Champion entrepreneurs turn challenge of change into opportunity for more success

Five of Perth’s top entrepreneurs sat down with WA Business News to talk about managing change, boosting philanthropy and achieving long-term success.

John Rothwell, Patricia Kailis, Stan Perron and Fred Rae have helped to build some of the most iconic businesses in Western Australia. 

Despite this, all of them have to deal with change, and it isn’t always easy.

That was one of the themes of a boardroom forum hosted last week by Ernst & Young, which brought together five winners of the Champion of Entrepreneurship award in its Entrepreneur of the Year program.

These industry leaders have all needed to deal with new challenges in their businesses and, in some cases, they have also found new opportunities.

As the founder and chairman of shipbuilding business Austal, Mr Rothwell has witnessed the fluctuating fortunes of the manufacturing sector.

Right now, he said Austal’s core manufacturing business at Henderson is being buffeted by the high Australian dollar, which has reduced its competitiveness, and the depressed economies of Europe, which has cut demand.

The company has responded by buying a shipyard in the Philippines.

“Nobody wants to hear that we, or any other manufacturer, are going offshore but it’s a harsh reality, it’s something we have to do,” Mr Rothwell said.

“The Australian yard is tough going and we’re gradually converting it to defence work that we can’t build in the Philippines for security and other reasons.”

In contrast, he said the group’s offshore operations, including in the US, had a brighter outlook.

Patricia Kailis, who co-founded MG Kailis Group with her husband, Michael, has also seen a lot of change in recent years. MG Kailis is no longer active in two of its original activities – it has moved out of pearl farming at Broome and rock lobster fishing out of Dongara.

The focus is now on pearl retailing, a prawning operation at Exmouth – “its said to be the best regulated fishery in Australia” – and the rock lobster fishery in Queensland, based in Cairns.

Mrs Kailis said the Exmouth operation had expanded to include distribution of wet fish from the north-west fisheries, and that part of the business was going well.

Stan Perron, who has worked in industries as diverse as mining, land clearing and earthmoving, said his automotive and property businesses were doing well. As the holder of the Toyota franchise for WA, the biggest issue last year was the shortage of stock, after overseas suppliers were affected by the tsunami in Japan and floods in Thailand.

The car business was now solid, he said.

“As far as shopping centres are concerned, it’s alright for us, we’re the landlord, we collect the rent, but the retailers are having problems,” Mr Perron said.

The Perron Group owns eight shopping centres across Australia and would like to add to that total. 

“We’re in the market to buy another shopping centre but only two have come on to the market in the past year,” he said.

The Perron Group has also been able to take advantage of opportunities created by other businesses getting into strife. It recently bought a big parcel of land at Baldivis from the receivers of the Oswal Group and acquired Luke Saraceni’s half share of the Vasse Newtown development near Busselton.

“We take opportunities as they arise,” Mr Perron said.

Fred Rae’s business interests in WA are focused on property, after his family sold its Gull Petroleum business to private equity-backed Ausfuel.  

“Like Stan, we collect the rent,” Mr Rae said.

However, he said the family-owned fuel business in New Zealand, also trading as Gull, was performing extremely well.

“When we gave notice that we were opening, the price dropped about 10 cents, and when we opened the service stations, people just flooded them,” he said.

Mr Rae, who has always been a hands-on manager, said the experience of being a non-executive director was “a bit foreign to me” but he had enjoyed watching the results.

Jack Bendat has also been named a Champion of Entrepreneurship, after achieving business success as a shopping centre developer, media owner and winery owner.

Now focused on philanthropy and his great love, the Perth Wildcats basketball team, Mr Bendat is upbeat about WA’s prospects, saying it’s the luckiest state in the luckiest country in the world.

Philanthropy

Mr Bendat is focused on giving back to a community that has been good to him and is concerned that other wealthy people are not doing the same.

“Ten out of Australia’s 20 wealthiest people have links to WA and, unfortunately, many of them will die with their money next to them,” he said.

Mr Rae said that his business had a policy of giving money to charity from the year it started and it maintained that policy throughout.

Mr Perron remarked that “there are a lot of family foundations in the eastern states that are well established; people with money here are fairly new”. He expressed concern there were “too many smaller groups starting up”.

Mrs Kailis agreed this might create problems.

“They certainly can raise money because they have public sympathy,” she said, but questioned the viability of some of the smaller philanthropic start-ups.

Mr Rothwell said he had received many calls over the years. Before making a donation, he would always ask to see the charity group’s financial statements.

“We dig fairly deep to see how many people are involved in administration and how much flows through to those who need it,” he said.

“There are quite a number that fail the test quite frankly.”

Mr Rothwell said he had also encountered philanthropic groups that sought funding and then tried to find a way to spend the money.

“That sounds ridiculous but we’ve had that experience,” he said.

“I think what John Poynton is doing is very valuable. He has developed a model where he is saying, there are so many options, let us do the vetting.”

Mr Bendat said that when charity groups asked for advice, he told them: “Make it very transparent what your operating costs are.”

He has adopted a rule of thumb for filtering charity requests. 

“If their overheads are more than 10 per cent, I do not invest in them,” Mr Bendat said.

Mrs Kailis said a lot of charities had difficulty finding suitable board members. 

She commended the contribution of accounting firms and law firms that encouraged executives to take these roles.

She said the Kailis Group tended to focus on charities or sporting groups that were relevant to the family, their staff and the communities where they operated.

“We support the community we live in and the community we work in,” she said.

Long-term success

A defining feature of the Champions of Entrepreneurship is that their businesses have stood the test of time. 

Their advice for young entrepreneurs looking to sustain their success goes back to first principles.

“They should not run, they should walk,” Mr Bendat said, adding that business people should “do one thing and do it well”.

Mr Perron exhorts business people to be honest and ethical and ensure they get good quality, loyal staff.

“Ethics and honesty is absolutely the basis of it,” Mrs Kailis added.

Mr Rothwell said business people had to first ask what they wanted to achieve.

“Some people are happy to take the money, other people really enjoy the business they are in and want to build it for perpetuity,” he said.

“The driving force is doing something you enjoy, and then finding people who share that philosophy who can continue the business.”

Prudent financial management is another theme running through the master entrepreneurs, who all got by on modest incomes while building their businesses.

Policy

If there was one concern that united the leaders, it was frustration with the planning approvals process, particularly at a local council level.

They found the process to be often very difficult, and inconsistent. “We need some uniformity in the system,” Mr Rae said.

He recommended Australia looked at the system in New Zealand, where local councils effectively outsourced the planning assessment to private contractors, who achieved a rapid turnaround.

“I believe that scheme New Zealand uses, has a place here, it would alleviate a lot of problems in the planning approvals system,” he said.

On a more positive note, there was agreement that premier Colin Barnett was doing a good job.

“I underestimated Colin Barnett,” Mr Rothwell said. “He is decisive, he cuts through and gets things done.”