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SMEs Making a Big Splash

Tuesday, August 1, 2006 - 15:34

This may well be the age of the SME (small-to-medium enterprise). These successful Australians have come a long way, and are set to make greater strides in the future, says Ann-Maree Moodie

Popular attitudes to small- and medium-sized businesses (SMEs) and their owners can often be derogatory. Everyone's heard stories about the small business that failed after five years. Or about the SOHO (small office/home office) owner who always went to work in her pyjamas and slippers. And then there's the common perception that small business is what you do when you can't make it in the corporate world.

However, the reality is the opposite. According to the latest figures available from the Australian Bureau of Statistics (ABS), there are more than 1.5 million small businesses, (defined as those businesses whose total income or expenses were between $10,000 and $5 million in the financial year), up by 3.4 per cent since 1995-1996.

"Over the same period the increase in total income for small business was 18 per cent, expenditure 18.6 per cent (including wages 29.9 per cent) and profit 13.4 per cent," the ABS says. "The average income for small business increased by 14.1 per cent to $279,270 while average expenses rose 14.7 per cent to $247,292."

A week might be a long time in politics, but in small business the equivalent is 10 years.

A decade ago Small Poppies: Profiles of Australian Small Business was published, advising aspiring entrepreneurs on how to start and grow a small business. It profiled 38 small business owners and provided a comprehensive case study of success and failure in the sector. The book demonstrated, despite prevailing myths, small businesses can flourish.

One of the "small poppies" was Collette Dinnigan, interviewed in her warehouse workshop early one Saturday morning, opening the door herself, and making the coffee. "To be in small business you need a lot of stamina and a lot of drive and a focus so that you've always got something to work towards," were her words of advice. Shortly afterwards, Dinnigan was invited by the Chambre Syndicale du Pret-a-Porter des Couturiers et des Createurs de Mode to show her collections in Paris, launching her career as an international fashion designer.

Other interviewees who were soon to become household names included John McGrath, the Sydney real estate agent who started his enterprise in the back of his beaten-up car; Jan Chapman, who made her name as a film producer of such classics as The Piano; lipstick queen Poppy King; Gillian Corban and Amanda Blair of stationery makers Corban & Blair; and Steve Outtrim, the owner of the then dotcom darling Sausage Software.

This study of 38 small poppies makes up a detailed investigation of the small and medium-sized business market over an extended period. Their stories illustrate the fortunes and the common failures of business management, and show that the combination of passion and attention to business basics is the key to success.

Kylie Davis was a freelance journalist and a first-time mum when she decided to launch a new local newspaper in Balmain in Sydney's inner-west. Over the next 10 years she grew the business from a home office into the multimillion-dollar Village Voice Enterprises, the publisher of three local newspapers. The company was bought by Harris & Co who were in turn bought by Rural Press. Rural Press then onsold The Village Voice to FPC Courier.

"We went from me writing all the stories and selling all the ads, to me heading a team of 15 full-time employees and 50 casuals who delivered the papers once a month," says Davis, who joined The Sydney Morning Herald as an assistant editor after the sale.

"The job description went from journalist to editor, general manager to publisher and managing director."

Davis attributes her success to passion, enthusiasm, talented and loyal staff, good business systems and the advice of a trusted accountant and financial adviser.

"My youth - and status as a mum - ironically worked in my favour," she says. "Balmain is a great community that has a lot of admiration and respect for people 'giving it a go'. I had an early fan base of a lot of blokes in their late 40s and early 50s who ran local businesses and who would shake their heads and laughingly acknowledge that I was 'a goer' and they all booked ads with the paper."

Trained as a journalist at The Australian with no formal business education or experience, Davis relied on gut instinct in the early days. "Our philosophy was to do everything the exact opposite to what I had seen in force at big corporations, and that meant treating employees with respect; being fair and reasonable in expectations; doing good deals, not tough deals; and not throwing our weight around but being straightforward and fun to deal with.

"But I did, however, learn very quickly that big corporations did not have it all wrong. There's a lot to be said for being profitable, for example, and that robust and strong systems made decision making easier."

As a publisher, there are thousands of possibilities for every edition to make mistakes and there are the inevitable errors made in the management of the business, its finances and staff. "My style of management was very open and straight up," says Davis. "I learnt very early on that trying to avoid difficult situations never reduced the pain. I worked very hard to be honest and open with my staff and to share the vision of where we were headed with them and the obstacles we faced - even when the advice was not to - and I was honest with our readers and advertisers too.

"My approach was always that an honest mistake had been made but we would rectify it to the best of our ability, and nine times out of 10 that approach would actually build our relationship rather than damage it.

"Other small business owners who took the same approach were always the best to deal with, and the most successful. There is a really strong sense of reality in small business and those who are good at it realise that what doesn't kill you makes you stronger."

It's commonly said that it's better to learn from someone else's mistakes than your own, but that you learn more quickly from your own errors. There is an entire industry built upon this premise, but is it helpful? "My own mistakes were always my best learning experiences," says Davis. "I found that 'what I resisted persisted'. So after a while of trying to avoid dealing with taking responsibility for my errors, I changed my approach pretty quickly. Reading about other people was interesting, but never had the same traction."

Nici Stanford (then Nicola Read), was a single woman running her own business, Wife Without Strings, at the time Small Poppies was published. A business specialising in home maintenance from cleaning and cooking to paying the bills and returning videos (it was 10 years ago). Nici told me, "I call myself 'wife number one' and we play on the obvious harem analogy and the clients love it.

"We leave little notes 'from your wife' and the client leaves notes from us addressed 'to my wife' or 'my other women'."

The sale of the business released her from her biggest hurdle - hiring and managing staff. "My advice about recruiting staff is to go with your feelings in an interview but always check references, especially to make a point of speaking with the last employer," she says. "Managing staff is also hard. I think you have to be tough; be kind but be firm, and try not to make staff your best friend. And that's very difficult in small business."

Today Nici and her husband, Tom Stanford, run the boutique tonic hotel in the NSW Hunter Valley wine country. "Every ounce of experience I learned at Wife Without Strings has helped with setting up tonic. I particularly learnt that I do not enjoy having lots of staff!"

Nearly all the small poppies have either expanded their business, or sold it to launch or buy a new enterprise. The period since 1996 has seen others also tapping into the potential of the SME market with competitions like Telstra's Small Business Awards, a plethora of books, magazines and websites, and university degrees in entrepreneurship.

An indication of the growing interest in small business is also seen in the number of research studies like the recent Women's Enterprise in Rural, Regional and Remote Australasia, by Leonie Still and Viti Simmons of the Centre for Women and Business at the University of Western Australia. The study found that the primary reason for starting a small business was independence and freedom.

On the best part of running your own business, the small poppies inevitably replied: "being your own boss", "autonomy", "controlling your own destiny" and "doing your own thing". On the reasons for venturing on your own, Vic Cherikoff, the owner of Australian native gourmet food company, Bush Tucker Supply Australia, says: "Having the freedom to be able to make your own decisions and enjoying the satisfaction of getting it right."

"You only live once and if you don't try things you want, you won't get a second chance," says Dr Barry McCleary of Megazyme Australia . "You can have all the so-called security of a full-time job and an employer, retire and live an ordinary life but at the end of it, perhaps you'll say, 'I wish I'd given that a go'."