FINANCING ENTREPRENEURSHIP VENTURES
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EntrepreneurshipTranscript.pdf
Elizabeth Ian
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So I guess we’ll start off with how you started the company initially?
So how did I start up. So basically I did an apprenticeship in refrigeration and airconditioning. I basically did an apprenticeship at Charlie Gardener Hospital, which in high insight has been a really good learning place to learn. Then I worked for a private business in Perth for about, I think it was 11 years after I finished my apprenticeship, and I got to a point in my life where I thought, there's a lot of opportunity that I could see and mistakes I could see that I thought they were making in customer relationships and so on. And to be honest with you, I started to think without sounding too bold, that I could probably do it better. But I was in my comfort zone, I didn't really want to change. My role was never defined because as I started off in tools and as I moved to engineering, it was kind of a growth in the company and no one ever said “you are not this person you are now this person” and my role was never changed. So I kind of felt lost in the position and then basically there was a wage issue that came up and I felt that I wasn't getting paid enough, so I started considering my options. I’m one of those people that love work, always loves work, and then one day I was driving into work and I felt like “you know what, I really don't want to go into work today” and I went in and handed in my notice. I thought they were going to say “Oh, we're really sorry to see you go, please we will give you more money” but they said “okay” (laughs). Which floored me and after that I had to give him four weeks notice, no one mentioned I was leaving, they just kept putting the work onto me like nothing happened and on the last day I said “You guys realise I’m leaving today” and they said “Oh yeah yeah okay, that's fine” and I left, basically with nothing in mind with what to do. I didn't really leave with the intention of starting my own business, I just left because I wanted to look for something else and I found that I was static and stagnant in the company. So I borrowed $20,000 from the bank, bought myself a vehicle and some tools, I had most of my tools, some ladders and bits and pieces that you need for this and that in the market. So that’s how i decided to start which was not a long term thought out plan.
Was there a large layoff between when you finished or did you just jump straight into it?
Straight into it basically.
How were you getting your clients? Where did you start?
This is what surprised me, so what I did was, I went to the clients that I had relations within the company. I didn't actually poach them I just basically said I’m no longer with the company, ¿Whitechurch¿ Refrigeration at the time, and then I said if you ever need me, because I have relationships with them and you just don't walk away because you build relationship, I said “Look, I've left, this is where I am”. And I was blown away by the number of clients that have moved straight away within months. Basically I had more than I could handle so within two months I had to take in someone else, then three months, and six months I had three people working for me so. I think that's the reflection that if you deliver service and you have relationships with people then people like working with people rather than working with companies, it’s a relationship thing.
Early life, did you have a mentor or someone who was in your business that you were sort of close to?
Well, when we’re apprentices, one of the reasons I got into refrigeration in the first place was my older brother, who was in refrigeration, so I kind of knew the industry so that's how I got into it. But I remember being asked in TAFE “what did you want to do eventually?” Most people wanted to be a supervisor or something, but I said at that point I wanted to have my own business. My mentor’s basically my brother who was in the industry, and maybe my Dad. I didn't really have a mentor in business as such, I knew very little about business and that was one of the scary things about business for me was I had a hands on experience and I had an engineering experience in the office from design and stuff but I had no business experience as such, so that was daunting but I think you
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learn pretty quickly and you talk to people and you know you can kind of stumble your way through it if you asked the right questions to people.
For sure. Okay, so I'll move on to, do you think there was any luck involved?
There's always luck There's a big part of luck and even today luck still plays a part on it. It’s very difficult to even today, when we were in work, we do fairly well and you don't know how much it is luck, how much it is relationships , because you don't know how much you’re drawing on your own experience to steer you through the obstacles. You don't know how much your experiences are guiding you to make those decisions or whether luck comes into play and you're going down this path of luck so I think luck is a fairly a big part in a business.
Were you just pushed to grow because of the market or whether you actually really wanted to grow?
