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Jane is a retail and small business writer with a special interest in emerging companies and entrepreneurs. She covered the financial services industry before moving into general business journalism and has written for The Age and The Australian Financial Review.

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Money from mayhem

Published 28 October 2010 05:01, Updated 04 November 2010 06:51

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There was no magic elixir that protected fast-growing companies from the fallout of the global financial crisis. But three common factors contributed to the success of the founders of companies listed on the 2010 BRW Fast 100: relentless determination, self-belief and the ability to change.

Although 74 per cent felt the impact of the economic downturn, 82 per cent say they benefited from opportunities arising from the crisis. And their growth is a testament to the power of their optimism.

Total revenue of the Fast 100 companies this year is $3.63 billion, up 47 per cent from last year. A record number of newcomers saw 70 making their debuts, nine of them in the Top 10.

Founders highest academic achievement

Left school before year 125%Less than $1 million15%More than $300,00019%Less than 40 hours7%
Completed year 12 12%
Trade qualification 13%
Undergraduate degree 50%
Postgraduate degree 20%
Less than $1 million 15%
$1 million - $2 million 25%
$2 million - $3 million 19%
$4 million - $5 million 9%
$5 million - $10 million 16%
More than $10 million 16%

“There are companies that benefited from a changing demographic, but there are also those that were able to take up where their competitors left off,” RMIT University’s school of management entrepreneurship leader, Professor Kosmas Smyrnios, says.

“When their competitors dropped out of the market during the GFC, they recognised the opportunities and went for them.”

Companies, including AWX (ranked 92), Azure Group (ranked 95) and Quinntessential Marketing (ranked 64), say the downturn forced them to get innovative and look to new markets for growth.

When AWX experienced a 30 per cent slump in its construction and engineering labour hire and recruitment business last year, it entered new markets in mining and health. Similarly, property and business services company Azure Group was forced to focus on new areas, such as wealth services, forensic accounting and corporate advisory when it lost 40 per cent of its clients as a direct result of the GFC.

For other fast-growing businesses, such as wholesaler Republica Coffee (ranked 60) and solar power company Apricus Australia (ranked 7), the downturn had some more obvious, counter-cyclical benefits.

Founders’ personal wealth

Left school before year 125%Less than $1 million15%More than $300,00019%Less than 40 hours7%
Completed year 12 12%
Trade qualification 13%
Undergraduate degree 50%
Postgraduate degree 20%
Less than $1 million 15%
$1 million - $2 million 25%
$2 million - $3 million 19%
$4 million - $5 million 9%
$5 million - $10 million 16%
More than $10 million 16%

Republica founder and chief executive Jacqueline Arias says many consumers who cut back their visits to cafes and restaurants during the GFC were willing to spend more on luxuries such as “real” coffee at the supermarket. Apricus benefited from federal government subsidies for solar panel installation.

“It had a positive impact on our brand ... because more people were willing to spend more on quality coffee at the supermarket to take home and enjoy with friends and family to make up for the fact that they were spending less on going out,” Arias says.

This year’s Fast 100 also points to a trend of younger entrepreneurs building successful businesses.

Almost one-quarter of the founders were in their 20s when they started their businesses, such as Selmar Institute of Education founder and chief executive Marcus Sellen.

In Sellen’s case he had been made redundant and started his training business with just $2000 in savings.

Sellen’s experience was not uncommon. Many of the founders of the top 10 companies started their businesses out of necessity rather than innovation. Like Sellen, some were made redundant from their previous jobs, while others found it difficult to work for a boss.

CEO’s gross salary

Left school before year 125%Less than $1 million15%More than $300,00019%Less than 40 hours7%
Completed year 12 12%
Trade qualification 13%
Undergraduate degree 50%
Postgraduate degree 20%
Less than $1 million 15%
$1 million - $2 million 25%
$2 million - $3 million 19%
$4 million - $5 million 9%
$5 million - $10 million 16%
More than $10 million 16%

RMIT’s Smyrnios suggests the trend is partially the result of a demographic shift, but it is also about the sectors where new businesses are emerging.

“Young people want to start their own businesses and they want them to be technology oriented from the start,” he says. “They’re doing it themselves from the beginning. Also, the downturn presented many of these companies with opportunities to grow at a faster rate.”

Fast 100 companies are increasingly aware of the benefits of social media, with most already using sites such as Twitter, Facebook, LinkedIn and You Tube to communicate with clients and potential customers.

Graduate recruitment firm Unimail (ranked 68), uses social media as both a marketing and a communication tool. Other businesses, such as online retailer Everten Online (ranked 51) use Facebook to stay connected with customers, while Sportsnet Holidays (ranked 5) publishes videos on YouTube

“Social media has been of great assistance to us in keeping in touch with clients on a more regular informal basis,” Unimail chief executive Andrea Culligan says. “It has also offered us the opportunity to change and evolve our business according to our stakeholders’ needs, quickly and efficiently.”

