Against the odds

It was not just rugby fans who celebrated when the Wallabies beat the Springboks in an epic quarter final at the 2011 Rugby World Cup. BRW Fast 100 company Sportsnet Holidays spent more than one-quarter of its annual turnover on 10,000 tickets. A Wallabies win meant a prized semi-final with New Zealand and a huge event to promote to Australian sports tourists. A loss in the quarter final would have meant Sportsnet would have barely broken even.

It was a big bet for a company with a $21.8 million turnover in 2010-11. But Sportsnet founder Rob Cecconi is too good an entrepreneur to risk his company on a single event. The 42-year-old knows that giant sporting events have killed plenty of small tour operators before. Much can go wrong: bad weather, tournament favourites eliminated early and poor scheduling, to name a few. Cecconi says lower than expected demand for World Cup packages mauled some European travel operators. A crowded Australian sporting calendar weakened local demand.

Sportsnet would still have sold its tickets to an All Blacks and Springboks semi-final but the win by the Wallabies meant greater demand for last-minute travel packages and tickets and higher prices. “I prayed to the rugby gods that the Wallabies would win,” Cecconi says.

“It’s not overstating things to say the win was a massive turnaround for local tour operators who were licensed to sell travel packages to the Rugby World Cup.”

Within 45 seconds of the siren, Cecconi had his first call from Sportsnet’s Brisbane office seeking extra tickets for the Wallabies’ next match. Minutes later Cecconi had calls from clients wanting tickets. “The Wallabies semi-final appearance will take us well into the black from this event,” he says. “I’m definitely not in the business of gambling but a good result in a big sporting event can make a huge difference.”

Those in big or small business might shudder at the risks entrepreneurs take and the sheer unpredictability of some industries. How many other enterprises would bet so much of their revenue on a “product” whose success or failure might hinge on a missed penalty goal, dropped ball or bad refereeing decision?

Cecconi sees it differently. Sportsnet’s strategy is about taking acceptable risks and managing exposures. “Companies in our industry come undone because they buy too many tickets and hold their inventory too long,” he says. “My advice to entrepreneurs is to thoroughly understand the market you play in.

“We continually build and expand our distribution channels and constantly review our risk. We never allow too much inventory to build up and always release inventory based on our risk assessment. And we never take anything for granted.”

The ability to control risk is fundamental to entrepreneurial resilience. Good risk managers can take more bets, recover from setbacks and stay in the game longer. They learn to see mistakes as part of an entrepreneurial “trial and error” process rather than a killer blow. They embrace uncertainty, constantly adapt and respond to ever-changing markets rather than hope markets respond to them.

Outstanding entrepreneurs also see mistakes as part of a learning journey, or self-awareness process that builds instinct and complements their rational decision-making skills. This year’s BRW Fast 100 survey was seemingly cathartic for many on the list who provided lengthy answers, even mini-essays, to the questions: “Have you suffered a major setback; how did you respond to this setback; what did you learn from the setback?” Sixty-two per cent answered in the affirmative to the first question. Some of their responses were incredibly personal and refreshingly honest.

Job Capital founder Jo Burston wrote about her father’s death and the profound effect it had on her successful payroll services business. Burston’s father, a respected firefighter, was diagnosed with prostate cancer and secondary bone cancer in 2006, a year after Job Capital began. Burston spent every minute possible with her father and helped her mother with the impending loss while building her fledgling business. “There were definitely times when I thought, ‘I can’t handle this’,” Burston says. “I worked 20 hours a day as I divided my time between family and business.”

Burston credits her mentor, family and friends for helping achieve a balance between supporting her family and building a start-up venture. “My mentor helped me realise it was about the quality of time I spent with my father, supported me emotionally and helped me better understand my own emotions,” she says. “My father had always been my biggest supporter. He wouldn’t have wanted me to let the business go under. To this day, I think about him and his values every time I give a presentation or win an award.”

Burston easily could have let her father’s death crush her entrepreneurial spirit. She describes it as “without doubt the hardest experience in my business life”. Instead, she used the setback as inspiration.

“I was determined to turn the emotional torture I went through into something positive. Never for a minute did I think, ‘poor me’, or ‘why is this happening to me?’” In her survey response, Burston wrote: “When he passed away, I felt more determined, focused and with an impermeable spirit to succeed, to make my father proud.”

In 2008, Job Capital earned $3 million and employed a handful of staff. In the latest financial year, Job Capital earned $25.4 million and employed 13. Burston is determined to make it Australia’s best payroll services people-management company and has a revenue target of $100 million.

Wealth has a lower priority for Burston after her father’s death. “I travelled to and from the Central Coast [in NSW] to watch him slowly disintegrate and lose his dignity,” she recalls. “Those car trips were lonely and sad, and gave me a lot of thinking time to focus on what really is important to me in life. I have always felt a huge responsibility for my family.”

