Speed is of the essence

Welcome to the BRW two-speed economy - the Fast and the rest. The companies on this year’s top 100 list haven’t had time to whinge about the resources boom (especially the two in the Top 10 that are in the resources industry). They’ve been too busy clocking up speedy growth amid sluggish economic conditions.

#1 Cozero

Started: With $50,000 in savings and credit card overdrafts and a background in green industry and utilities, Geoff Alexander and Nick Armstrong, pictured, established COzero in March 2007 to provide a trading platform for the rapidly developing global market in carbon credits. Before starting COzero, Alexander was involved in creating greenhouse gas abatement mechanisms, while Armstrong had founded Greentricity, a licensed electricity retailer that was bought in 2006 by Fast 100 company Australian Power & Gas (ranked #1 in 2010).

Edge: Offering local investors access to the $136 billion carbon market, while offering global investors access to carbon trading using highly stable financial and trading technology. “We’ve managed to use a lot of the intellectual property developed in the finance and trading sector in Australia and apply it to carbon trading around the world,” says Armstrong. “That is a very attractive proposition to international investors, and we should see more growth when Australia also starts to trade in carbon.”

Result: Over the past three years, COzero has managed a phenomenal average annual growth rate of 605 per cent, with last year’s revenue coming in at $165.8 million. Having started with the intention of listing midway through 2011, policy uncertainty surrounding the carbon tax has led the company to delay its listing, although the founders are bullish about continued growth in coming years.

Darkest day: While rapid growth sounds like a great problem to have, the challenges of managing growth came crashing down on Armstrong’s shoulders in December 2010 when the company came within a hair’s breadth of insolvency.

“I had to run into the bank and deposit my savings into the company’s account so that we could pay our suppliers,” Armstrong says. “The scariest thing for me was having a business that is highly profitable but still running the risk of becoming insolvent due to cash flow.”

Smartest move: The brush with insolvency, coupled with an accountant’s bill topping $20,000 a month, led to the appointment of a chief financial officer.

“We have been growing so fast we got to the point where we were running about two months behind on our accounting and were constantly having to play catch-up,” Armstrong says. “Having someone working within the company means we are not always looking backwards but are finally able to look ahead and forecast and plan for the future.”

Interview: Jeanne-Vida Douglas

#2 Jetts 24 Hour Fitness

Started: Personal trainers Brendon Levenson, pictured, and his wife Christy Levenson traded up from running an old-school gym with 24-hour access to a new, high-end outlet complete with a crèche, classes and a sauna. They shouldn’t have bothered. They quickly realised that their members preferred the cost and convenience of the old model. “We found 87 per cent [of our members at the new gym] were not using the classes or crèche,” managing director Brendon says. “We built this bigger gym because we thought that was what the market wanted.”

Members were paying 50 per cent more for the new facilities and were stuck in a contract, whereas before they paid on a casual basis.

“The value proposition wasn’t the same,” he says “We built a full-service gym that required more room, more equipment, more staff and trainers and more overheads – all costs we had to pass on to members. We found they didn’t want these. All they wanted was a traditional gym, without contracts.”

Edge:Eighteen months later, in August 2007, the couple opened the first Jetts 24 Hour Fitness outlet on Queensland’s Gold Coast, which incorporated the elements of the old gym – crucially 24 hour access, basic equipment and no contracts. In an industry that is dominated by more expensive full-service gyms, such as Fitness First and Fernwood, Jetts shook up the model.

Result:The fitness franchise has grown to 113 outlets in Australia and 16 in New Zealand. Franchise revenue was $43 million in 2010-11 and the chain recorded average annual growth of 403 per cent over the previous three years. Levenson has plans to open another 60 clubs in 2012.

Darkest day:The early days of Jetts were tight. “We did not have enough capital,” Brendon says. “We opened the first [Jetts] gym with $150,000 and then the business model took off. We had to manage our cash flow super carefully through this growth. Although a lot of our growth comes from franchising, we still had some growing pains, particularly when you’re adding 40-plus clubs a year.”

Smartest move:By challenging the conventional thinking of the fitness industry Jetts has delivered customer satisfaction.
“The fundamental backbone of the business [is] we listened to our customers,” Brendon says.
“The journey from our old club to where we
are today is because we gave our customers what they wanted.”

