1 HOW OUR BEST MID-MARKET FIRMS ARE DRIVING AUSTRALIA S ECONOMY WHERE DO YOU SEE YOURSELF IN THREE YEARS? Hiring tips for mid-market firms PLAY YOUR CARDS RIGHT The do s and don ts of debt FUND INNOVATION WITH INVENTORY A guide to asset-based lending KEEPING A JUGGERNAUT GROUNDED OzForex CEO s challenge In partnership with
2 GE Capital WE ARE COMMITTED TO GROWING AUSTRALIAN MID-MARKET BUSINESSES The Australian Mid-Market is a key driver of our economy that often flies under the radar. It s made up of companies with revenue of $10 $250 million. And in reality, these companies contribute around $425 billion in added value and 3.2 million full-time equivalent jobs. The Mid-Market is one of the most growth-oriented segments of the Australian business community. However, companies in this sector are generally not large enough to attract media attention and conversely too big to receive government assistance. For this reason, GE Capital is committed to helping Mid-Market businesses grow. As part of this commitment we publish the GE Capital Australian Mid-Market Report focused on increasing the understanding of the Mid-Market s outlook and its challenges. Some key findings from the most recent report are shared in the following pages. For the complete report and regular updates, visit GECapital.com.au The Mid-Market contribution is forcing policymakers to take notice and seek to better understand the drivers and needs of this important sector. AARON BAXTER MANAGING DIRECTOR, COMMERCIAL, GE CAPITAL A & NZ Mid-Market contributions to the Australian economy. 37% of all business revenue is contributed by the Mid-Market $$$$$$$$$ $$$$$$$$$ $$$$$$$$$ $$$$$$$$$ $$$$$$$$$ $$$$$$$$$ 21% of all deposits and borrowings are contributed by the Mid-Market 23% of full-time employees are represented by the Mid-Market % of Australian businesses constitute the Mid-Market Source: GE Capital Australia Mid-Market Report March 2013.
3 EDITORIAL Contact James: THE MID MARKET DESERVES MORE RESPECT If the small business sector is the backbone of the Australian economy, then the mid market is surely its heart and soul. Companies with revenue of between $10 million and $250 million may be small, but they employ 3.2 million Australians, create one in four full time jobs, and contribute $425 billion each year to the wider economy. The contribution of the mid market has been vastly underappreciated. But this year BRW, in partnership with GE Capital, has been working hard to change that. Throughout 2013, BRW has been shining a light on the sector through our inaugural Mid Market Awards and our frequently updated Mid Market Hub at brw.com.au. We ve been telling the stories of our great mid market businesses, examining the key challenges they face, and providing advice and insights to help them run their businesses better. From Brisbane to Perth and all points in between, we ve talked to the leaders of the mid market and celebrated the great work they ve done building their businesses and bolstering the Australian economy. This Momentum supplement continues that work. In it, we look at some of the big issues facing the mid market, from building and protecting a culture through to retaining staff and getting the right funding arrangements in place to drive growth. The overarching theme that comes across is the importance of balance. True, the mid market can be a tough place to be. While mid market firms don t always have the brand recognition or scale that larger companies enjoy, they do have many of the problems of their larger rivals, such as the challenges of managing staff and meeting compliance obligations. But their size also provides great opportunity. To think quickly and act even faster. To maintain flexibility. To adjust or fine tune their business as customers and markets require. Thankfully, Australia s mid market firms have proven themselves to be expert at getting the mix right. Long may they continue to drive this country forward. James Thomson publisher Amanda Gome editorial editor James Thomson deputy editor Michael Bailey news editor Chris Jenkins flagships editor Tom Brentnall rich lists editor Andrew Heathcote art director Bryan Cook senior designer Stephen Clark photo editor James Cottam social media editor Caitlin Fitzsimmons reporters Michael Bleby, Leo D Angelo Fisher, Georgina Dent, Nassim Khadem, Jane Lindhe, Ben Hurley, Mercedes Ruehl, Fiona Smith, Matthew Smith contributors Mark Cameron, Alan Carroll, Tony Featherstone, Chris Richardson, Phil Ruthven advertising group sales manager Vaughan Cottier (02) national advertising manager Claire Tilley (02) nsw advertising manager Ben Coulston (02) senior account manager Gosh Kattel (02) victoria Alana Soste (03) brisbane Abby Hart (07) adelaide Brad Barber (08) perth Liz Molyneux (08) asia Publicitas Major Media: hong kong (852) malaysia (603) singapore (65) taiwan (8862) thailand (66) united kingdom Warren International Media (44) europe Robert Logan & Associates (44) united states World Media (1212) new zealand McKay & Bowman (649) marketing and circulation head of marketing Vicki Aristidopoulos circulation