www.viewpoint.net.nz - NZ Transport, Aviation, Logistics & Supply Chain Blog

Setting up in Australia

Mainfreight today announced that they have conditionally sold Pan Orient Project Logistics business and its 75% interest in LEP (New Zealand and Australia) to global logistics company Agility Group for A$83 million. It is the last of the non core Owens businesses to be sold. The funds released from the sale will be used by Mainfreight to fund its ongoing international expansion.

With Mainfreight, Freightways and others slowly establishing significant off shore businesses I wonder what a successful strategy would be for more NZ companies to do the same?

The road to overseas subsidiaries it would seem is littered with more stories of failure than success. Air NZ and Ansett, Telecom and AAPT (yet to see the end of this movie) are examples of huge companies struggling to make it happen. How then is it possible for a NZ company to stem the tide of Aussie investment and head into their backyard? What are the key points to consider?

#1 It is harder than you think.
Summed up well by Josef Roberts who launched Red Bull in the two countries. "Don't rush overseas. Australia might have five times the population, but it also has five times the competition, and Kiwis aren't used to dealing with Australian bureaucracy. Roberts worked out a worst-case scenario, and then doubled the cost and doubled the time. "We were about right," he says. "It took three times as long and was three times as expensive." [From Idealog "Meet the man who gave Red Bull wings"]

#2 You need to avoid the Valley of Death
Rod Drury wrote about the Valley of Death "From New Zealand, once you have saturated the local market, you then have a massive transformational change to address another market. You may need to introduce capital, add new staff, learn foreign rules - the list goes on. For us to take almost our first step of expansion, to enter only our second market - we bet our businesses. I'm calling this - the Valley of Death."

#3 You need to take your time.
This would be the key lesson I have gleamed from companies like Mainfreight, Freightways or even Michael Hill who have set-up in Australia. They seem to make slow educated decisions about their growth into other countries. They take the time to understand the markets, people, culture and regulations and they take small incremental steps. They have done this well and don't bet the NZ business on it.

I don't have much first hand experience. Hopefully one day I will, but in the meantime I am interested in your thoughts.

Agoge is the 28th Fastest Growing Company

Last Thursday agoge received a place in the Deloitte Fast 50. This is a competition to establish the 50 fastest growing companies in New Zealand. Well after I duffed the speech and we went out to dinner to celebrate, I got to reflecting on what got us there. Here are some of my less than insightful observations:

My Team - The average age of my team is 30 and I am privileged to have the people I have. We are growing and learning and trying things together. We have an incredible culture, a heap of fun and seek to live "people matter" in everything we do. As Tim Finn says in his song "We had no idea, that it couldn't be done. And we needed to find, a like minded someone" I have found those someones in my team. The lesson: People are more important than anything else!

A lucky idea? - I had (and still do) have a heap of business ideas. I choose to launch under Logistics Personnel because it was the idea that I thought offered the quickest growth and good cashflow. A heap of the other ideas would have been a disaster. I did it after taking a week off work and surveying potential customers, researching the market size, blah blah. The lesson: Choose the right idea, an idea that will actually sell.

Cashflow - I started the company with around $60k cash and we have grown the business to almost $10m in annual revenues in 3 years. We could not have done it without strong cashflow. Seth Godin had a post the other day that gave 10 secrets of the marketing process. "#1. Don't run out of money. It always takes longer and costs more than you expect to spread your idea. You can budget for it or you can fail." - He's right and I often use the saying "Profit is a concept, cash is a fact".

We have had extended periods of making losses in the past as we invested in the future. We could only do this because we have strong cashflow. We work hard on rapid debt collection (65% in 17 days) based on the principal that the money belongs to us once it is billed. It sounds a little arrogant but a heap of small business just let other companies use them as a bank. We are not a bank! The lesson: You must have strong cashflow! You will only run out of cash once.

It is genuinely a privilege to be in the Fast 50. I am not sure we will make it next year, getting 200% growth year on year gets more and more difficult as you get more and more millions in revenue. I am not too worried if we don't but I know one thing for certain, we will have a heap of fun trying.

Failing 90% of the time

I read an interesting Scott Adams post today. In it he waxes lyrically for what feels like a day about all of his successes. Finally towards the end of what appears to be self-inflated dribble, he writes "To put all of this in context, and before you start to vomit at my bragging, I must confess that I fail miserably about ten times for every one success. (That's an accurate estimate. I've literally kept score.) But interestingly, the failures always involved activities that seemed entirely feasible. I was completely qualified for all of the things that failed."

He fails 90% of the time. Interestingly enough failing 90% of the time is only an issue if your goals are set to low. If you have huge goals and only get 10% of them, you become a huge success.

If you have small goals and only get 10% of them what do you get?

Killing the entrepreneurial spirit

Few successful start-ups become great companies, in large part because they respond to the growth and success in the wrong way. They grow exponentially and attract a team of people that love growth and have an entrepreneurial spirit. After a while the lack of planning and systems and good hiring of some systematic people means the company can turn into a very disorganised company. The response is often to bring in veteran managers to rein in the mess.

“They create order out of the chaos, but the also kill the entrepreneurial spirit. Members of the founding  team begin to grumble, 'This isn’t fun anymore. I used to be able to just get things done. Now I have to fill out these stupid forms and follow these stupid rules. Worst of all, I have to spend a horrendous amount of time in useless meetings.' The creative magic begins to wane as some of the most innovative people leave, disgusted by the bureaucracy and hierarchy. The exciting start-up transforms into just another company, with nothing special to recommend it. The cancer of mediocrity begins to grow in earnest.”

Most companies build their rules and processes to manage the small percentage of wrong people, which in turn drives the right people away. Getting the entrepreneurial spirit back it would seem means you need to give more freedom to your people.

Agree, disagree, have a question? - Post a comment now.