Interview: Jessica Gardner

#3 Hostplus

Started: Industry superannuation fund Hostplus services the hospitality, tourism, recreation and sports sectors. It was established in 1987 by the Australian Hotels Association and the trade union United Voice (which until March this year was known as the Liquor, Hospitality and Miscellaneous Union). Hostplus employs 170 people and has 984,000 members and $9.5 billion under management.

Edge: Chief executive David Elia, pictured, describes Hostplus as “pioneering” and striving to “do things differently” for the benefit of members. “Our mantra is for our members to expect more from us in everything we do,” he says. “To give members real value and help them get ahead, you have to look to innovate and to create opportunity.” In 2010, Hostplus opened its first retail outlet on Queensland’s Gold Coast, in partnership with ME Bank. “This is a great example of us trying something that has turned out to be very well received by our members,” Elia says. Hostplus expects to open more retail branches. Other initiatives include a low-cost balanced, passively managed investment product that charges an industry-low management fee of 0.036 per cent. Hostplus has also maintained its weekly membership fees at $1.50 since 2005.

Result: Hostplus had revenue of $2.34 billion in 2010-11, an increase of 21.3 per cent on the previous year’s $1.93 billion. Membership grew 5 per cent in the 2011 financial year. “Growth delivers enormous benefit for our members because we have the economies of scale to improve services and keep our fees as low as possible,” Elia says.

Darkest day: There is no hesitation when it comes to deciding on Hostplus’s darkest day: the global financial crisis. “The GFC was an incredibly challenging time for super funds and for all businesses,” Elia says. He also looks at that time as one of opportunity. “Businesses that had strong fundamentals and were well managed were able to work through the GFC and come out the other side. In our case, we came out in an even stronger position by engaging our members and staying close to them.” It was during the GFC that Hostplus decided to freeze membership fees, which it will continue to do until the end of 2012.

Smartest move: When the nation’s employees were given the right in 2005 to choose which fund their compulsory superannuation contributions would be paid into, Hostplus considered whether to pursue members in other industries. It chose to stick to its core industries. “As a sector-specific fund, we understand our members better than any other fund, which gives us a powerful competitive edge,” Elia says.

Interview: Leo D’Angelo Fisher

#4 iproperty group

Started:Inspired by the success of online real estate classifieds at home, BRW Young Rich list member Patrick Grove spent $400,000 on a Singapore software company and a nascent Malaysian real estate portal in June 2007 and iProperty Group was born. It now has websites in Hong Kong, Indonesia, Malaysia and Singapore. Former REA Group (the owner of realestate.com.au) general manager Shaun Di Gregorio, pictured, joined as chief executive in early 2010.

Edge: Grove floated iProperty only three months after it was established. “The company listed really, really early, to say the least, but when we look back now we see [the access to capital] as one clear advantage we’ve been able to leverage as the company is growing,” Di Gregorio says. “Being listed can be onerous for a small company . . . but the benefit of having access to capital and the profile that the business now enjoys has been a significant advantage.”

Online advertising trailblazers Simon Baker and Georg Chmiel (both ex-REA Group also) are non-executive directors. “We have a tremendous amount of experience in our management team and board,” Di Gregorio says.

Result: Turning over $7.23 million in the 2010-11 financial year, iProperty clocked up average revenue growth of 223 per cent over the previous three years. Its Malaysian arm makes up about 50 per cent of revenue. “Singapore and Malaysia are relatively mature but we think Hong Kong and Indonesia in the long term will be bigger businesses for us.”

Darkest day: Expanding too quickly has been the undoing of many start-ups. An economic downturn thrown in caused heartache for iProperty. The global financial crisis dampened demand for property at a time when “the company found itself in seven countries with a structure that wasn’t supporting the growth, with a management team that probably didn’t have the experience to guide it through”, Di Gregorio says. The company exited Taiwan, writing off $360,000 and although it still holds interests in India and the Philippines, iProperty is “basically inactive” there, he says.

Smartest move: “Agreeing that a focused strategy was better than an expansive one,” Di Gregorio says, the company took a “country first focus”, installing regional offices in each of its core markets rather than trying to manage remotely from the Kuala Lumpur head office. “To win in this game, you have to compete locally because every market is unique.”