sales and Pat Zinghini distribution manager customer service manager Fiona Carroll financial review group chief executive officer Sean Aylmer chief operating officer Simon Anderson commercial director Simon Smith customer service hotline editorial contact Angela Cipri (03) Recommended retail price $7.95. Annual airmail rates overseas: New Zealand $330.64; Singapore, Malaysia, Indonesia, Papua New Guinea, India, Japan, Hong Kong $432.64; United States, Canada, Europe $ All BRW material is copyright. Reproduction in whole or in part is not permitted without written permission of the editor. Member of the Audit Bureau of Circulations. BRW is published by Financial Review Group, a division of Fairfax Media Publications Pty Ltd (ABN ), 1 Darling Island Rd, Pyrmont, NSW 2009, Australia. Pre-press and production by Magazine Operations, Fairfax Media Ltd. Printed by Hannanprint NSW. brw sydney office Level 1, 1 Darling Island Road, Pyrmont 2009 brw melbourne office Level 6, 655 Collins Street, Docklands 3008
4 HIREFORATTITUDE, TRAIN FOR SKILL Every decision involving employees should revolve around the culture of a business and that applies right from recruitment. Report: James Thomson Phil Di Bella has a message for any leader who is setting out to write a culture statement for their business don t bother. You don t make your culture from the top. When a customer walks in and tells you over a cup of coffee what your culture is, that s your real culture, he says. That real culture doesn t come from the top down, Di Bella argues, but from the bottom up. A cultural audit at his business, Brisbane s Di Bella Coffee, revealed five words to be at the heart of his business: passion, accountability, consistency, inspiration and integrity. That came from Above from left: Michael Burke, Peter Skene, Phil Di Bella, Andrew Northcott and James Thomson. our people, not from our senior management. That makes me very proud. Di Bella was speaking as part of a panel in Brisbane in September, which formed part of BRW Momentum seminar series. The event, sponsored by GE Capital, focused on how to recruit, manage and retain great people. Joining Di Bella on the panel were Brisbane entrepreneur Andrew Northcott from LSA Recruitment, Aussie Farmers Dairy chief executive Peter Skene, and Michael Burke, executive general manager of equipment financing at GE Capital. Photos: Paul Harris 4
5 If there was one resounding message from the panel it was that every decision involving the people should revolve around one thing: culture. And that starts with the recruitment process. All members of the panel argued it is best to hire for attitude and train for skill. What leaders need to look for is potential employees who will fit seamlessly within the culture the business has set. The way I recruit and the way the organisation recruits is about ticking the cultural fit box, Burke says. As a recruiting leader, it s your responsibility to understand the culture and clearly articulate that, and articulate your expectations. Burke says this means being prepared to tell the story of the business warts and all even if that means selling against the job as some in GE s human resources department have accused him of doing. My reply to that is that I m not selling against the job, I m being transparent. You don t want to be facing that situation where somebody has to say to you, Hey Michael, I didn t realise it would be like this. It s a point that resonates with Skene. If a person comes and you ve oversold the business, it s not just the damage to that person. They are at the coffee table, they are in the lunch room, and you end up affecting other staff and your culture. Attitudes are contagious. Where do you want to be in three years? Skene and Northcott make the point that leaders need to know how their business and culture are changing. There are also the right people for the right stage of your business, Skene says. There were some people in our business who were right for the start up phase, but there are some people where the business is now, when we need a certain level of process, who don t fit. Northcott agrees. Nine years ago it was me sitting in a living room. Today, including labour hire, we ve got 1500 people. Throughout that journey you ve got people who fit a certain purpose. It s a balance between losing that knowledge and making sure you ve got the skills to perform for your customers. Below: Peter Skene says leaders need to know how their business and culture are changing. If a person comes and you ve oversold the business, it s not just damage to that person, you affect other staff and your culture. Attitudes are contagious. Peter Skene, Aussie Farmers Dairy Di Bella admits he has largely been removed from his company s recruitment process for the simple but very good reason that his obvious passion for his business can be a little overwhelming. But he has a simple test to ensure his hire for attitude, train for skill mantra works. I ve never seen a resume that says employ me, I am not going to turn up to work, I am an absolute idiot. They are all trustworthy, they are all punctual, they are all brilliant and they ll all make you millions. I ask two questions: Tell me what you want to achieve in 12 months; tell me what you want to achieve in three years. If they can t answer those questions there is no way they are going to add value to my business if they can t add value to their own life. Di Bella s new recruits get a taste of the culture of his organisation from a number of different angles new staff spend their first Continued on page 6 5
