how to do it
When it comes to building an empire, you need more than just big dreams. Sara Lucas discusses what women entrepreneurs can do to truly make it big.
Sara Lucas
In 2010, Sara co-founded
Heads Over Heels, helping
women entrepreneurs gain
access to high value, senior
connections. “Today, I
continue to support the start
up community as a
passionate advocate for
women entrepreneurs
through my roles on the
Advisory Board of the Mobile
Enterprise Growth Alliance a
digital/mobile training and
accelerator program, and as
mentor to emerging
entrepreneurs through
PushStartAU.” Sara is also a
pitch coach helping early
stage, high growth
In 2011, Sara founded
EnrichMe.com.au, designed
to help women and their
families on their journey
towards better outcomes for
themselves around money.
“EnrichMe draws on more
than 50 years of knowledge
that our executive team has
amassed designing,
marketing, advising upon
and untangling financial
arrangements for ordinary
people all over the world.
We’ve worked in senior
executive roles with the
biggest of global names and
through our knowledge we
seek to empower and
educate people who just
want straightforward,
unbiased information with
no hidden product push.”
You can
follow Sara
on Twitter:
@sasslucas and
t takes guts to give birth to a business. Vision, tenacity and commitment are essential to nurture and facilitate its growth. Similar to parenting, it’s not for everyone, but for many it’s an excellent choice when the time is right. The creation and management of high growth companies, however, presents an even deeper challenge. Growing a scaled, SUR¿WDEOHFRPSDQ\UHTXLUHVQHLWKHU
gathering of high growth entrepreneurs LQWKH:HVWHUQZRUOGOHVVWKDQ¿YHSHU
cent will typically be female. Why is that?
When it comes to high growth companies, the “lists” (BRW Fast 100, Rich 200 and so on) are dominated by men. And yet, according to research by BankWest using Australian Bureau of Statistics data, more women set up small businesses than men. We just don’t typically grow them beyond $1 million in annual revenues. Of course there are notable exceptions. Katie May just sold Kidspot to News Digital Media for a reported $45 million. She started Kidspot in 2005 with blood, sweat, tears and an online directory, growing to reported 2010 revenues of $7 million and 68 per cent average annual revenue growth.
that comes to mind when thinking of leisurewear and she continues to accelerate her bright, sassy Lorna Jane ‘Live Active’ designs into her retail stores. Starting out at her kitchen table making gym clothes while working as DGHQWDOWKHUDSLVWVKHRSHQHGKHU¿UVW
store in Brisbane’s CBD in 1990. With her husband Bill by her side throughout, in May 2011 she had reached 104 stores throughout Australia with a further 20 planned and according to their corporate site, enjoyed turnover of $90 million in 2010. International expansion is next.
different businesses in the success spotlight. Both founders have the personal attributes needed. They are smart, tenacious and well connected, but what’s the common theme of their success other than their X-­Factor?
Money to grow
Capitalisation is the answer. Both businesses ensured they had strong balance sheets to fund their growth plans and actively sourced strategic partners to provide the money for expansion. Katie’s early funding was reported in SmartCompany.com.au to have been provided by the late Irvin Rockman, former Lord Mayor of Melbourne. And, according to sources in the mergers and DFTXLVLWLRQVLQGXVWU\SHUFHQWZDVLQ
exchange for a cool $250,000. In contrast, the Clarksons raised their latest capital round through the pooled investor money managed by CHAMP Ventures, a private HTXLW\¿UPDQGDUHQRZUHSRUWHGWREH
in takeover discussions with a number of interested parties.
Rob Antulov is a director of Hall Capital, an Australian-­based corporate DGYLVRU\¿UP$QHQWUHSUHQHXUDQG
veteran of the capital raising scene, Rob notes: “I have come across a number of female entrepreneurs who build a small, successful sub-­scale business, barely enough to pay themselves a salary, but they tick along undercapitalised, ¿QGLQJLWGLI¿FXOWWRµEUHDNWKURXJK¶ to get to scale.”