Interview: Jessica Gardner

#5 Proweld Constructions

Started: Mick Robinson’s decision to go it alone as a business owner came after becoming “sick of working for halfwits and doing [my] best for them and not being appreciated”. A boilermaker and welder by trade, Robinson, pictured, worked as an operations superintendent in mine construction before establishing Proweld Constructions in 2007. Proweld specialised in metal pipe fitting and fabrication before adding labour hire to its operations. Labour hire now accounts for 60 per cent of the company’s revenue.

Edge: Labour hire is a numbers game and Proweld knows how to keep hold of good staff, even when most of their employees spend more time working on remote mine sites than under the company’s roof. Proweld pays “well above average and there’s always barbecues and beers once a month.

“Once a year we take [all staff who have] been with us for longer than six months to Bali,” he adds. “It’s just to let them know we appreciate them.”

Result: Proweld has grown into a 120-strong operation in just four years. Company revenue has tripled over the past year to $10.8 million and Robinson expects to repeat this in the coming period. He could be mistaken for a hopeless optimist if the company hadn’t already turned over $6 million in the first three months of this financial year. Proweld’s portfolio of clients is a who’s who of heavy industry and big miners and the list is growing as talks continue between Proweld and Bechtel LNG in Gladstone, Queensland.

Darkest day: The GFC hit Proweld hard. “Things were very, very tight,” Robinson says. “A lot of projects got shelved until things improved and there was just no work around.” But letting go of good staff wasn’t an option. In the notoriously tight labour market of Western Australia, each member of staff could potentially take years to replace when the market picked up again. Robinson’s team had no choice but to ride out the lull. “I didn’t get rid of any staff. I told everyone ‘we’re not going to make much money, but we’re going to keep our heads above water’.”

Smartest move: Robinson overcame the difficulty of finding new, quality staff in WA by setting up a new shop in Sydney. “You can get more people over in the east. We could go blue in the face advertising for people in the west and you still wouldn’t have any luck.” Proweld has also invested nearly $100,000 over the past 18 months in a skills training and testing centre near its headquarters in Jandicot, WA, with plans to build a similar one in Sydney.

Interview: Samantha Hutchinson

#6 UNLTD Energy

Started: UNLTD Energy began in 2007. It is now the biggest provider of solar energy in Perth. The chief executive of UNLTD, Kieron D’Arcy, pictured, says the secret to the company’s success was its initial tactic of going to schools and community centres to promote the solar energy product. The deal offered was that for every six kilowatts of solar energy sold, the school or centre would receive one solar panel (a ratio of about 42 to one). Apart from some early stresses when “three houses were on the line”, growth has been sound. D’Arcy says the company has avoided raising debt.

Results: About half of the sales still come from referrals, compared with the more usual ratio of about one-quarter. UNLTD’s growth has been fast. The company turned over $1.4 million in its first year, $7.4 million in the second, $12.9 million in the third and almost $30 million in the fourth.

Edge: D’Arcy says a decision was made early to focus on sales growth rather than pursuing high margins. The company started with $100,00 in capital and four people. “We wanted to make a fair and reasonable product, not look to maximise profits,” he says. “We focused on the number of jobs we do. We have probably the best price on the market at this time.”

D’Arcy also says the aim was not to grow too quickly. “We haven’t grown as fast as we could,” he says. “We tended to hold back to do things within our financial means and human resources requirements.”

Darkest day: D’Arcy says the biggest challenge will be the gradual withdrawal of federal and state government subsidies. The company aims to focus on providing solar to commercial properties that do not rely on getting feed-in tariffs but are looking to reduce the amount of power from the grid they consume. D’Arcy says eventually residential users will rely on solar power and ceramic fuel cells. “The grid will be the third option.”

Smartest move: “We underestimated how important those community leaders are,” says D’Arcy. He says two-thirds of sales in the first year came from referrals. “Once people saw [the panels] on roofs, they would say: ‘What’s that?’ It turned out that the people we were selling to were leaders in their groups and others in that group would follow. It wasn’t something we planned, it just happened.” D’Arcy says that only in the second year did the company advertise through Google.

