Starting and running a business is precarious - just surviving the first few years is a milestone and achieving fast growth is still rarer. With skills shortages, a restrictive investment capital environment, increased red tape and compliance costs and onerous taxation regimes, Australia's fastest-growing companies make it against the odds. For an emerging company to develop the Midas touch and experience fast growth, it requires sharp strategic thinking and adherence to basic business principles, as well as good luck.
A survey by BRW [sister publication of CIO New Zealand] of the 100 fastest-growing companies in Australia shows the main issues holding back growth in 2008 will be finding quality staff and gaining access to capital.
Deloitte Growth Solutions partner Tim Gullifer says there are three ways to obtain rapid expansion. "The first is through acquisition. In this way, you achieve what I call a hockey stick effect where growth falls away and then turns up after 12 months" due to the effects of integrating another business and understanding the cultural and human resource differences of the two entities.
The second important impetus for growth is diversification - the development of new processes to provide efficiencies and new products and services. The third element is "just doing what everyone else does, but doing it better", Gullifer says.
"Pull all three together and you get rapid growth. Some companies do this very well. The Pulse Pharmacy group, for example, has applied these principles and is growing rapidly. Organisations such as Pacific Brands and the Just Group have been acquiring brands to get into further consumer areas and this has paid off."
Gullifer admits that the lack of skilled staff and funding will continue to haunt companies in 2008. "Skills will remain a problem as the universities are not getting people into the courses where the skills exist, in engineering and commerce for example. Everyone is looking offshore for talent but this isn't necessarily the solution as you don't always know what you are getting when you hire someone from overseas. There are often cultural, moral and technical differences which can be incompatible with the culture of Australian companies.
"The lack of funding is also a problem. Those companies which have funded and managed debt effectively will be able to build rapid growth. They will be the ones in a position to acquire other companies to develop and put in place diverse strategies and to seek out and hire the best people."
Many companies are holding back on spending until after the first budget from Treasurer Wayne Swan, Gullifer says. "It will be the first Labor budget in years, so many companies will sit back and say, 'Let's wait and see'."
Upstream Print Solutions of Melbourne offers managed print services that compete with global giants such as Xerox, Canon, Hewlett-Packard and Ricoh. Chief executive Neil Tilley's strategy for rapid market growth has been to connect with other small and medium business owners and operators to share and develop ideas and strategies.
"We developed the Coalition of the Davids - as in David and Goliath - a group of like-minded business people who were mostly concerned about how to grow when competing with large multinationals," Tilley says. "For our business, it has been fantastic. We have gained ideas and strategies to get the competitive advantage."
Upstream produced a 29.9 per cent rise in profit in 2007, the company's best sales year yet, and also signed about 400 new customers, representing $14.6 million in new revenue.
Tilley says that through the interaction with the Davids, he was able to identify points of difference with his huge competitors. "A good example of our group dynamic is that we recognised that bigger competitors don't trade off today's profit for tomorrow's benefits. They just won't do it and that means we are able to take the risks to pinch their market share.
"Essentially, we give each other confidence and bounce ideas off each other. We think about what the big competitor will do if we do something. It is a tough game but let's face it, everyone is sitting around trying to work out how to knock you off."
Tilley's advice is that business owners looking for growth should seek like-minded colleagues with whom to share problems, ideas and opportunities.
"Don't be afraid to experiment. We all looked at the six best things we did and the six dumbest things. We found that you shouldn't be concerned about doing something that doesn't work. People spend a lot of time sitting around worrying whether to do something or not when they should just give it a go.
"We apply the 'what if' principal to ideas we discuss to evaluate the risks and benefits."
Besides Tilley, the Coalition of the Davids includes managing directors such as Greg Roebuck of carsales.com.au, Wayne St Baker of Champion Compressors, Ian Rich of Aira, Martin Van Os of ITW Buildex and joint managing director Kerry Smith of PFD Foods.
Also included is managing director Alistair Murray of Ronstan, which has grown rapidly to become the second-biggest sailboat hardware manufacturer worldwide.
Tilley says the skills shortage has taken up much of the group's time but perhaps a drop off in economic conditions may alleviate the problem. "Some business people are saying that they are looking forward to a recession so we can get some good staff."
For founder and chief executive Stephen Spitz of expanding franchise group Xpresso Delight, the key to growth is in an old adage: 5 per cent inspiration and 95 per cent perspiration.
Xpresso Delight, which provides coffee machines to the workplace, has grown by 186 per cent over the past three years. Spitz attributes this to the time he and his business partner spent getting to know their market, building a business with low overheads and developing clear differentiators to others in the market.
"You need to be lean and mean - it is absolutely imperative," he says. "You need to look at the competition and work out what they do well and then learn from them.
"You need to really understand the potential of your business, knowing how much it can grow and into what areas. Many people have an 'If we build it, they will come' philosophy, but obviously there is much more involved.
"For anyone to be able to grow a business and to be successful, they have to have a real understanding of sales and marketing. Otherwise they are just kidding themselves."
The telecommunications franchise group Telcoinabox, led by managing director Damian Kay, has grown by 182 per cent in the past three years. "We have re-engineered the business to become more efficient and to get better labour utilisation," Kay says. "We are now in a position to capitalise on this and handle greater growth rates without dying by indigestion. Gearing for greater growth has been an exciting process and vital in such a competitive industry."
Maintenance of the basics leads to business growth, he says. Managing cash flow, developing workable and realistic business plans and managing staff effectively are all keys to successful growth.
In obtaining the necessary capital for growth, small to medium businesses often face problems borrowing from the banks unless they have long trading histories and a very high capital ratio. But Kay says an ability to service debt is not the sole criteria from a bank's perspective.
© Fairfax Business Media
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