Amanda Gome’s report tries to find out the magic formula of how “these meteorites” shoot across their industries, raise the performance bar requiring large companies to change strategy, and knock out unwary competitors. She goes on to say that many continue on a fast-growth trajectory to become big brands and businesses within 10 years.

The Upstarts show that fast growth is possible in any industry, whether it is declining, maturing or emerging. The list has many industries, ranging from retail and manufacturing to technology and telecommunications.

Some industries dominate, particularly business services. The outsourcing trend, whereby small businesses provide services to large companies in their non-core activities, is very strong. These small businesses focus on a very specific niche and solve a specific problem.

Phillip Hains, founder of The CFO Solution says: "We only work with listed companies - no others. We have a firm grasp of what the regulators and governments expect and are also planning for the future."

Ivan Kaye, founder of BSI says: “We have the leading team in Australia that specialise in accessing Research and Development and Export Grants and Incentives. The depth of knowledge in this area enables us to provide an awesome service to both SME’s and large corporates, with guaranteed added value.”

Characteristics

This group tends to be aggressive, occasionally arrogant, and are changing the way business is done. They are highly innovative companies aiming to be leaders in their field. Upstarts are strongly market-oriented, forge links between their technology and markets, and adapt their products to respond to consumer trends and client demands. They tend to be well-off serial entrepreneurs who begin well-planned businesses. Nearly half the businesses were on the drawing board for between seven months and two years before they were launched; 54% took less than six months to plan. They recognise the need for export, and are serious about innovation. 1/3 say they spend more than 10% of their revenue on R&D. They are extremely well educated and qualified, with 25% having MBA’s: Many have completed other courses and joined networks.70% started businesses before or had corporate backgrounds. Only half the businesses were profitable from day one, but nearly all (90%) were profitable after several years. The Upstarts are rewarding themselves with handsome salaries, mostly between $100k and $200k per annum. Many of the entrepreneurs put in back-breaking hours. About a third of them work more than a 70 hours a week and most work 45-60 hours a week. Most of the entrepreneurs (72%) intend to keep expanding their companies. nearly every company claims to be a leader in their field,

Teamwork

Another key characteristic of fast-growth start-up companies, according to the OECD report, is teamwork: regular communication, shared decision-making, skills training and profit-share mechanisms. High-growth companies also tend to be decentralised, participatory and readily adaptive organisations.

Networking

The OECD report says high-growth companies are well integrated into a network of alliances and partnerships with other companies, service providers and public and private institutions. This network is absolutely crucial. When BRW asked the Upstarts what their best strategic move had been, many said it was developing external relationships and networks. Careers Australia says developing alliances with other quality specialist recruitment companies helped it to stay focused and strengthened its unique position in finance and accounting recruitment.

HotMagna says its best strategic move was forging alliances with multinational IT vendors including Sun Microsystems. Wireless IP aligned itself with Microsoft to fast-track sales and commercialisation of its software.

Other Upstarts use a large business to champion their products. The gift company RedBalloon Days says it deliberately pursued strategic relationships and customers who would openly promote the company to staff and customers.

Challenges

  • recruiting, training and maintaining staff.

"Without a doubt the reason we grew so fast was our people," says Aussiehome.com's Gunningham. "The atmosphere is terrific. I love going to work where the staff are 15 years younger than me and very creative, show initiative, into R&D and are fun!"

Steve Watson & Partners, says his human-resources strategy was the main reason he grew fast. "We shot for a flat management structure, demolished all our offices and embarked on a campaign to empower even the most junior staff. This accelerated a focus on quality management as well as client expectations with significant results."

  • obtaining finance,
  • expanding markets,
  • calculating the risk of alliances,
  • finding the right partners and consultants

Says Felix La Spina of Webit Technologies “BSI has assisted me in taking my major challenges away from me, so that I am able to focus on my core business”

BSI Peoplehave helped me with identifying and recruiting key staff. BSI Services have assisted me with raising both capital, debt and maximising grants and incentives that are available, and have identified potential partners to enable me to expand in USA and China. Being part of the ADI and BSI Network, is a powerful factor enabling my business to succeed”