6 whether working at the coffee group is for them. The best way to see if someone isn t working is that they put their hands up and say This isn t for me, Di Bella says. If they don t self select out in the first month after they ve worked in every single department, there will be no grievances down the track with people thinking, This will get better. The process also allows Di Bella and his managers to further map out a career progression for the new staff member and help them to get to where they want to be in 12 months or three years. If an employee wants to be in account management working with retail clients, they might start out on the road as a customer service FOUR SECRETS OF PHIL DI BELLA S CULTURE Phil di Bella s biggest passion is customer service and so it s no surprise that his culture has borrowed from the writings of US management expert Stephen Ludin, whose famous Fish! Philosophy was created after watching the fishmongers at Seattle s World Famous Pike Place Fish Market. There are four key tenets, which Di Bella explains. Choose your attitude: People before they come to work need to choose their attitude before they get to work, no matter Continued from page 4 30 days travelling around every different department. There are a few reasons. First, it allows the new hire to see how the different parts of the business work together. Di Bella s is a vertically integrated business that does its own sourcing, manufacturing and wholesaling, and runs its own coffee outlets. Understanding how the supply chain works means new staff understand how their contribution affects the wider business. Di Bella says it also has the benefit of allowing staff to self select and decide what s happened to them that morning. Be present: When they are at work, their number one deficiency is that they are not present, they re not engaged, they re just going through the motions. Have fun: I tell our people that if they enjoy themselves, so will their customers. Make their day: Customer service is about what is that unexpected thing you can deliver that makes your customer s day. 6 It s our responsibility as leaders to give as much positive reinforcement as we can, as regularly as we can. Michael Burke, GE Capital representative. We ve got a matrix internally that says If you want to get to this position, you should start here. It s an extensive process, and one that has been refined over many years by Di Bella and his team. You are never going to get it perfect, because perfection is impossible. But if you get the processes right, you limit the variables. And if you limit the variables, you limit the cost. And people are serious costs. Keep the culture alive Recruitment of course, is only the start of the process of ensuring all your staff live your culture. The communication provided to team members has been shown to have a huge impact on staff retention and Burke argues it is leaders who must show the way on the issue of feedback. I love going around to my staff and saying, Have you got a moment, I d love to give you some feedback. But people hear me say that, and they shut up. Why? Because there s a negative perception around feedback. Photos: Paul Harris
7 It s our responsibility as leaders to give as much positive reinforcement as we can, as regularly as we can. It s particularly important, Burke argues, to ensure the annual performance review process doesn t become the only time feedback is delivered. When employees walk out of those discussions surprised, it s a poor reflection of me as a leader. Di Bella agrees on the need for regular feedback, but takes a different and somewhat less positive approach to setting the landscape around these discussions. I come from this position: I want you to be aware that 90 per cent of my job is to focus on the 10 per cent that s got to be better 90 per cent of what you re doing is fantastic, so let s focus on that 10 per cent. Retention, the panel agreed, is also about understanding what motivates a staff member. Di Bella says research from Harvard has shown a common hierarchy of motivations, starting with job security, followed by flexibility, appreciation, feedback and finally money. Phil Di Bella, opposite, and GE Capital s Michael Burke agree on the need to give regular feedback to staff. In Skene s experience, money won t necessarily be the difference between a staff member staying or going, but if it s not managed correctly it can start to erode a company s culture. Take the example where someone new will arrive and will be paid more than someone who has been there for five years and has been a great employee, he says. That sort of thing needs to be watched so money doesn t become a demotivator. So how hard should you fight to retain a staff member? Andrew Northcott says that while an entrepreneur s natural inclination is to keep every person, you need to protect your culture carefully. It isn t always possible to change the mind of a staff member who is unhappy, and convincing them to stay leaves open the possibility they will keep eating away at your culture from the inside. If we have a conversation [with someone] who is thinking of going and we convince them to stay, you can bet that we ll be having the same conversation in three or six months time. BRW. 7