So what is “high
breakthrough to the dizzying levels of ‘high growth?’ According to the OECD, WKHEDVHGH¿QLWLRQRIDKLJKJURZWK¿UP
is one which ‘grows at a rate which is deemed to be high in comparison to the PDMRULW\RI¿UPVDQGDVVXFKLVQRWDEOH¶
With Australian economic growth currently hovering around the three per cent levels, we’re not talking stratospheric ¿JXUHVKHUH
achieve annual growth rates in turnover or number of employees of over 20 per cent for three consecutive years, should be considered high growth. To reach high growth, a business needs economies of scale or a decrease in the marginal cost of production as its extent of operations expands. Put simply, the more of something you make, the less it PXVWFRVWWRSURGXFHDQGWKHPRUHSUR¿W
you must make if you are to get very big DQGSUR¿WDEOH
While this sounds obvious, it is pivotal since it explains why so many small businesses fail to get scale; coaching, consulting and training are obvious candidates. Although these can be excellent businesses in their own right and may meet the lifestyle needs of their founder, scale is an enormous challenge for them.
Gaining scale needn’t mean a loss of control, which many fear. It means being accountable to others sure, but the trick is WR¿QGWKHULJKWSDUWQHUVZLWKZKRP\RX
can work easily, who ‘get you’ and what you’re seeking to achieve. X
/ 33
Where can the
funds come from?
Many times I’m asked: “But don’t I have to mortgage my home to the hilt in order to grow my business?” No, is the simple answer. Borrowing, or debt capital, is one avenue but if your business plan is red hot and your execution is strong then investors will sit up and take notice, which at least puts you on the right track. (TXLW\FDSLWDOORRNVIDUPRUH
interesting than debt for early stage companies from where I’m sitting. Who would you rather be sharing the growth journey with, an investor with deep experience and skin in the game, who really understands your segment and will support you with introductions and knowledge, or a credit controller at a major bank who can call in your loan at any time they like? Debt funding is handy for FDVKÀRZPDQDJHPHQWDQG
essential in the mix for large, listed businesses but in the current economic environment there are plenty of reasons why unlisted companies are better off with investors.
If you’re inspired to break through the lifestyle ceiling to high growth there has never been a better time in Australia to do so. According to Roger Kermode, ANZATech Director of Business Development, PushStartAu founder and entrepreneur: ³7KHUHLVDIUHHÀRZRIFDSLWDO
in the early stage space, the National Broadband Network will be a game changer regardless of your political views and WKHUHLVDÀRZHULQJHFRV\VWHP
of support and information all designed to accelerate companies past the early stages and into high growth.”
A change of
If we are to succeed on the high-­
growth path we have to change our mindset. In the New Yorker recently, writer Ken Auletta ran an insightful piece about whether Sheryl Sandberg, chief operating RI¿FHURI)DFHERRNDQGRQ
the Forbes Most Powerful List has the capacity to change the male ÀDYRXURI$PHULFD¶VWHFKQRORJ\
heartland, Silicon Valley. 34 / BUSINESS CHICKS LATTE
Cupcakes and
that after her presentations the women will ask the ‘soft’ TXHVWLRQV³+RZGLG\RXOHDG
what challenges have you had along the way?” not “How did you achieve 68 per cent year-­on-­
year revenue growth?” Ken also writes that Sheryl goes on to say she had an “Aha!” moment in 2005, when Pattie Sellers, an editor at large at Fortune, invited her to the magazine’s Most Powerful Women Summit, an annual gathering of several hundred women. Sheryl attended, but she thought the title was embarrassing, and refused to list it on the web-­based calendar that she shared with her colleagues. She says that Pattie later chided her for being timid. Pattie reportedly recalls, “I told her that most of the women on the Most Powerful Women list – Carly Fiorina, Meg Whitman, Oprah, and many others – had a hangup about the word when we started ranking them in 1998, but they’ve come around, and she should, too. What’s wrong with owning your power?”
Jeremy Colless wears two hats as an angel investor with Proto Partners and corporate advisor with Artesian Capital, an Australian-­based investment PDQDJHUZLWKRI¿FHVLQ
Sydney, Melbourne, London, Singapore and New York. An active supporter of female-­led companies, Jeremy is typically approached for funding by founders of companies valued at $1 to 3 million, looking to raise $400,000 to $1 million and who PLJKWKDYH¿YHWRHPSOR\HHV
He says: “Two of the 15 (13.4%) of the early stage companies in which we are currently invested, are led by women and that’s Posse and Customer Underground. The overall percentage of companies led by women that approach Arte-­
sian/Proto would be even lower, SUREDEO\¿YHSHUFHQWRUOHVV´
Jeremy goes on to say: “Once they’re across the table from us, however, I haven’t noticed any marked difference in capital raising approaches.”