Interview: David James

#7 Tyro payments

Started:Jost Stollmann, pictured, was close to becoming Germany’s minister for economic affairs in Gerhard Schroder’s government but instead he quit politics and embarked on a two-year yacht voyage during which he and his wife and five children sailed into Sydney and stayed.

Not long after getting to Australia in 2004, Stollmann met the founders of MoneySwitch (now known as Tyro Payments), a company started by three engineers who decided they would go into direct competition with the big banks and process eftpos transactions. In 2005, Stollmann was appointed chief executive and the company met the technical hurdles required for regulatory approval for this service.

Edge: Tyro works with about 5000 merchants and processes more than $2 billion in eftpos transactions annually. It is the only independent eftpos provider competing with the major banks and while it has only a 0.6 per cent share of a $400 billion industry, the fact that Tyro still exists post-GFC is a testament to Stollmann’s determination to keep “competing against the establishment” by “nibbling a little bit off” the big four’s share.

“There’s two questions we ask ourselves,” Stollmann says. “Is it possible to compete against the big banks? And is it possible to give SMEs a voice? We don’t know yet. It’s a work in progress.”

Tyro provides the technology to process transactions itself (he says the big banks outsource it). “This provides higher value to the retailer, whereby they get a service that’s faster, more secure and reliable.” He says a case in point is Medicare, which uses Tyro to process a large chunk of its transactions. Now Medicare can give rebates to customers who are out of pocket on the spot by using Tyro’s services.

Result: Revenue has risen from $14.3 million in fiscal year 2010 to $19.9 million for fiscal year 2011 and the average growth over three years is 161 per cent. “It’s a great success to still be alive given the adversity that a new entrant faces in the payment space,” Stollmann says. “Because it’s so difficult we haven’t seen many people engaging in the same challenge. It’s regrettable because Australia needs more entrepreneurs and innovators.”

Darkest day: Stollmann says there are still high barriers to entry. “It’s the combination of discriminatory structures in the payment space and anti-competitive behaviour by [the big four],” he says. “That dampens switching behaviour and makes it very difficult to obtain market share and grow.”

Smartest move: Initially it was to trust the three founding engineers and give them the money to develop the business, Stollmann says. But more broadly, the smartest move has been creating a reliable system. “We have designed a system that we market as never failing and being safe,” he says. “We concentrated on getting the basics right and now we can build on that.”

Interview: Nassim Khadem

#8 Finovia

Started:Geoff Pritchard, pictured, isn’t a stranger to the fast club. He was previously chief executive of Western Pacific, which also made the BRW Fast 100in 2005 and 2006. Pritchard sold that company into a listed entity in 2006 and teamed up with business partner Barry Johnston to establish financial consultancy firm Finovia. The company, which was set up in February 2008, gives financial advice in three main areas: professional services, accounting and management consulting.

Edge: Pritchard says Finovia has been able to capitalise on the “HR war for talent”. Much of Finovia’s business comes from companies that are prepared to invest in helping their executives handle personal issues in finance, including debt finance, taxation and superannuation.

The amount a company spends can range from a few hundred to a few thousand dollars, depending on how many employees it’s prepared to pay for and the scope of the work. “Companies are prepared to invest in the financial wellbeing of employees,” Pritchard says. “It means [the employees] can focus on their work and make better business decisions.”

Finovia also has specialist staff – 30 are in Melbourne and 10 are in Perth. Most come from professional services backgrounds in accounting, wealth management, financial consulting and the legal profession.

Result: The average growth in revenue over the past three years has been 158.8 per cent, with revenue for the 2010-11 financial year hitting $6.6 million. Pritchard says the fact that it sells a service means the company is able to generate growth regardless of the wider economic picture.

“It’s about helping people make smart decisions about money,” he says.

Darkest day: “People issues are always a challenging issue,” Pritchard says. “Finding good people who are able to help the company move in the right direction and further grow. We need to be able to give our clients comprehensive advice but it’s not easy finding people with specialist skills.”

Smartest move: Engaging the private equity arm of the Wyllie Group, Viburnum, when the company was founded. Viburnum, which now manages $51 million for the Wyllie Group and associates, helped Finovia carry out five acquisitions when it set up in 2008.