8 GE Capital Our relationship with GE Capital has been fantastic. Over 11 years our facility has doubled, but our business in that time has quadrupled. GRANT BURGE, PROPRIETOR, CHIEF WINEMAKER, GRANT BURGE WINES Grant Burge Proprietor Chief Winemaker Grant Burge Wines Paul McCann Managing Director Corporate Finance GE Capital
9 UNLOCKING THE BORROWING POWER OF GRANT BURGE WINES The 2013 GE Capital Mid-Market Report showed a fall in concerns about the global economic environment over the past 12 months. At the same time, Australian Mid-Market CFOs showed an increased focus on growing their business revenue. Grant Burge Wines is an example of a Mid-Market business with a clear focus on revenue growth. Securing capital in the wine industry is not always easy, with many lenders concerned only with bricks and mortar. Since Grant Burge Wines partnered with GE Capital 11 years ago, they ve been able to unlock significant working capital to support growth ambitions. Through the Asset Based Lending solution provided, GE Capital funded a number of growth opportunities including a warehouse development to reduce storage costs and the creation of a salesforce and new distribution business. Grant Burge, Proprietor and Chief Winemaker at Grant Burge Wines, explains, Right from day one GE Capital have understood our manufacturing issues and what s required to finance those businesses. Key to this understanding were independent valuations of the business inventory and wider asset pool carried out by industry experts. By recognising the true value of the assets over $50 million in total, GE Capital unlocked significant accounts receivable and inventory-secured funding. Aside from credit capacity, Mid-Market companies need flexible finance solutions to manage their changing needs. GE Capital has provided exactly that for Grant Burge Wines, building flexibility into the funding model to accommodate variations in their sales cycles. GE Capital Corporate Lending GE Capital knows that it takes more than finance to build a business. If you d like to know how trusted relationships and an understanding of real-world business challenges could help your business grow, talk to a GE Capital expert. Richard Byrne Executive Director Corporate Lending Mid-Market Insight: CFOs look for growth Pressures around growing revenue built steadily from the September 2012 quarter. Concerns about economic environment have eased. Growing Revenue Economic Environment Sep 12 June 13 Source: GE Capital Australia Mid-Market Pulse Check, June % 20% 30% 40% 50%
10 ASSETS A NEW BASE FOR MID MARKET LENDING Using a company s accounts receivable or inventory as collateral for a loan once considered a strategy of last resort has become more popular since the GFC. Report: Brendan Swift Viking Rentals is one of Australia s largest toilet hire businesses, with a fleet of more than 4000 spread across five states. Such an asset base might be highly valued by its customers but, when it came to the company s lender, the situation was somewhat different. The big four banks struggled to take a view on Portaloos they didn t really see dunnies as collateral, says Tim Wilson, who has a Viking board seat as managing director of private equity investor Blue Sky Private Equity. While each toilet remains in use for an estimated years, the company s previous bank lender placed a conservative two and a half year asset life on its sizeable inventory. Wilson, who has worked in banking and finance at companies such as Babcock & Brown, Westpac and Investec, says the company turned to specialist lender GE Capital, which placed a higher five year value on the company s flushable assets. We suddenly had twice the cash flow effectively within the business because we were repaying things over five years, not over two and a half years, he says. It is a classic example of asset based One toilet hire company has found its facilities have a value beyond the comfort stop. 10 lending, which uses a company s accounts receivable or inventory (the type of inventory can stretch as far as the lender s appetite for risk) as collateral. Once considered to be a lending option of last resort, it has since become a more popular choice for companies looking to free cash flow in the wake of the global financial crisis. An American vision In the US, more than $US20.5 billion in asset based loans have been written this year alone, according to Standard & Poor s. Photos: Getty; Glenn Hunt.