Jeremy is not alone in experiencing a lower overall percentage of women approaching him for funding.
Paul Niederer, CEO of digital unlisted market, the Australian Small Scale Offerings Board $662%ZDVVXUSULVHGWR¿QGKLV
statistics demonstrate that of the 40 companies currently listed on his board, only four are led by women.
Paul says: “We could do more [for women] and will. As a result RI\RXUTXHU\>DVNLQJDERXWRXU
female representation] I am going to change my presentation, we have never analysed these stats before; why is that?”
Ghazaleh Lyari,
founder of Ghermez
Cupcakes agrees and
indicates that the
same challenges
abound both for
corporate executives
and entrepreneurs. The
former Wall Street
investment banker
worked in the big end
of town before
producing her luxury
cupcake range.
Founded in 2008
Ghermez operates
three retail stores in
prime Sydney locations
and is opening a
further store in 2011.
While she plans to
build her foundations
in Sydney, Lyari is coy
about national
expansion and
beyond. She currently
employs 20 staff and
plans to increase that
number again this year
in line with her
expansion. “I believe
one of the biggest
barriers to progress for
working women in
general, is the lack of
adequate support
infrastructure for
managing home
duties,” she says. “For
those of us with
children this can be a
burden when we
choose to dedicate a
considerable portion
of our time and energy
to our professional
lives. Lack of
affordable child care
forces many women to
make a choice, which
often becomes the
curtailment of their
So what of the women that make it past the early hurdles, successfully raise capital and push onward towards mega growth?
Ghermez Cupcakes Ghazaleh Lyari says: “Our professional journey imposes heavy demands on our time whether we’re running a high growth company, or are an executive in a large organisation. Most men in VLPLODUSRVLWLRQVEHQH¿WIURP
having a partner who chooses the support role in the relationship in overseeing domestic responsibilities. Most women don’t have that luxury.”
Women’s ability to manage and outsource where possible without doubt plays a big part in navigating the high growth path, but what of the associated costs? Let’s assume the cost of outsourcing and support is say, $50,000 per annum with childcare, housekeeping, outsourced meals and so on. How much would you suppose a business needs to earn in revenue (%,7'$WRODQGWKHHTXLYDOHQW
of $50,000 in post tax dollars in your hot sticky little hand for the cleaner’s wage? Depending on the nature of your business, its cost base and your capacity for smart tax management, the range is a staggering $85,000 to $400,000. While you pick yourself up off WKHÀRRUSHUKDSV,FDQH[SODLQ
that this wide range is a factor of your company’s cost base. If you operate a high cost business, like a coffee shop for example, you need to pull in big licks of revenue to pay staff, rents and other big ticket items etc before there’s any left for you. At the other end you might see a technology business that operates ZLWKORZ¿[HGDQGYDULDEOHFRVWV
and higher margins. It follows therefore the range will be wide. No wonder this high growth gig can feel like facing the West Face of K2, the base revenue hurdles before you even get out of the door can be off the scale.
Melissa Widner, my co-­
Founder at Heads over Heels, is a mother of four, a successful entrepreneur, board director, venture capitalist and angel investor. It’s entirely possible to be out of breath before you even sit down for coffee with her, such is her schedule. She’s fond of saying that in her experience, it takes more effort for a partnered woman with children to start, grow and manage a small lifestyle business than a mega growth operation, simply because once you’re big you can afford to pay for the help both in the business and at home, freeing up your time to focus on the areas most important to you. As I pull in the hours building EnrichMe.com.au from scratch I know it would be a whole lot harder without my team by my side, a capitalisation decision I made very early in the piece and one which has been validated by investors as sound business practice as we enter a funding round.
There is a perception, and I believed this for many years too, that a big, hairy, fast growth company is a bigger challenge than a small business, but I Melanie Kansil is CEO of
Customer Underground,
one of the companies
funded by Jeremy Colless
is firmly on the highgrowth track. Having just
completed her first round
of capital raising for an
undisclosed sum she has
aggressive plans for
expansion. Her staff
numbers in tripled in 2011.
According to Melanie,
the deterrents for anyone
driving a high-growth
business can be the
inherent risks of building
and executing on new
products and the need to
have persistence,
courage, and optimism.