Despite their success, Fast 100 companies claim rapid growth has its pitfalls. More than half the companies on the list have suffered a big setback, such as a fallout with an investor, troubled employees and managers and the demise of niche markets, (see “Back from the brink”, page 62)

Finding the right staff has been a big challenge for 57 per cent of company founders. That is a turnaround from last year, where companies turned their focus from the skills shortage to short-term survival.

Next year recruitment will be a priority for 95 per cent of Fast 100 companies.

Fast 100 stats

  • 50% - Proportion of company founders who feel their business has adversely affected their health and personal lives
  • 37% - Proportion of company founders who have experienced anxiety or burnout
  • 59% - Proportion of company founders who think going into business with family members or friends is a bad idea
  • 74% - Proportion of company founders pursuing wealth creation outside their businesses.

AWX plans to employ 300 more casual employees during 2011 and another 10 permanent staff, while Art Index (ranked 72) and Assetivity (ranked 32) plan to increase staff numbers by 50 per cent in the coming year.

Selmar (ranked 10) expects to double its number of employees within two years and Third Horizon Consulting Partners (ranked 77) will more than double its workforce to 150 in 2011.

Developing growth strategies is the second most pressing concern (40 per cent), followed by managing staff (35 per cent), increasing competition (31 per cent) and accessing capital for growth (22 per cent).

More than 70 per cent of founders have not raised any subsequent rounds of capital since starting their businesses and 18 per cent have taken out two rounds of capital raising.

More than half of the business owners that did seek additional funds got it from the banks, 24 per cent went to family and friends and 16 per cent went to venture capitalists for the extra capital.

For those that attempted to raise capital in the past year, the banks proved to be less than willing to accommodate their needs.

“With the GFC having taken its toll, the appetite of most risk-prone investors has vanished,” Tyro Payments (ranked 4) chief executive Jost Stollmann says.

“In addition, there is an overabundance of attractively priced no-brainer opportunities. Our project is complex and daring.”

Other companies such as four-time Fast 100 member Refund Home Loans (ranked 97), say the banks refused to fund them, despite their strong track records and growing profits. Refund founder and chief executive Wayne Ormond claims his facility was reduced by BankWest despite the company’s expansion.

Despite their plans for growth, 63 per cent of companies on the list are not looking for additional capital to fund it. More than half of the companies say expansion will come from organic growth (51 per cent), while 10 per cent say it will come from new products.

Just 18 per cent of companies were founded with a “born global” international focus, however 40 per cent are now trading overseas. Another 17 per cent of companies are planning to sell goods and services overseas in the future, yet only 34 per cent are taking advantage of the growth in the booming Chinese and Indian markets.

Many companies say they plan on building critical mass locally before expanding into China or India and others say they have not found a suitable joint-venture partner to move into those countries.

The cultural differences and language divide are often the main reasons for not expanding into Asia and traditional English-speaking foreign markets, such as New Zealand, the United States and Britain, are favoured for international expansion.

“Cultural differences to expand are currently too great [in China and India] and as an introduction into exportation we look to align cultural similarities,” Unimail’s Culligan says.

The main reason Fast 100 entrepreneurs start their businesses is because they identify a niche market (65 per cent). More than half say they went into business for a personal challenge and 44 per cent admit making money was the motivator. Another 42 per cent say independence, or being their own boss, was the reason they started a new business.

RMIT’s Smyrnios says the founders of fast-growing companies tend to be “big thinker”, ambitious types who have clear goals.

“They tend to be leaders that are transformational,” he says. “They’re passionate, empathic, they don’t tend to use the stick – they’re more likely to just fire people,” he says. “They have a clear vision of what their company should look like.”

But with that ambition and drive comes stress, according to Smyrnios. Half of the company founders on this year’s list admit that at some stage their business had adversely affected their health and personal life in some way. Thirty-seven per cent say they have suffered anxiety or burnout.

Many entrepreneurs who suffered from stress, anxiety, depression or burnout say they did not know how to deal with it. While some sought medical and psychological help, others took holidays and time off in the hope that they would recover.

the fast 100 working week

Left school before year 125%Less than $1 million15%More than $300,00019%Less than 40 hours7%
Completed year 12 12%
Trade qualification 13%
Undergraduate degree 50%
Postgraduate degree 20%
Less than $1 million 15%
$1 million - $2 million 25%
$2 million - $3 million 19%
$4 million - $5 million 9%
$5 million - $10 million 16%
More than $10 million 16%

“I do believe that has a lot to do with the type of people they are, the type of leaders they are,” Smyrnios says.

“They work very long hours and there is a tendency for them to do the work themselves rather than delegating.”

Despite the pressure on both a personal and professional level, Fast 100 companies have a much more optimistic outlook for the future than the average Australian business.

More than nine out of 10 are either “confident” or “very confident” about the coming year.

“That’s the nature of the entrepreneur,” Smyrnios says. “They’re always looking for the next opportunity and the next challenge.”

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