Portfolio: Sarah Neill

Rich 200

Rich 200 25th Anniversary Flagship edition
BRW.  29 May 2008
Researcher and Writer

Public Face of the Law

Feature: Slater & Gordon
BRW.  22 May 2008
Pages 48-49

      

CASHED-UP CLASS ACTION SPECIALISTS REDEFINE THE LEGAL PARTNERSHIP AND EMBARK ON AN ACQUISITION AND EXPANSION SPREE.

It has been a year since Slater & Gordon became the world’s first publicly listed law firm, but it is unlikely that lawyer and managing director Andrew Grech will be throwing a party. He and the other directors have had other things to worry about.

“The listing, to be frank with you, is pretty incidental,” he says in answer to how the float has altered company culture and business practices. “It was never for us an end in itself. It was always for us only one more way of achieving what we wanted to achieve as a group.”

Instead it has been a catalyst in a broader overhaul begun in 2001 when the firm was first incorporated. The May 21 float last year netted a capital injection of $35 million and allowed the company to begin an ambitious course of acquisition and expansion that has returned revenues and profits beyond even the directors’ initial expectations.

The listing was also a path to running the law practice in a more democratic way than the traditional partnership model.  “We had assembled a really talented group of people, and wanted to create a way for them to have the same opportunities for ownership that we did,” Grech says. “But we also realised that we’re in an environment where, for people to work collaboratively, we had to move away from the more traditional model which we feel encourages people to take quite a short-term view, operating quite independently of each other.

“In a partnership, it’s really about what fees [lawyers] generate and what clients they personally bring in rather than what role they play in the execution of a strategy for the whole of the practice.”  The partners all received substantial stakes in the listing, with Grech and deputy chairman Peter Gordon both sitting on stakes valued at more than $89 million. But almost a quarter of employees are now also stakeholders through a shareholder plan.

Grech stresses that as an ownership and management structure the public listing places remuneration partially in the hands of the market, making it dependent on overall performance rather than concentrating the power to determine promotion and reward with a group of senior partners.

“There’s talk in some parts at the moment of people scaling down and not admitting any new partners. In a partnership if you know your income’s going to be less, you cull the number of partners. We wanted a business that allowed the rhetoric [of supporting lawyers’ careers] to become a bit of reality.”

It is a claim that mirrors the egalitarian way Slater & Gordon believes the organisation approaches the law and business in general.  “What troubles us is the sense that sometimes we are viewed as though the business is all about one small group of people in charge,” Grech says. “We believe one of the strengths of the business is the group we’ve built around us. And if you look, we’ve built considerable wealth for a lot of people.

“Rather than the rhetoric about those things, we’d like people to judge us by what we actually do. The fact is our people are out there every day helping clients, that’s what they do. Whatever people might think of us, there’s no denying that we fill a real need in the community, and the community commitment of our people, I think, is absolutely unparalleled.”

Grech is referring to the class action law for which Slater & Gordon is famous - or infamous - from the watershed 1989 compensation award to miners affected by asbestos in the CSR Wittenoom blue asbestos mine to current cases centering on asset management firm Opes Prime, retail investors Centro and Westpoint Property Group.

With the additional reporting requirements and transparency of a listed company, as well as the capital injection from public investors, Slater & Gordon’s project and class-action workload is likely to ramp up even further.

The public company structure has raised the interest of domestic and international litigation funders, and Grech expects the shareholder class-action market to open up dramatically in the next year.

“They see us as having the competency and the scale now to be able to deliver the results that they need,” he says. “If you’re a litigation funder, one of the things that you’re very focused on is the capacity of those that are engaged by the clients to carry it out. Your investment really hinges on the competency and the capacity of the lawyers that are engaged.”

It will be helped, he believes, by a more receptive environment for class actions in Australia. “Now I think it’s widely recognised that class actions and group actions have a significant role to play as an economical way of redressing people’s legal rights. There’s a lot of hyperbole about about ‘an explosion of litigation’, but more informed commentators agree that grouping claims and sharing legal costs has got to be good for the client.

“I also think they see the private profession and the civil law system as a way of ensuring and essentially providing a significant deterrent for people to ensure that these things don’t happen in the first place.”

This month, Grech is overseeing what will be the company’s eighth acquisition in the past year - Secomb’s Solicitors of Footscray, western Melbourne. It will bring the company’s legal network to 26 locations with more than 500 staff and expertise in areas such as wills, probate, family law and wealth protection. Grech estimates that at any moment, the business is dealing with more than 12,000 individual, active clients.

Having set an original target of $65 million revenue for the 2008 financial year, Slater & Gordon has turned over more than $37 million in the first half and has adjusted its projections. Profits for the first half to December 2007 were almost $7 million.

Grech attributes much of the growth to expansion into regional areas, and an attention to providing commercial legal services to small and medium businesses that Grech believes have previously been priced out of top-tier legal firms.

“One of the things that running cases on a conditional-fee basis teaches you to do is run cases very cost effectively. We’ve been able to transfer those skills into the more traditional fee-for-service areas of commercial litigation and business transactional work.”

On the issue of a possible worsening US sub-prime crisis or credit crunch, Grech is unfazed.
“The stockmarket fluctuations are disconcerting. It would be less than honest for me to say that’s not a concern. But overall we take a long-term view on share price, and it’s just pleasing that the price remains above the listing price, notwithstanding any market volatility.”

The share price currently sits comfortably above the issue price of $1, an exception among newcomers on the ASX. Grech’s explanation is prosaic: “There’s hardly a relationship between the rate at which people get injured on the roads and the economic cycle, or even the rates at which people get injured at work.”