She says: “While
women often possess
these attributes in spades,
they risk being derailed
by additional challenges;
the biggest being how
the high-growth path
clashes with the structural
realities of their lives,
particularly those of
/ 35
dynamic, open to new ideas, and committed to that longer-­
term growth path, with a strong strategy in place.
5 top tips for mega-growth
If the high–growth journey appeals
to you, here are my tips for getting
1. Get online, read and research, learn who the movers and shakers are in growth acceleration land. Follow them in social media, read their blogs and they will point you to a wealth of useful resources.
2. Reach out to the players. We women are less willing to put ourselves forward but there are so few of us stepping forward we’re almost still a novelty and we get a lot of attention!
3. Give feedback when people help, which they will. Go back to the principles of networking. It’s a two way process, they’re looking for interesting investment opportunities and the chance to share their wisdom. You’re looking for expertise. Win/Win. Have an “ask”, be explicit about it and have something to give too, it’s a big turn off to be approached by someone who is constantly on the take and reputations spread fast.
connections and commitment to assist you.
the maze is having a supportive spouse/
partner if you’re in a relationship, and being willing to confront your own assumptions about how you work, and how you manage your family life. I’ve seen several businesses derailed by misaligned expectations between spouses and adding these marital issues into the mix can be explosive. For you personally, are you OK that there are certain things that can’t be done by you anymore – whether that’s housecleaning or school pick-­ups? If you’re single ensure you have balance in your life, supportive people DURXQG\RXDQGGUDZ¿UPERXQGDULHV
around your leisure time. ,¶OO¿QLVKZLWKH[WUDFWVIURPRQHRI
Sandberg’s 2011 commencement address to the women of Barnard College, Columbia University NYC. You can watch in on You Tube here http://tinyurl.com/sherylspeech
“Don’t let your fears overwhelm your desire. Let the barriers you face -­ and there will be barriers -­ be external, not internal. Fortune does favour the bold. I promise that you will never know what you’re capable of unless you try ... Start out by aiming high … Go home tonight and ask yourselves: ‘What would I do if I weren’t afraid?’ And then go do it! Congratulations.”
Go Sheryl, and go you. Strap yourself in and go for the high growth ride, it’s a blast.
The right deal
business to the next level. But it also means sharing control. The Commonwealth Bank’s Cherie Juwono discusses the pros and cons.
uilding a successful business is one of the most rewarding things you’ll ever do. But while passion and HQWUHSUHQHXULDOÀDLUDUHHVVHQWLDOZKHQ
you’re starting out, they can only take you so far.
What about an
the ideal solution. By selling part of your business to an investor, you can ¿QGWKHH[WUDFDSLWDO\RXQHHGWRHQWHU
a new phase of growth, whether that PHDQVPDNLQJDVWUDWHJLFDFTXLVLWLRQ
expanding interstate or overseas, or simply investing in new premises, SHRSOHDQGHTXLSPHQW
Just as importantly, you can tap in to the expertise and industry insights of an experienced operator. That’s because WKHULJKWSULYDWHHTXLW\SDUWQHUEULQJV
much more to the table than cash. They can also offer you advice, ideas, experience, and an established network of professional and industry contacts. How it works
to negotiate a deal that suits your needs, so an investment can take many forms. 3ULYDWHHTXLW\LVDVRXUFHRI
investment capital from high net worth individuals and institutions for the SXUSRVHRILQYHVWLQJDQGDFTXLULQJ
will be looking to help you grow your EXVLQHVVVLJQL¿FDQWO\RYHUDWKUHHWR
listing, trade sale or management buyout that allows them to exit the EXVLQHVVDQGJHQHUDWHDSUR¿WRQWKHLU
To make that happen, they generally want to keep you and the existing management team in place, working with you to set a strategy and create an architecture for growth. That might mean buying a minority stake from you, leaving you in economic control of the business. Or it might mean buying a majority share with an ‘earn out’ agreement.