Well, I've tried to manage growth. Growth is something you can't stop, because if you provide a good service or a good product you can't help it, the snowball will grow because people want to use you. The difficulties is managing that growth, because in my opinion, growth is not necessarily the ultimate. A lot of people have different ways of driving a business. We have always focused on profit, and my belief is if you're not doing it to make money then the effort you got to put in to make it happen is not worth it. So my philosophy has always been profit related. So if we pick a job, we will very rarely pick up a job just to pick up a job, there has to be enough profit on the job for us to pick up. There are other companies out there that might work on growth because they try to build the asset of their company. I'm not really worried about the asset of the company, I'm more worried about me being able to take enough money home at the end of every year to justify the amount of effort we're putting in.
Have you reached a point where you're more compelled to manage rather than innovate because you came up with the idea of the business and you know, entrepreneurs are more likely to innovate rather than manage, did you find that you struggled in between the two?
I do struggle between the two. I struggle for a number of reasons and it depends on the type of business.. We are a very service oriented business as oppose to someone selling a product, if you sell a product the brand is sold itself. If you're selling a service then you’ve, got to sell a relationship service and you got to give a reliable service. So the the difficulty is to build relationships, clients want a one-to-one communication with yourself and the difficulties as you grow you can't have one-to-one communication with your clients because you have too many clients to have that one-to-one relationships with. So that's the difficult juggling act of trying to manage the growth and keep those relationships. Secondly, trying to take on second tier management which is difficult because that becomes a two fold thing. If you allow them full access to your client base to say ”go off to have those relations with client” the reality is these days people just last in companies 3 to 5 years, the next thing you've allowed them to take a portion of your clients with them and they will do exactly what I did which is relationship. But if you understand the reasons people have clients, then the difficulty is allowing sub-managers to deal with them because then there is just this risk of losing your clients because they will go wherever that person goes because you've built relationships and that's how your business works. It's a difficult one.
Do you still find now that you're coming out with new ideas?
We do, as I said, its difficult to judge whether you're doing that based on experience, because you know market changes. So what was a ¿appliable¿ market, and I will give you for instance, probably 5 to 7 years ago, we were focusing a lot on air conditioning data rooms and computer rooms, because there was only a small group of people doing that, so we were picking up ¿enlargement¿ for work. Then again, as people see that market and see companies doing well in that market more and more
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become involved in the market you end up with more competitors. So the company has probably shifted a number of times . We are in the business 27 years now and it's probably shifted focus so many times in the related industry, so we did a lot of marine refrigeration and air conditioning, all those boats that had the wrong refrigeration and we had to change it so we spent a lot of our effort doing that, as I said we’ve done computer rooms and these days we're finding because of the downturn of the market in property, a lot of the property in Perth and the change in the mining market, a lot of those office spaces within the CBD area has now run out of business or downsized, so there's a lot of vacancy space for tenants in Perth or we found that the tenants in West Perth are now able to afford leases in Perth so a lot of the West Perth market are buildings that are 30 to 35 years old, they're all getting tired with no tenants and look pretty run down so they've got to spend money on it and they've got to put in new carpets, new air conditioning so we're picking up a whole new market in a new area. So as I said, you find that you change where your market is based on. Like I said earlier it's hard whether you're based on experience or whether that's luck or you know.
A lot of business owners find they have a loss of control, you start off as a one man show and slowly as you get more and more employees you lose your sense of control. Is there anything that you've put in place that helps manage that?
There is, obviously one of the things we've done is managed the size of the company, so it goes back to what I said earlier, we're focused on profit rather than growth. And then the difficulty is managing the next level of management, so you have to basically bring them into the office and I don't think it's that hard, if you don't have this type of employee-employer relationships and have a team relationship, that I find is more effective. If everyone becomes part of a team rather than “I’m a boss and you're this person and you're that person” we have structure, but if everyone feels like “You can talk to me and I can talk to you” at the same level, then that's an easier thing to control, and as long as they're happy in their environment then it kind of works.
That's good. So, also in that do you find it difficult to tolerate mistakes made by your staff members?