11 We have good invoices, we have good revenue, but because we invest a lot back into the business and growth, the profitability that would support it in a normal banking structure is not as evident. Kate Farrar, QEnergy Well known companies such as retailer J.C.Penney, computer specialist Dell and beauty company Revlon are among those to tread the asset based lending path. The US asset based lending and factoring trade association, the Commercial Finance Association, says asset based lending spans a range of industries, including manufacturers (31 per cent of the total marketplace), followed by wholesalers (28 per cent) and retailers (17 per cent). More than two thirds of borrowers are in the mid market business sector with revenues under $US50 million. The asset based lending market in Europe is also thriving: many banks in the region continue to face downgrades following the global financial crisis and a lack of liquidity has opened the door for specialised financiers to poach corporate customers. While Australian banks relatively conservative approach to lending helped them navigate their way through the GFC relatively unscathed, that traditional approach has also opened the door for specialist lenders to target the local market. Asset based lending has also found its way into the Australian personal lending market (online Australian company Assetline launched earlier this year, lending up to $1 million to clients secured against personal assets such as gold, diamonds and cars) and it is also mid market businesses particularly fast growing companies undergoing expansion which may not yet be profitable that are becoming a prime market. QEnergy managing director Kate Farrar. Unbilled but not unrecognised Wilson s positive experience with Viking Rentals led him to suggest an asset based lending structure earlier this year for another of Blue Sky s investments, Queensland based energy retailer QEnergy, which had previously raised all of its capital via equity issues. Managing director Kate Farrar says the unconventional loan structure suited the company s high growth strategy. We have good invoices, we have good revenue, but because we are investing a lot back into the business and growth, the profitability that would support it in a normal banking structure is not as evident. The company almost tripled revenue in the past financial year to $90 million from $35 million as it expanded into NSW, South Australia and Victoria: 45 per cent of its customers are now located outside its home state of Queensland. Continued on page
12 THE BASICS OF ASSET BASED LENDING Asset based loans free cash flow for the borrower by shortening the time lag while waiting for inventory to be sold or for accounts receivable to be paid by customers. Asset based loans are typically structured as revolving credit facilities (a revolver ) secured against the borrower s assets. The lender assesses the eligible receivables or inventory (which can include invoices or such nontraditional assets such as wine stock) and grants a percentage advance rate against its value. Companies often take a secured revolver loan when they cannot obtain an unsecured bank loan. A revolving credit facility can be secured solely against inventory (a popular path in the retail industry) but advance rates tend to be lower than those secured against receivables. Asset based loans are popular among retailers, wholesalers, distributors and manufacturers, which have assets that are easily pledged as security. Unlike a typical term loan, the value of a revolver fluctuates over the term of the facility as excess cash flows in (helping minimise interest expenses) and is redrawn as needed. Such flexibility matches a company s working capital needs while term loans often fund longerterm objectives or capital equipment purchases. Asset based loans can also be used to finance acquisitions, including by using the acquired company s assets if it is inventoryrich or has a high level of outstanding receivables. Asset based lending is similar to factoring (which is popular in the textile and apparel manufacturing industries), where a company sells its receivables to another company. The major difference is ownership with asset based lending the accounts receivable are only used as security for the loan and their value remains on the company s balance sheet. Continued from page 10 QEnergy s $10 million asset based revolver loan is secured against billed as well as unbilled customer invoices estimates of unbilled invoices are able to be made because electricity use is continuous and predictable. It is an innovative structure and one which many lenders would not contemplate. Farrar says the company also had a loan offer from a bank on the table but turned it down because, while the interest rate was comparable, it was accompanied by more strict lending covenants. They were more onerous and the volume of financing was not as available, she says. It is an unusual situation higher risk is usually reflected in significantly higher interest rates. But the assessment of risk has changed since the GFC. Wilson says traditional lenders are now more conservative. If you turned back the clock a few years, there would have been a bigger gap between an asset based lend and a typical term loan from a bank but the margins for term loans have blown out through the GFC, he says. It s not as though asset based lending has come in it s more that margins on