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Survey gives growth insights

THE Rising Stars survey provides unique insights into the strategies and outlook of fast-growing Western Australian

businesses. The survey is a joint initiative of WA Business News and professional services firm Deloitte. As well as identifying fast growing private enterprises, the survey features a detailed questionnaire on the growth drivers of the respondents.

 

Projected Revenue

Respondents to the 2004 survey are even more optimistic about future growth than last year’s respondents.

Commenting on the outlook, Deloitte Growth Solutions partner Luke Martino said: “Against a backdrop of global policy stimuli and positive Australian economic conditions, it’s both remarkable and encouraging that the surveyed private enterprises have expressed confidence in their business growth.

“More than 70 per cent of respondents have a projected revenue growth of more than 30 per cent for the next three years.

“This is a promising vision”.

Key Growth Indicators

The top indicators of growth were revenue and working capital, followed by value delivered to shareholders.

“High growth enterprises are looking at the combination of value delivered to shareholders with revenue and working capital indicators,” Mr Martino said.

“In addition, profitability was recognised as an important aspect to growth delivering shareholder value”.

Barriers to Growth

Domestic economic conditions were cited as the main barrier to achieving even higher growth. Other barriers were the shortage of experts, limited ability to raise capital and global economic conditions.

Commenting on capital raisings, Mr Martino said: “In the public arena there was a rush of IPOs in the first half of the financial year that carried over into the third [March] quarter.

“However, there was a drop in the average size of offering as a flood of smaller companies joined the boards.

“The average capital raised per listing will pick up again in the last [June] quarter as a number of major floats make their debut, including Pacific Brands, Zinifex, Excel Coal and Just Group.

“Survey respondents recognise the ability to raise capital as a barrier along with the domestic economy and the shortage of experts.

“This confirms the complexity of the current business environment and the need for leaders of growth businesses to be able to select the right people at the right time for the particular growth strategy”.

Growth Drivers

Developing quality products and services was the main growth driver identified by survey respondents.

Other growth drivers included the quality of management and the level of innovation.

“The stakes are always high,” Mr Martino said. “Quality should be the current buzzword.

“Without quality people and quality management to build a quality team, offering quality products and services, businesses will not be successful.

“We operate in a discerning market.

“High growth companies concentrate on their customers’ needs and delivering quality products and good customer service”. 

Growth Strategies

The survey found that companies are turning to product innovation and diversification to increase market share.

Mr Martino said Australia’s emerging market was becoming more committed to long-term growth and having a strategy to achieve that growth.

Human Resources Practices

The top three human resource practices identified by the survey respondents were promotion of an innovative culture, performance management and training.

Other highlighted practices included provision of incentives and a focus on retention of existing staff.

“An innovative culture dictates that an emerging business needs to put a larger focus on developing a sustainable growth culture,” Mr Martino said.

“Performance management and the appropriate training of key people are being recognised as integral to an organisation’s success”.

Nearly all of the survey respondents ‘agree’ or ‘strongly agree’ that they are recognised as an employer of choice.

They also ‘strongly agree’ that their culture plays a significant and integral role in their growth and success.

Mr Martino said these findings indicated that management was critically aware of the environment employees were seeking.

“Growth businesses are adapting to their unique culture suitable to the key people in the organisation,” he said.

Technology and the Internet

The participants in the Rising Stars survey were nearly unanimous in recognising the benefits of technology and the Internet, to optimise both customer-facing processes like sales and marketing and internal process.

“It’s good to see that private enterprises have embraced technology as this will enhance customer relationships,” Mr Martino said.

Strategic Relationships

One of the biggest changes between the 2003 and 2004 surveys was the reduced weight attached to strategic relationships.

“There was an acknowledgement of strategic relationships but this had reduced from the previous year’s survey result,” Mr Martino said.

“This may indicate that growth businesses are concentrating more on their own people and ‘quality’ relationships.”

Future Investment

The survey respondents have identified a

variety of areas where they plan to make their single greatest financial investment in the

coming years.

“Research and development, including product development and innovation, is seen as important drivers and hence attracts a greater financial commitment,” Mr Martino said.

“This, combined with operations and technology, was attracting the bigger spend by growth businesses”.

Outsourcing

More than 40 per cent of the survey respondents outsource or divest non-core business functions.

Mr Martino said “outsourcing, where appropriate, is being adopted if it contributes to

efficiencies and hence growth”.

He added that owners of private enterprises are discerning and wary as to the cost benefit equation.

Future Issues

“The old adages of capital and quality people are clear trends cited by respondents,” Mr Martino said. 

“Given the extremely positive outlook on growth, these are not surprising inhibitors. 

“Clearly there are opportunities in the private equity markets and capital equity markets that are being tailored for fast growth enterprises. 

“Seeking correct advice and expertise in this area is becoming an important facet of the growth strategy”. National growth for Benchmark

 

PETER Langham knew the debtor finance industry inside out when he started his own firm.

He had 20 years’ experience in debtor finance, initially in his native UK and latterly in Perth with two of the big local players, Scottish Pacific Business Finance and AGC.

So when he went out on his own and established Benchmark Debtor Finance in 1998, Mr Langham knew exactly what he wanted.

He attributed Benchmark’s success to skilled and experienced staff that can work closely with businesses to provide funding.

“Even more importantly we want our staff to have a real customer service ethic, and we think that this approach has fuelled our success and our expansion.”

A telling illustration of Benchmark’s service ethic is the absence of voice mail.

People answer the phone, every time, which is a rarity in the era of centralised call centres.

The company also has a policy of establishing an operations centre in each State, so that staff are close to their customers.

This is a clear point of difference from the major bank-owned competitors, who typically have national service centres covering all States.

Since being founded six years ago, Benchmark has become one of the major players in the Western Australian debtor finance market.

With backing from venture capital firm Foundation Capital, Benchmark is aiming to match its local success in the interstate markets.

Foundation Capital agreed to invest $3 million earlier this year, with another $1 million available on call, to support increased funding lines and boost Benchmark’s national expansion.

Benchmark opened offices in Sydney and Melbourne in 2002 and its current expansion includes plans for offices in Adelaide and Brisbane.

Mr Langham is on the lookout for the right people to establish these offices, and is prepared to wait for the right people rather than rushing the expansion.

Over the past two years, Benchmark has lifted annual turnover by 141 per cent and now handles $300 million of working capital finance a year.

It has been helped by overall growth in demand for debtor finance, also known as cash flow lending or factoring and invoice discounting.

Debtor finance provides an alternative to overdraft finance, and is ideal for fast growing businesses that can use invoices to secure the cash advances.

Most of the major banks promote debtor finance but Benchmark focuses on smaller businesses that it believes the banks do not service properly.

Mr Langham says another sign of Benchmark’s success is the loyalty of its 22 shareholders, most of whom have been with the company from the start.

-         Mark Beyer

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