I don't, because as long as they don't hide their mistake. I know I make mistakes and I think everyone makes mistakes. I think as a team on how do we fix that mistake. So the first thing you gotta do to manage customer perception of that mistake because obviously it has a cost impact on us. I'm not saying we don't lie to customers, we try to control mistakes so first we don't affect the business or customer, which is ¿paramount¿ to us and then secondly it's obviously a financial backlash on us if it is a mistake that's going to cost some money they are going to try recover that money for us, so we look at how we are going to manage that in the end. So I'm not hard on mistakes, if someone comes to me “Oh I've made a mistake” that's fine , if someone kind of hides the mistake and creates a bigger problem then I kind of take a deep view on that.
Sure, so you're more of being openly communicating with each other in that way.
Yeah, I don't see myself as a boss, I never see a structure, I never see a hierarchy of management, I always sort of say “This is what we got to achieve as a group of people” and my job is to say “you need to go to this job or you need to go to that job or you need to do this” and your job is to do it. And then if we ¿____________¿ my then it all works.
Are you planning for more growth? Or are you happy with where you are at the moment.
I guess the honest answer is no, because you get to an age which I am, I'm at 57 now, so growth is not necessarily a good thing, because you obviously now get to a point where financially I'm okay, you then start to manage lifestyle right? So lifestyle becomes a big focus on an individual like myself so then by getting larger then you're creating it more difficult situation trying to control your private lifestyle. I'm not planning growth because of that, because of my age. If I was younger, I probably would.
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When you started, what was your rough vision for the company?
It's kind of odd, because I really didn't have a vision, I didn't have a vision to say “in five years I'm going to do this or in 10 years I want to be in this position”. I still don't have a budget to work with, like other companies will say, “these are my budgets”. Because I'm pretty much set in a position where I can pretty much control it and I guess the fact that we have been reasonably profitable and successful then that's the model that kind of works. I don't do a lot of advertising, so the reality is, we've been lucky because we've establish a relationship with our clients that has continued to grow. So what happens is, is we find luck, a client that's from one company then moves to another company then he will introduce us to that company and the next thing we still do work for the original company and now that that new company and that creates the growth. So I keep going back to the same thing, I believe that relationships have the most important thing you can build in the business because that just keeps giving, because as people grow the company grows because they move out and if you don't do the right thing by the original company you don't suddenly lose something you keep that and then you got this new opportunity and that's really what prompted our growth.
So, you've put a major focus on profits and personal service, how would you say that's changed over the 25 years? Or has it mainly remained the same?
No, to me that is the ultimate key. It's a very easy thing to do to provide service and I think so many people don't do that. If you say “I'm going to come tomorrow” then you go tomorrow. If you say “can you give me a quote by wednesday” I’ll give you a quote by Wednesday. That is to me the most important thing. If people can rely on you and don't have to make a phone call “Oh Ian you said you were going to do this” to me that's the catalyst of growth. It does put a lot of pressure on you because these days as technology changes, emails change, and the amount of emails you get, so the information coming to you wants responses back, it's becoming harder and harder because of the communication we have these days. All people want is to take it off their desk and have it dealt with you know what I mean? Just about communication, to me, is the most important thing and that's what I do, I try to respond all my emails that day if not the next day to say “thanks I've got your email, I'll have your answer in two days or a week or month, whatever it is”, you just let them know what's going on. Communication and relationships is the key.
How have your previous experiences helped you plan for the future as you better understand the market?
It's a hard one because as I said you don't really know if you're drawing on experience because experience is something you have within and I don't know if my experiences are going to say “do this” you just have a gut feeling that this is the way you should do it. So it's very hard to put that to words, how do you do it, how do you contemplate it. You’ve got to have a level of self-belief, I think that's one of the main things, you’ve got to sit yourself in a meeting and have the confidence to say “this is how we do it” or people will feed off your professionalism and your self-belief I guess and if you sit in the meeting and you don't give definite answers, but if you say “this is how you do it, what you're doing is wrong” you’ve got to be able to say it in a way that you're not offending anyone, you have to say “this is not going to work because of these reasons from my experience, what it's worth it's worth” this is just what I think. You just have to be open with communication.