corporate lending have blown out towards whatever asset based lending would have been priced historically. The banks move in The asset based lending operations of the big banks are often focused on more traditional equipment financing and car leasing businesses. Alastair Welsh, the boss of Westpac s commercial banking operation, says the bank s focus is largely equipment financing, which is seeing strong demand from companies wanting greater cash flow flexibility in a post GFC environment. We re seeing a lot more businesses which have traditionally not financed assets because they ve been able to fund them by cash, just gives themselves optionality at the current [low] interest rates. We see it as a growing market. In October, Westpac made a major foray into the sector by acquiring motor vehicle and equipment asset finance business Capital Finance Australia (which holds $6.8 billion in total receivables) and corporate lending business BOS International Australia, for a combined $1.45 billion price. Competition for the businesses was reportedly strong with other banks such as the Commonwealth Bank of Australia and ANZ also weighing up the merits of the sale, which was prompted by Lloyds refocusing on its UK base after the bank s operations were damaged by the GFC. 12
13 We know the value of Grant Burge Wines inventory very well. We can get in there and understand what they ve got and provide financing against it in a way that the banks here just cannot. Aaron Baxter, GE Capital However, more broadly based asset based lending is typically the province of specialist lenders with a greater knowledge of the worth of unusual collateral and systems that are better able to assess their specific risks. There are a number of local players, such as global debtor finance (or invoice finance) specialist Bibby Financial Services, which says its Australian arm has been growing by an average of 20 per cent a year, and GE Capital, which remains the world s largest asset based finance company. Aaron Baxter, GE Capital Australia and New Zealand, managing director, commercial, says 80 per cent to 85 per cent of US mid market companies rely on assetbased lending. The mid market in Australia remains relatively wary of debt (just under one in five businesses expect to borrow more in the next 12 months), according to GE s March 2013 Australian mid market report. However, those companies intending to raise money cited access to capital for special projects at reduced rates (53 per cent of those surveyed) followed by reduced government regulations (44 per cent) as priority areas for support. Wilson says asset based lending is an area for specialist financiers with particular skills that allow them to keep interest rates competitive. They ll have some monitoring and make sure the underlying business is performing to expectations but they ve done their work against the value of the assets at the front end, he says. Whereas the other banks in my experience will do less work at the front end around the value of the assets but will have a more strict covenant regime because they haven t done the work at the front end. New juice from grapes The limit of assets that can be used as collateral extends well beyond portable toilets. In July, McWilliam s Family Winemakers also tapped GE Capital for a new $55 million financing facility over five years (compared with a typical three year time span for its previous lending facilities). Chief executive Rob Blackwell says the company previously had banking facilities with ANZ and Westpac, which were secured against assets such as land, equipment and vineyards. But a new strategy to produce a greater volume of higher priced, highermargin premium wines lined up well with a shift to asset based lending. That invariably means the value of your inventory the grapes you re buying will be a higher price and that flows into the value of your inventory being higher, he says. But the big piece is we ve made a conscious decision to hold some of our icon/flagship wines in museum stock (or inventory) for a longer period of time which flows back into creating more equity for those particular wines and the brand overall. That s a conscious decision that we re going to hold more working capital in wine inventory than we ever had before. The risk for the lender is the value of the wine inventory unexpectedly drops rapidly, although the oversupply that previously weighed down the Australian wine industry has been correcting in recent years. Wine inventories are now about 1.7 billion litres, a significant improvement from the 2.4 billion litres in 2006, according to NAB. GE has $200 million in financing in the wine sector, previously financing companies such as Accolade Wines and Grant Burge Wines. As an industrial company ourselves, we know the value of their wine inventory [Grant Burge Wines] very well. We can get in there and understand what they ve got and provide financing against it in a way that the banks here just cannot, Baxter says. BRW. 13
14 GE Capital With GE Capital, it s more than money. Being part of a larger organisation they understand not only our industry, but the broader global economy. We have access to all levels of management and the knowledge base there is just incredible. IAN COLEMAN, MANAGING DIRECTOR, CONPLANT Michael Burke General Manager Equipment Finance GE Capital Ian Coleman Managing Director Conplant
