I called a company I had used many years earlier at my previous house so I was a repeat customer. Their salesperson came out to do his measurements then worked out some pricing before we sat down to look at the numbers.

The very first thing he did was write down a number on a piece of paper, told me this is the retail price then crossed it out and wrote another number down because “he wasn’t going to stuff me around”. Really? I pushed him a little and very quickly we were at about 44% of the retail price.
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The caveat he had on the price was that he “believed” scaffolding would be required to complete the job. The next time I spoke to the salesperson was to tell me the cost of the scaffolding required which added up to a 40% increase on the price he quoted – so we were practically back to the retail price remarkably enough!

“But you are still getting a 44% discount on the shutters, it is the size of the house that requires this level of scaffolding”, he told me. Really? Does this sales tactic really work on anyone?
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I wasn’t just not going to use their service, I was pissed and I called/emailed the company to get a comment back. Nothing was forthcoming so I wrote a review on productreview.com.au and gave them 1 star out of 5 (the minimum). I must admit it felt good. I showed them!

It’s amazing how quick you can turn someone from a potential repeat customer to a negative reviewer so quickly and in today’s online world, why would you take the risk?

Footnote: I got a great job on the shutters for less than the 44% off the retail price I was initially quoted with no scaffolding required.


A Key Component of an Acquisition


I’m a firm believer that in general, “people do business with people they like“. I know there are exceptions but as a rule I stand by this.

In order to like someone in a business sense does not mean you need to be mates; there needs to be a mutual respect between each other that business will be conducted in a manner that you both expect.

When carsales looks at an international acquisition target, local management is a key component of the decision making process. Very early on in the process I like to understand what the local management structure is going to look like and ascertain if there will be issues from day 1 after closing.

People do business with people they like” takes on an extra meaning when the management you are relying on to run the day to day operations of a business you have invested in is on the other side of the world. A true mutual respect as people first is important in this.
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This is why dealing with and forging close relationships with local management is a key component as a strategic investor. The structure of our partners in our 4 international acquisitions (Webmotors.com.br in Brazil, Encar.com in South Korea, Soloautos.mx in Mexico & Chileautos.cl in Chile) are somewhat different but the relationships we have/are building are very similar. In each business we are very close to the executive management; talking on an almost daily basis and sharing more than just business.

When we started Digital Motorworks, very early on we did some business with News Limited’s then new digital arm called News Interactive (News Digital Media) for their online jobs platform Careerone. We saw our personal relationships (we didn’t know them beforehand) as important and worked hard on it. Our work with Careerone expanded (and then exploded) and before we knew we were performing the same services to The Times of London (News International) which then spread by recommendation to TES Education and Emap (also both in the UK). When News were looking at starting an online automotive platform they came to DMi first.
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Yes DMi had some nice technology that served their needs but I have no doubt the relationships we formed within News Interactive were the driving force behind establishing our brand within their business.

Even internally, it is hard having a workable business relationship with someone you simply do not like, trust and/or respect.

People do business with people they like” can take on a number of meanings. It may be “just business” but business involves people and where people are concerned, it is better to like people than not.