So what approach do you take when it comes to strategic planning?
We're very cautious as a business because there's litigation all around us and that's changing these days. So I guess the first thing that would cross my mind in an opportunity or in a contract or anything is what is my risk, and as I said, I've gotten to an age, the reason why i'm ¿_________¿ So the first thing I'm going to do is “what is my impact?”. “If this goes pear-shaped, how is this going to affect
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me?” and there has been situations where I've just walked away because I think the risk was higher than what I was going to return. You don't go for it just because there's an opportunity, and I think when a lot of people make a mistake they see an opportunity “that's an opportunity, we got to go that way”. I think we go to see an opportunity, “okay that's an opportunity, what's the opportunity? What is the consequences of the opportunity? What is the risks and am I willing to take those risks”. It's a balancing game and there's risk to everything you do.
How did you fund your entrepreneurial ventures? Did you have any difficulties with this from your original loan?
It was difficult, because at the time I had a mortgage, it was a big lump of money for me in those days, it was twenty-grand it's for the outlay of my business. I had to buy a vehicle, buy tools and then you have to be able to put yourself in a position where you can't just say “here I am” open the door and nothing comes in. I've always set myself up, for even as a one man band even when I was that for the few months that I was as a business, not “here I am trying to start a business” but “here I am, I am a business” so I bought myself a mobile phone and in 1990 that was a big lump of money. So I think the intent was “here I am, I'm a professional business” I'm not in here trying to make it through the difficulties of starting a business. I leased a small showroom in Osborne Park, so I had a premises, had a phone, had a vehicle, I could take calls, if I turned back I could be a professional business.
What did you actually put into towards the bank as you applied, becuase you wouldn't have any employment at that point. Did you actually have to put together a business plan to apply for your finance?
Luckily, we've always been thought as kids to not to borrow, if you can't afford it then you can't afford it. The reality is, I had a house, which was paying off a mortgage for, but I had a reasonable amount paid off and I still had savings, so I was able to go to my bank and say “hey look, this is what I want to do” but I had a sufficient asset that the risk wasn't with the bank, the risk was still with myself. So getting the finance wasn't really a big problem.
Did you get equity financing or debt financing, but I guess with that it was Equity financing?
It's always has been. We’ve never run an overdrive with my business at all, so basically we've managed the cash flow. I knew refrigeration and I knew the technical side, I didn't know the administrative side, and to me that was difficult, I had no idea how to do accounts or books and that's important. So again, cashflow is the paramount and still is and that has never changed so you know we will chase our debt if someone doesn't pay and I will take action against them if they don't pay straight away. There's no if’s, but’s or maybe’s.
Was there any other stages of investment or did you take on any other investors?
I started the business in 1990 and as I said in the first three months I had to take on someone else then I took on another two technicians and then Daryl, my brother, joined me two and a half years later so that was the difference where my expertise were air-conditioning, Daryl's expertise were refrigeration, so Daryl's market is industrial refrigerations so we do a lot of abattoirs and dairies and breweries and large refrigeration complex. So when Daryl came on board we basically had a whole different client base so we still operated in a way whilst we are one company, Daryl still operates his business and his customers which is totally different to my business and my customers, but the finances and all that come back to the single point but as a company there's two quite separate divisions.
So to launch out on that, were you guys in the financial position to do that off the company's money or did you have to take on another round of investments.
Well it was kind of easy because he was my brother, so that kind of changes the dynamics a little bit.
But he had to buy into the company, so he invested into the company. I've always had this professionalism kind of thing, I didn't start off as a sole trader, I started as ¿_______¿ company, so we had directors, we had shareholders, if someone wanted to come in they were shareholders so it operated as an infrastructure rather than a sole trader or a partnership arrangement.