“We wouldn’t have been able to establish a business of this scale, and at the same speed, without private equity funding,” Pritchard says.

Interview: Nassim Khadem

#9 Salva Resources

Started: Like many young people, Lachlan Broadfoot, pictured, had always wanted to combine work and travel. But the way he did it defies conventional practice.

In 2007, Broadfoot resigned from a marketing role at Rio Tinto to start Salva Resources with his good friend Grant Moyle. Both men continue to run the company.

They started by opening an office in India. “It had huge potential,” says Broadfoot of his early impressions of the Indian market, which is notoriously difficult to break into.

After securing some key clients in India, the pair opened a Brisbane office in 2008. More recently, they have set up in Indonesia and the UK and plan to do likewise in Mongolia and Mozambique.

Edge: Salva Resources is a mining consultancy business that provides technical expertise at mining sites and on exploration projects.

Although Broadfoot had accrued experience in the resources sector before starting Salva, his co-founder Moyle had not. Broadfoot says Moyle’s lack of experience in the mining sector (he had previously worked in the finance industry) proved to be a blessing. “Grant could look at the business fresh,” he says. “It meant he could focus on growing the business and not just on doing work for the business.”

Result: Revenue for Salva Resources’ Australian operations grew by 140 per cent to $13.6 million in the year to June 30, 2011. The business also made about $2 million in revenue from its international operations.

Darkest day: In Salva’s earliest days, Broadfoot says he was forced to question his business strategy. To help manage expectations, Broadfoot and Moyle decided to give themselves a year to set up the business. Living in a foreign country helped because they knew they would get an exciting life experience even if the business failed. The early going was slow but Broadfoot kept costs down by staying in backpacker accommodation and conducting business meetings in hotel lobbies.

Winning the support of early clients was crucial and Broadfoot says he did so by not looking for short cuts. “We got a lot of kudos by showing that we were prepared to put ourselves on the ground and live [in India],” he says.

Smartest move: Broadfoot says his smartest move was to go into business with his best mate. “It would have been too full-on otherwise,” he says. Friendships offer suffer when friends become business partners but Broadfoot says they have avoided this by being open and focusing on different parts of the business.

Interview: Andrew Heathcote

#10 LSA Recruitment Group

Started: In 2004, at the age of 20 and still studying a Bachelor of Science at university in Queensland, Andrew Northcott decided to get into the contract labour business. Having just $800 behind him and no labourers on his books, he started by contracting himself out to small clients who needed short-term help.

Edge: Northcott’s “blue collar” labour business has grown considerably since its humble beginnings and accounts for about three-quarters of annual revenue. Most of the remainder comes from LSA Recruitment, which was set-up in 2007 to service the professional “white collar” recruitment market. The business evolved from an early attempt to provide staff with flexibility to work from home into a franchise operation.

LSA Recruitment has 12 business partners (franchisees) and Northcott has plans to grow this number to 114. The franchise model is unique in the recruitment industry and Northcott believes that it provides him with a substantial advantage over his competitors.

Business partners pay $22,000 for exclusive rights to a territory and they get the benefit of LSA Recruitment’s systems, network and a $1000 income guarantee for each of the first 12 weeks. LSA takes between 5 per cent and 20 per cent of each business partner’s revenue depending on the size of their billings. Business partners typically have a background in the recruiting industry and are attracted by the opportunity to work for themselves. “We help ensure a smooth transition from PAYG employee to business owner,” Northcott says.

Result: LSA Recruitment Group’s revenue grew to $22.8 million in the year to June 30, from $9.4 million the previous year.

Darkest day: Starting a professional recruiting business just days before the global financial crisis meant LSA Recruitment had some tough challenges in its infancy. But Northcott says this proved to be a blessing as it ensured that costs were kept down. “Our cost of sale would be among the best in the industry,” he says.

Smartest move: The decision to embrace technology has proven to be one his best, according to Northcott. “If you look across the industry, there are probably only four or five software packages that can support recruiting businesses,” he says.

By developing his own, Northcott says he has been able to reduce the costs involved in sourcing clients, efficiently manage the recruitment process and service rural areas. The technology platform is also used to share information between business partners and tender collectively on their behalf.

Interview: Andrew Heathcote

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