An earn-­out is a contractual provision stating that the seller of a business is to obtain additional future compensation based on the business achieving certain IXWXUH¿QDQFLDOJRDOV
Even with a minority stake, DSULYDWHHTXLW\LQYHVWRULVIDU
from a passive partner. Instead, they’ll work actively to support the existing management team and re-­
engineer the business for growth. When is the right
time to sell?
to be given up lightly. Once signed away, they’re hard to regain. If you can achieve your growth ambition without extra FDSLWDOWKHQSULYDWHHTXLW\LV
probably not for you. But there are two broad situations when it may be just what you need.
injection of capital and expertise to position your business for the next phase of growth. The second is when you’re looking to realise some of the value locked up in your business for other purposes — whether it’s to build a house, fund the kids’ education, or start a new venture. Your business also needs to have reached a certain stage of maturity. Generally, investors will be looking for a proven track record of generating cash, together with strong prospects IRUWKHIXWXUH3ULYDWHHTXLW\LV
all about growth, since it’s that future growth that’s going to allow both you and your investor to exit the business with a healthy SUR¿W6R\RXQHHGWRKDYH
demonstrated growth potential.
What investors are
looking for
If you think you’d like to attract DSULYDWHHTXLW\LQYHVWRU²DQG
get the best possible price — it’s important to build a business with the right characteristics. Here are some of the things they’ll be looking for:
> Strong cash generation.
> A stable core business with consistent and rising revenues.
> A strong market position among your competitors.
> A number of growth options — whether through industry consolidation, product innovation, or geographical expansion.
competitive advantage. They’ll also be looking for a business owner who’s 3ULYDWHHTXLW\GHDOVFDQWDNH
many forms, from a simple cash sale, to an earn-­out or a VWUXFWXUHGHTXLW\GHDO7KHVDOH
price is typically calculated as a multiple of your business’ earnings before interest tax, depreciation and amortisation (EBITDA), with multiples varying considerably between different industries. So it’s important to get good advice and thoroughly understand the long-­term implications before you sign. Among other things, you’ll need to understand how you’ll share control with your investor — both economic control through your respective shares in the busi-­
ness, and voting control through your shareholder agreement. $QLQGHSHQGHQWDFTXLVLWLRQ
with a proven track record and experience in your industry, then work with you to negotiate the right deal. They can also help you explore other options, such DVGHEW¿QDQFLQJRUDWUDGHVDOH
is something you might like to consider down the track, it’s a good idea to start talking to an adviser now.
process advice, opinion on VRXUFHVRIJURZWKHTXLW\DQGWKH
options around the use of debt as a source of future growth. The right partner
Right now, it’s a seller’s market for business owners seeking SULYDWHHTXLW\LQYHVWRUV
according to Alexandra Commins, an Investment $VVRFLDWHZLWKSULYDWHHTXLW\¿UP
RMB Capital Partners. RMB Capital Partners is a mid-­
and a buy-­and-­build specialist. It invests alongside existing owners and managers, backing good TXDOLW\WHDPVWRGRZKDWWKH\
do best – grow their business. Many of RMB’s most successful partnerships have involved an investment in a strong business followed by a series of smaller DFTXLVLWLRQVWKDWDUHLQWHJUDWHG
into the parent business. A recent example includes a $17 million investment in air-­
conditioning business, Hastie Group which was after 3.5 years listed on the ASX with an enterprise value of $180 million.
“There’s a lot of competition in WKHSULYDWHHTXLW\ZRUOGFKDVLQJ
good assets at the moment”, Alexandra says.
But while Alexandra believes SULYDWHHTXLW\FDQEHDQ
important tool for realising your growth ambitions, she also recognises that selling part of \RXUEXVLQHVVFDQEHDGLI¿FXOW²
and emotional — decision. ³$FFHVVLQJSULYDWHHTXLW\LV
a really tough decision ... a lot depends on your business goals and whether or not a capital infusion now is the best way to achieve those goals,” she says. ³7KHUHDUHDORWRIFRQÀLFWLQJ
emotions involved. In most cases they’ll be able to open more doors for you than you’d be able to do alone.”
partner, then take the time to negotiate the right deal. “Having the right chemistry with someone you’re going to work closely with on an almost daily basis for the next four to six years is very important,” she says.
That means looking into their track record.
can seem charming and easy going when the deal is being negotiated”, says Alexandra. “But when budgets aren’t met and the business faces challenging WLPHVKRZ¶VWKHSULYDWHHTXLW\
partner going to react? You want someone who’s going to stick with you through good times and bad times”, she says.
lucrative and rewarding partnership if you take the time to negotiate the right deal. $OH[DQGUDVD\V³(TXLW\VKRXOG
be used very wisely — your FRPSDQ\¶VHTXLW\LVWKHPRVW
valuable currency you’ve got.”
Cherie Juwono is an Executive in the Commonwealth Bank Acquisition Finance and Advisory Team. L
/ 37