The Fast 100’s experience with setbacks shows a personal side of entrepreneurship that rarely comes out in official statistics on business failure. Administrator reports supplied to the Australian Securities and Investments Commission comment on “poor financial controls”, “poor strategic management” and “poor economic conditions” as the main reasons for business failures.

Yet the Fast 100 are more likely to nominate personal issues, such as relationship breakdowns, family problems, splits with business partners and staff resignations as their biggest setbacks. Their responses reinforce the view that start-up entrepreneurship, at least early on, is more about people and products than profits. Find and keep the right people, launch the right products and profits often take care of themselves. The trick is staying confident along the way.

Tristan White’s confidence was crushed when his fast-growing physiotherapy business, The Physio Co, lost a client that contributed half its revenue. After two slow years, The Physio Co’s services for aged-care facilities took off but the business grew too quickly and quality suffered.

White, then 26, remembers the ordeal: “The client said, ‘Tristan, you need to make a change here and lift the service quality’. I said I’d get to it and never did. I didn’t listen. The business was growing so quickly that I was having to be the physio, manager and entrepreneur on a scale that was beyond me at the time. I was a young physio, not an entrepreneur who knew how to scale a big business.”

White is hardly the only entrepreneur whose first venture almost died from growing too quickly. Many start-up entrepreneurs focus on cash flow first, with systems and structure a distant second, meaning their venture cannot sustain rapid growth for long periods as product quality wanes.

He was not prepared for the personal blow of losing a client. “I was absolutely heartbroken by it. I invest a lot of emotional energy in my business and am incredibly passionate about it, the staff and people we help. This was my baby. To have your main client say your product is not good enough is like a kick in the guts. It cut me to the core. I had to really dig deep to get through it.”

Losing half the revenue overnight meant White had to scramble to find new income. Fortunately, the business had few overheads, with White working from a spare bedroom and the business employing mostly part-time staff. His response was to target more manageable growth and refocus on people, culture and service quality.

The big lesson was developing systems to give field staff more autonomy. “The only way you can maintain fast growth is by giving staff the authority to solve problems as they occur,” White says. “That comes back to having a strong culture and values, and the right systems. I also appointed a team captain, or chief operating officer, who has helped me focus the business’s commercial success.”

White is so confident in his team that he works one days a week from his house in Sandy Point in southern Victoria. “I absolutely trust my team to deliver,” he says. “We now have systems that provide feedback on service quality every day and we fix problems the instant they occur.” The Physio Co won back its biggest client and now services even more of its aged-care facilities. Revenue of $2.2 million last financial year was up 38 per cent on the previous year.

As some entrepreneurs deal with unpredictable ventures, family problems and confidence issues, others confront another business killer: bad luck. Momentum Media founders Alex Whitlock and Phillip Tarrant launched Sterling Publishing in August 2007, just before the global financial crisis struck. Starting a new print magazine about non-bank lending, an industry with huge problems, as advertising markets collapsed, was publishing suicide.

Also, their former employer responded aggressively. Whitlock wondered whether the first magazine, now called The Adviser, would survive. It had $5000 in advertising revenue from two ads for its second issue – chicken feed for even the smallest trade publisher. A magazine with a skinny ad count sends a terrible message to other advertisers and often creates a cycle of heavy discounting that customers come to expect. It was the worst possible start.

Whitlock and Tarrant responded quickly. “We had a frank and frightening conversation that if we didn’t get this magazine up and running quickly, Sterling Publishing would fold,” Whitlock says. They cancelled the January issue with two ads, repositioned the title towards mortgage brokers, changed the masthead and pedalled faster than ever. “Looking back, I’m glad we launched when we did,” Whitlock says. “Nobody in their right mind would have launched a publishing business straight after the GFC. We would never have done this business had we waited another 12 months.

“We had to become incredibly customer-focused to survive. When you live or die by each issue, you have to think very carefully about how you meet reader and advertiser needs. I believe when you show customers your business is committed for the long term at the very bottom of the market, you grow much faster on the way up.”

The Adviser’s eventual success encouraged Sterling Publishing to launch a second magazine, Smart Property Investment, in February 2011, and a third, Real Estate Business, last June. Their bold approach to launching publications in highly competitive, weakening markets, is paying off. Smart Property’s early performance is exceeding the company’s expectations. Momentum Media’s revenue in 2010-11 was $2.8 million, up 130 per cent on a year earlier.

More importantly, Sterling Publishing has become a business in its own right after originally complementing the parent company, Momentum Media, a media-services business. Whitlock credits his partnership with Tarrant for the early success. “I wouldn’t have got through the tough times without having a business partner I trusted and was friends with,” he says. “I would have made bad decisions and struggled to function on my own, given the immense challenges the company faced.”

Whitlock and other Fast 100 entrepreneurs overcame tremendous personal and business setbacks and emerged stronger from their ordeal. Not unlike the Wallabies in that famous quarter final, they found a way to win when nothing went right. They showed it’s not how many mistakes you make in start-up ventures, but how you respond, learn, and play every minute of every match that matters most.

BRW

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