15 CONPLANT IS PLANNING FOR GROWTH WITH CONFIDENCE In the 2013 GE Capital Mid-Market Report, 26% of Mid-Market CFO s listed managing cash ﬂow and 20% listed government regulation as key business concerns. This rings true for Conplant, the largest privately owned compaction specialist in Australia with an annual turnover of $40 million and a ﬂeet of over 750 vehicles. With a desire to aggressively tender for more projects but needing adequate capital in place to do so, Conplant turned to GE Capital to unlock the equity in their substantial portfolio of equipment assets. Global industry and asset expertise allowed GE Capital to provide an innovative and agile equipment ﬁnance solution which delivered improved interest rates and better cash ﬂows. And when new legislation changed Conplant s asset security landscape, GE Capital brought their people, expertise and a collaborative approach to support them in implementing the required changes. Since partnering with GE Capital seven years ago, Conplant has been able to plan its future with much more certainty. The company s hire business has now doubled in revenue and Managing Director, Ian Coleman couldn t be happier, We re now in a growth phase and GE Capital are right there with us. GE Capital Equipment Finance GE Capital can provide the funds to purchase new or replacement equipment needed to grow your business. With real-world industry knowledge, GE Capital has an in-depth understanding of asset valuation, trade and management. If you d like to unlock the existing value in your business with customised, ﬂexible loan structures, talk to a GE Capital expert today. Michael Burke General Manager Equipment Finance Mid-Market Insight: Report reveals common business concerns As of June 2013, Growing Revenue, Managing Cash Flow, Finding Staﬀ and Government Regulations were among the most common business concerns listed by Mid-Market CFOs. Growing Revenue Managing Cash Flow Finding Staﬀ Government Regulation GE Capital Australia Mid-Market Pulse Check, June % 20% 30% 40% 50%
16 OZFOREX VOWS TO STAY GROUNDED From its investors to its staff, the newly listed company aims to stay focused on the qualities that helped bring it success. Report: Michael Bailey Photo: Nic Walker 16
17 OzForex, the online international money transfer business, was a finalist in 2013 s BRW/GE Mid Market Awards for outstanding companies, with revenue between $50 million and $100 million but we re happy to admit, it probably wasn t the biggest highlight of its year. That honour would belong to its stellar debut on the ASX on October 11, when it closed 28 per cent above its $2 opening price on the first day and, at press time at least, had not looked back. The success of the OzForex float was a much needed injection of confidence for investors or at least their stockbrokers after a so so year for initial public offerings. It made the company founded in 1998 by former Bankers Trust forex salesman Matt Gilmour probably the most talked about midmarket company of Just don t ask OzForex s 180 odd staff exactly what the share price is today. We had a good celebration after the listing but my message to staff was clear: we re not going to become stock watchers, says OzForex chief executive Neil Helm. The stock will go up, the stock will go down, but all that matters is that we continue to give our customers the best price and best service on a foreign money transfer, and treat them and our investors now, too in the same open, transparent way we have always done. CEO Neil Helm says delivering the best price and the best service is all that matters. Overdeliver to the underdog With a market capitalisation now exceeding $500 million, OzForex is destined to one day no longer be a mid market company, at least by the definition of annual revenue between $10 million and $250 million. Turnover at OzForex will have to more than treble to break out of that band, but there is a sense that such a metric will not take that long to achieve. As OzForex heads for the top end of town, the challenge for Helm will be to maintain the one element of the company s culture that has arguably created most of its success a sense of respecting and standing up for the underdog; in OzForex s case, the fellow mid market and small businesses once shut out of the plum deals in foreign exchange. That anti establishment streak has been evident in all of BRW s conversations with Continued on page
18 Continued from page 17 Matt Gilmour over the years, the first of which was when OzForex debuted on the Fast 100 list of Australia s fastest growing companies in Back then, the business born in the sun room of Gilmour s house on Sydney s northern beaches originally as a forex information site, then after 2003 as a transactional site once it was no longer required to hold a $10 million capital reserve was buzzing off a turnover of $3.4 million, up from $300,000 in Gilmour shares the credit for building the business with Gary Lord, who had worked with him in the 1990s at Bankers Trust s foreign exchange division. Both knew firsthand the raw deal that small to medium size enterprises were getting on their currency transfers compared with large institutions. At BT, each dealer might have 10 or 15 clients, Gilmour says. They d get the red carpet treatment. I was also on the e commerce committee, so I d get to assess online dealing systems that were coming through. Brilliant, instant access to the spot price, so long as you had at least $500,000 to trade at a