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An Overnight 30-year Success

Wednesday, July 1, 2009 - 09:32

Salmat may not be a household word but its operations touch many Australians daily. Its founders talk about what is needed to grow and sustain a business. By Richard Jones

Salmat, which began small in 1979 as a letterbox distribution network, is now a major Australian communications and outsourcing company with more than 7000 employees.

During that time, founders and Joint Managing Directors, Philip Salter and Peter Mattick, the 'Sal' and 'mat' in Salmat, have led the company. Now, after 30 years of positive growth, successful acquisitions and a public float, the close friends and work colleagues have appointed a new CEO and are planning to move on as non-executive directors.

Salmat came about through one of those business opportunities that arise from time to time. Salter and Mattick owned two successful menswear stores back in the late 1970s. According to Mattick: "I used to say to Phil that this is an awful business because the stock goes off. After one season, you have to basically throw it away."

"While we were good at it we didn't have a passion for it so we were looking around for something else. At that time, Phil's dad was doing some sampling for Colgate and small distribution work and so we had a look at it and came away thinking: no stock, good margins and a solid customer base with potential."

Salter admits that both he and Mattick were good at selling. "Pete, my Dad and me used to get out there and we'd just knock on doors."

"I think if there was one ingredient that made the company successful early, it was that we put ourselves in front of a lot of people and lots of decision makers; we would wear the figurative four hats in a day.

"We were really passionate about the business. It was all encompassing and, while we tried to balance ourselves out a bit, it was bloody hard in those early days." But those days have certainly paid off.

According to Mattick, running a small family business is "the best spot in the world because you know everyone personally, you know their kids".

"You're not big enough that you're a threat to anyone and you can make a good, solid living.

"It's a big decision to go to the next level, for example, to go interstate. Those decisions come at a cost in terms of both financing and energy."

IT and cashflow
Both Mattick and Salter agree that one of the key triggers in the growth of Salmat was - and continues to be - the use of technology.

"We were one of the first to use computerised systems for distribution, not just accounts, and that took a lot of the costs out. By the early 1980s we were fully computerised in terms of contracts to walkers, and it was unheard of at that time," says Mattick.

"IT was always at the forefront of the way Salmat operated; we always asked the question 'how can we do it smarter?'. It still drives the business today." Salmat now has about 400 IT staff on the payroll.

Salter says one of the toughest tasks in the early days was meeting payroll and day-to-day costs, one of the reasons why their focus has always been cash is king.

"We had to get our customers to pay us quickly and we have always worked on about 30 days on debtors in and out. We learned some pretty harsh disciplines in those days and we were fortunate to have some bank managers that trusted us.

"It wouldn't happen these days; they backed us because they saw that we had sensible margins and our revenue was increasing dramatically from month to month. We got tremendous support from a couple of different bank managers."

As the company continued to grow, the joint MDs became concerned that one of the quicker ways to go broke in business was to grow too quickly. So, in 1986, Salmat offered a 49 per cent holding to News Corp to raise funds. They felt that the company was getting to a size where it was having trouble funding day-to-day costs; indeed, Salmat had to find $1.7 million a week just to keep the wheels turning.

Key culture
According to Mattick, one of the key underlying strengths of Salmat was the way it was driven by its people and culture, a strength that remains today.

Salter believes that if a business doesn't have a culture then it won't survive long term, and if the business doesn't have good people then it will eventually just slide away. In Salmat's case, the proof of the pudding is in the eating. For example, the company doesn't have a human resources department, it has a 'people and culture division'.

"We have a view at Salmat that we will solve the customer's problems by giving them a better service or a better product or a different product," says Salter.

"We grew with our clients because, when they asked if we could find a solution for them, rather than job it out, we would do it ourselves."

According to Mattick, Salmat relied on organic growth or some intelligent acquisitions for its successful growth rate of about 14 per cent each year over the past 30 years.

Hard decisions
Salter says their focus is always on the company's success. "If that means making some hard decisions then we're happy to make them.

"Decisions are made now so that in 10 years time this business will be employing not the 7000 people as it does today, but 14,000 people, and it will be turning over $5 billion, not $1 billion.

"We can only do that if we have the discipline to make hard decisions about people and products. If something is not working then we get out of it. Take, for example, a sampling company called CPM. What a disaster. We set it up and put a lot of money into it and it didn't work. We also developed a secure email product that failed because no one really needed it."

Both men agree that another key to their success formula is their constant search for new products and services. They used to travel overseas each year on the lookout for new products and services.

Salter is firmly of the belief that, once management makes the decision not to remain a small company, then there's no use being middle sized; it's just not a good place to be.

"If you want to be a big company it comes back to listening to customers and working out how you can solve their problems. For example, the reason we got into call centres is that some of our customers asked, 'Can you make calls for us?'. They weren't happy with the service they were getting.

"I think we have a natural affinity to grow the business and probably we take some risks, but, on balance, we're getting more than 50 per cent right."

Salter and Mattick agree that the real key to operating in tough times is not just about reducing overheads, it's about working smarter and better.

According to Mattick: "We keep saying to ourselves, we've got to find a better way to do it for our customers so they can win. If the customer doesn't win we're not going to have a business, so we've got to be the most efficient and innovative provider; we've got to be No.1 in our class, in every sector, and in every business."