18/03/2010 - 00:00

Be it business or succession, Perron sticks to plan

18/03/2010 - 00:00

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Perron Group chairman Stan Perron is a survivor, having ridden out the tough times and prospered in the good over several decades. Examining his business philosophy reveals the art of wealth preservation ... starting with an early shift into property.

Be it business or succession, Perron sticks  to plan

“WE have gone into property in a big way,” Mr Perron said.

“We went into shopping centres 37 years ago. They have proved very profitable.”

Perron Group owns eight big shopping centres spread around Western Australia and the east coast. The company also owns several office blocks, including a half share in Central Park in Perth’s CBD.

Mr Perron said the group’s experience with shopping centres had been positive since he bought his first, in Thornlie, from developer Jack Bendat.

“Shopping centres are pretty much the same providing it is in the right area. The management of shopping centres is quite important,” he said.

In his early property investment days, Mr Perron also bought hotels, such as the Charles in North Perth. However, he found the management of those, particularly the people side, far more onerous than shopping centres, which are put in the hands of professional third-party managers.

Business preference

Mr Perron likes businesses with strong cash flows, few staff and the capacity to ride the cycles

It is not just shopping centres that have proved profitable.

After selling his earthmoving business to Thiess Brothers for £750,000 in the early 1960s, Mr Perron ended up with their Toyota franchise, going into business with a friend who knew the car business.

The pair each put in £10,000 to buy a plot of land on the corner of Plain Street and Adelaide Terrace, a site that is still a Toyota dealership today. Mr Perron later bought the site next to it to house his headquarters.

With Japanese goods not known for the quality they are today and, with sales of around 1,000 in their second year, Mr Perron’s business partner decided to shift into selling Fiats and was bought out of the business.

Today, Toyota commands almost a quarter of the WA vehicle market and is very popular in the mining sector where LandCruisers are not only reliable, but the Perron Group has mastered the art of ensuring spare parts are accessible.

Devolves responsibility

Perron Group is run by a select group of executives who command a total staff of around 100, a size that has not grown much in the past couple of decades.

The group CEO is Ian Armstrong, who has been with the group since Mr Perron bought his second shopping centre, Phoenix Park, and inherited the executive as manager. Mr Armstrong manages the property interests and other investments directly and sits on the executive committee with Mr Perron and chief financial officer Ross Robertson, another long-term staff member with about 28 years with the company.

Mr Perron’s daughter, Liz, who is on the independent board, also sits on that committee.

Other important people at the top of the lean organisation are Mark Lauren, who heads up motor vehicle sales, and Gary Nettle, who runs the spare parts division.

“Good staff is the secret to a good business. Some of my staff have never had another job,” Mr Perron said.

He said he had no magic formula for keeping people in the company. He doesn’t have a bonus scheme but instead pays well and looks after his people.

“I am always here and they are working for an individual with an interest in the company.”

Strong relationships

Apart from the long-term relationships with his staff, Mr Perron said he also had strong links to key suppliers and customers, such as Toyota and dealers.

While car sales have to hit benchmarks, Mr Perron said that the people who ran Toyota dealerships were very long-term business partners.

“Once a Toyota dealer, they stay that way; that is the ultimate in dealerships,” Mr Perron said, noting it was not always the top of the vehicle sales tree as it is today.

Mr Perron has also backed a number of land sub-divisions developed by start-up players in the sector. He finances the project and gives the entrepreneur a percentage of the profits. In some cases, this has been repeat business.

“That is a sideline,” he said.

“We have had mostly good experiences; that is where they do all the work and we finance it.”

The WA franchise itself was, until 2001, simply a gentlemen’s agreement done on a handshake. These days it is more formal.

Investment in service

“Spare parts carry 40,000-50,000 line items, it is very modern and up-to-date,” Mr Perron said.

“We pride ourselves on service; that is why Toyota is so popular.

“Just about anywhere in WA, including the Kimberley, you can get a part for a Toyota.”

The group recently adapted, at a cost of about $12 million, an automated system for managing spare parts at its Kewdale workshop, using systems from the pharmaceutical industry.

Perron Group also runs a training centre at Kewdale for service people and those working in dealerships.

Prepared to trust

“There is a lot of trust, and responsibility,” Mr Perron said regarding his executive team.

“I suppose that is why they stay, they have their own departments to run. They get some satisfaction out of doing what they do best.

“We really don’t worry them.”

Mr Perron admits to not being computer literate. He retains a ledger book from the early 1960s that studiously records Toyota sales for most of the time he’s had the franchise.

He receives updated numbers about the group’s businesses on a monthly basis.

Succession plan

Mr Perron said he started to get organised in terms of succession planning and structuring his business for the longer term about 30 years ago.

He has a daughter, who has a non-executive role in the business as a director, and his son runs his own logistics company, which he operates from the same offices as the Perron Group headquarters.

The business itself is structured in a way to ensure it survives well after Mr Perron’s passing – having membership rather than shares – and he has ensured there are disincentives for family members to attempt to take out too much from the business.

The key mechanism is a one-for-one contribution to charity that matches payments to the family. Mr Perron has created his own charity that shares in what the group does, receiving a payout matching whatever distribution the family gets – something of an insurance policy against future greed.

The Toyota franchise, which was a verbal agreement until 2001, is one area where Perron Group has moved more recently to ensure longevity of the business.

“About 10 years ago I was getting long in the tooth and the staff asked what is going to happen when I fall off the perch?” Mr Perron said.

“We approached Toyota and it took a couple of years but we have a firm ongoing agreement now in the company name.

“There was always a doubt while it was a personal association but we had 35 years of experience

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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