time. Meanwhile, the average small importer had to fill in a telegraphic transfer form at the local bank branch. They d get whatever the hell the bank said the rate was that day. After spending more time with Sequel Server than he cares to remember, by 2001 Gilmour had a rudimentary version of the OzForex online dealing system ready. He prepared a brochure on his proposal forex delivery and forward contracts for deal sizes as small as $500, without the fat bank margins and slow turnarounds and sent it to 12,000 importers. The response rate was huge by direct mail standards 4 per cent encouraging Gilmour to begin hiring staff and lobby for the removal of the $10 million capital requirement still preventing true competition in Australia s forex market. That hurdle fell in 2003, and OzForex has grown ever since. At the time, Gilmour and Lord knew that consumers were becoming more comfortable with looking beyond the major banks for services such as mortgages and savings accounts. We have tried to ride on the coattails of that trend. It is not really a difficult pitch to encourage customers to pay a lower price and get higher service levels, Gilmour told BRW, revelling in getting up the big banks noses. No opinion is sacred A not quite so big bank, Macquarie, bought 51 per cent of OzForex in 2007 and Helm then working for the Millionaire s Factory after being a project management consultant at Accenture came in to run OzForex as part of the package. He says it s simply the quality of what OzForex does that continues to attract and retain staff from often bigger companies. Doing something good appealed to me OzForex really did give clients a better deal than elsewhere, and I could see its potential as a best kept secret that I wanted to make a worst kept secret, Helm says. In surveys many people don t even mention the rates we ve got for them, but do mention the customer service. Neil Helm, OzForex A human being from OzForex calls every new online customer within an hour to finalise their account set up, and again within minutes of them entering their first online transaction. Obviously we do that in part to give ourselves comfort, and to abide by anti money laundering rules, but we find it gives our customers a lot of comfort too, Helm says. In surveys many people don t even mention the rates we ve got for them, but do mention the customer service, particularly those first two phone calls. To put this in context, OzForex currently executes about 500,000 international money transfers each year, with 85 per cent of them now carried out purely online. Helm also highlights that about 25 per cent of new customers mention a family or friend referred them to the service. Listing on the ASX will add compliance obligations, but Helm is determined that OzForex will not become a stifling bureaucracy. There s a saying inside the company that no opinion is sacred, he says. We ll listen to and consider any suggestions our staff make about how we could be doing things better. BRW. 18
19 MODEL EMPLOYEES ONTHE MIDDLEROAD Recognising individuality, providing training and having fun are just some our Mid Market Award finalists secrets to retaining staff. Report: Anthony Black Awidely held doctrine is it s easier for an employee to find a new job if they are already in a job. Big business is ever ready to hire top people, often at the expense of small and mediumsized enterprises. Indeed, it can be argued that mid market companies are plentiful employee breeding grounds for national and multinational giants eager to tempt top talent with attractive salary packages. Mid market companies are always vulnerable to losing staff because they often can t match a competitor's offer to double a salary in a package that may also include fat bonuses and a car. Employees have access to information like never before and the latest job prospects can be found and shared within seconds via social media. Anne Bastock, chief financial officer of recruiting firm Clarius Group, says providing interesting and varied work, fresh Tony Nash, CEO of Booktopia, rewards staff who resist the urge to take sick days. opportunities and a flexible working environment help mid market companies retain staff. Employees should be provided with opportunities to learn new skills, Bastock says. Ambitious people want and expect to be challenged. If people are bored, they are more likely to leave. It s a constant challenge for mid market companies to retain staff. They can t offer the big dollars of big business, but not everyone is after huge pay packets. Many people are content with an interesting job, a nice office and fair working conditions. No company likes losing a valued staff member, so BRW asked four mid market company chief executives to share their insights on how to retain their finest employees. Those companies were finalists and winners in the recent BRW GE Capital Mid Market Award, Continued on page 22 Photo: Louise Kennerley 19
20 GE Capital Andrew Stafferton General Manager Distribution Finance GE Capital It s been a really exciting period for us working with GE. There s a real empathy towards our business. We re all on the same page, we all have shared goals, and we re all in it to win. DAVID ROSE, DIRECTOR, STRATEGIC BUSINESS DEVELOPMENT, POLYCOM David Rose Director, Strategic Business Development Polycom Michael Beesley Managing Director Transition Systems Australia
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