THE HARDEST PART

  • Maintaining constant enthusiasm in the face of bloody difficult situations. BodyOnline
  • The uncertainty about how successful a product will be, even when you have done extensive market research. Calytrix Technologies
  • The relentless pace at which you must work with limited resources and people. Ginger & Smart
  • Ensuring business systems keep up with business growth. ETM Travel
  • Worrying how to pay the next wages bill. Business Strategies International
  • Getting used to the fact that you generate your own pay cheque. Careers Australia
  • Ensuring the company is successful while spending quality time with a young family and enjoying life outside work. ARK Consulting Group
  • The constant stress of trying to find new customers and projects to support a growing workforce. HotMagna
  • Managing profitable growth and maintaining cashflow. ICON International Communications
  • Having to be jack-of-all-trades and master-of-all. Nudie Foods Australia

Whitlam says in the early days of a start-up, normal social life and recreations have to be abandoned. "It can be very lonely and at times drive you to despair, particularly in the middle of the night when the technology lets you down and you need to have a proposal to put before a client first thing in the morning."

Anna Whitlam, founder of the recruiter Market U, says she started her business on $30,000, some of which was borrowed against the equity in her apartment and $15,000 from her mother (which she paid back in six months). "For the first six months, I did not draw a salary."

How to attract new customers

  • Actively hunt - Chris Gray, of Icon International Communications, says he uses every meeting, every event and every social occasion to hunt for business. "Two of the best international opportunities for our firm came from discussions on bus trips to work, and many good leads have been struck up on the fairway."
  • Referral - Karina Heikkila, of the software company Objectify, says: "No one sells our products better than our existing clients. Just one or two comments to their peers results in additional sales at the lowest possible cost."
  • Testimonials and written referrals Visean Online seeks a written or verbal referral from a satisfied customer to a new customer five days after a job is completed.

Case Studies - Calytrix Technologies favours product testimonials. Its founder, Mark Rheinlander, says: "In our industry, prospects like to hear how other companies have benefited from our products." Electronic Keying Australia uses case studies in their advertising and direct mail. Its founder, Steven Fine, says: "Rather than an information dump, a case study does a far better job of attracting new customers."

  • Free Trial - The entrepreneurs also love the "try before you buy" approach and offer free trials and prototypes. They are so proud of their products that they feel if they can simply get people to sample them, they will win new customers.
  • Gaurantee - Telecommunications company Symbio Networks swears by its slogan 'Don't pay until it works'.
  • Real demonstrations - George Deligiannoudis, the founder of telecommunications company Wireless IP, says his industry is riddled with PowerPoint product presentations. "Our motto is 'real demonstrations', which has got us into some curly situations, but we firmly believe this approach has given us a reputation for delivery and some of our largest customers. Our ability to demonstrate it working, at every opportunity we get, is the key to attracting new customers."
  • A no-brainer pitch - Ivan Kaye, founder of Business Strategies International, which assists companies to raise capital, develop growth strategies and ways to export, says: "We target customers carefully and develop a pitch that gives them something they can't refuse."
  • Press releases and brand awareness - Some also use the media to win new business. Aussiehome.com says it wins awards and puts out press releases to help increase brand awareness. This helps it develop a reputation among its clients as an award winner and an industry leader.
  • PR - The manufacturer Loaded Footwear found the best way to get customers was to spend money on public relations and be consistent with the message to consumers. Australian Celebrations Training says it successfully engaged the public relations company Spin to increase awareness.
  • Write papers – become the college of knowledge.Some Upstarts develop a reputation as a specialist in their industry. Software company HotMagna writes and publishes papers that demonstrate independent, provocative thinking and establish its technical credibility and thought leadership, says its founder, Henry Okraglik.
  • Share advice and intellectual property – Add value - Recruitment company Market U positions its business and consultants as the centre of knowledge by openly sharing advice and intellectual property with potential clients who have never used its services. This leads to an excellent referral network,
  • Promoting the brand - at every opportunity and with clever guerrilla tactics also wins customers, according to Mark Alexander-Erber, founder of the hotel/pub chain Pubboy. He leaves coasters and branded cigarette lighters in the pubs of the opposition, he wears Pubboy T-shirts when flying and he pays Penthouse Pets to parade in them. Alexander-Erber says he is losing more than 100 branded schooner and middy beer glasses a week, often in country towns. "We estimate that one in every five country homes now has branded Pubboy glassware in their kitchen." He is not complaining.

Author: Amanda Gome
Date: 31/03/2005
Source: BRW
Publication: Business Review Weekly
Section: News and Features