It should also do little to soften the scrutiny that Slater & Gordon’s directors have become so used to, with the market ructions likely to increase opportunities in their commercial law sectors and boost their profile even further.

“In fact, one of the things that attracts investors to our business is that in a way it’s counter-cyclical,” Grech says. “In the business law and commercial litigation area, we’re moving into a period with tightening credit where businesses are going to become distressed, and that tends to create legal problems. It creates a volume of litigation that drives work for firms that provide services in those areas.”

The company intends to continue its expansion. Client referrals from regional areas are growing “exponentially,” and the company that previously earned 98 per cent of revenue in Victoria now earns 40 per cent from other states. It is a strategy it believes will spread risk as most personal injury legislation, in particular, is state-based. There are also plans to corner a larger piece of the $700 million-a-year personal-injury market by providing local legal services.

But don’t expect any change in attitude. “It’s not as though we’re unused to being criticised,” Grech says. “The legal profession has its share of petty enmities. It has been new territory, a listed law firm, but business has been growing across all areas, and our strategy is pretty clear. We’ll continue supporting organic growth.”

SARAH NEILL

The Power of Two

Fast Starters Profile:  TDA Interiors
BRW.  24 April 2008
Page 52

 

A SMALL OFFICE FIT-OUT COMPANY IS WINNING BIG SUCCESS THROUGH THE POWER OF PARTNERSHIPS.

Andrew Holder and James Kemp are used to working in a partnership. The two have been friends for more than 25 years, as travel partners and flatmates, and each was the best man at the other’s wedding. In their latest venture, the pair has built TDA Interiors into a $22 million commercial fit−out business in only two years.

The business provides conventional office fit−outs − requiring internal restructuring, partitioning, air−conditioning, lighting, carpeting, furniture and finishes − but can also act as advisers on building choice, location, budgeting and design.

Holder was a 13−year veteran of the fit−out industry when he left TDA in the United Kingdom for Australia in 2004 with his young family. It coincided with an offer from one of TDA’s founders for £40,000 ($84,578) capital to establish TDA Interiors in Sydney. The first step was to organise for Kemp to make the move to Sydney as co−director.

From there, “it evolved very naturally”, Holder says. “On day one it was me and a cardboard box in a serviced office, then we won our first project with Nokia, then all of a sudden we had six projects on our plate.”

“In that first year we did work that perhaps other people don’t want to do, the messy work of moving an office around rather than having a fresh plate to work from − difficult work.” Paying those dues gave TDA a $7 million turnover in its first year, and a small profit, and one of the jobs led to a breakthrough project: the 84,000−square−metre Optus headquarters in Sydney’s North Ryde.

TDA’s youth was an advantage. “We’d just delivered the Yahoo!7 job successfully with the same project managers, DTZ, but more importantly, we were a small entity compared to the other companies that were competing for the work,” Holder says. “If you give a large project to a company that’s quite small, you’ve got a risk there, but on the flipside, you know that the company is going to give everything to make sure they

deliver.”

TDA has promoted its “fresh” image in the market, with particular success in the media and advertising sectors, wooing clients including Nokia, Virgin Mobile, the Photon Group and Yahoo!7. “In conventional, hard−dollar tendering it’s very difficult to differentiate yourself,” Holder says. “Often the prices are very similar. You need to brand the document and touch the client somehow.”  TDA argued its case with Yahoo!7 through a custom−designed faux website and a submission branded with the company’s signature colours.

With revenue projected to reach $40 million for the 2008 financial year, the next step for TDA is national expansion. A Brisbane office has been established for 18 months and will provide almost $15 million in revenue. The company will open an office in Melbourne later this year, with staff and resources to be shared.

TDA has also signed a two−year deal with travel group Flight Centre to outfit its regional head offices in Australia and New Zealand.  It is the kind of deal that Holder and Kemp aim for, believing relationships with companies that “culturally align” will produce steady and satisfying work, just as relationships with compatible designers lead to their best work.

To manage the continued growth, the two directors have introduced a seven−person group management team from their 35 employees.

“We’ve made mistakes,” says Holder of the past two years. “But we always pay the bill, rather than try to recoup the costs from the client. Bad delivery or bad reputation will ruin you overnight in this business.”

“What we sought to do was bring a real personality to the industry. The businesses here were very stale, weren’t delivering fun, the salesmanship was missing. I think that’s why we’ve grown so quickly.”

6 TDA INTERIORS
Last year: Not ranked
Founders: Andrew Holder, James Kemp
Turnover: $17.65 million

Three secrets of success:

• Maintain a point of difference − TDA nurtures its “fresh” image in the conventionally staid construction field.
• Choose employees carefully, and build a core of key staff to rely on.
• Stick to your word − clients need to trust the quality and delivery times of your work.

SARAH NEILL

Lifecycle: Ground Floor Collaboration

Lifecycle:  Culmination
BRW.  10 April 2008
Page 60

 

TWO INNOVATORS DEVELOP A SELF-SUSTAINING WEB COMMUNITY.

Michelle Gilmore and Christie Coleman, Ground Floor Collaboration
Position: Founders

Milestones:
2006: Ground Floor Gallery opens in Sydney
2007: Development begins for Ground Floor Collaboration site
2007: Ground Floor Collaboration goes live

If your employer resists new ideas, start your own show. That’s what gallery owners Christie Coleman, left, and Michelle Gilmore did when they opened Sydney’s Ground Floor Gallery in 2006.

Their floor space was tiny, and they had to call on friends to help renovate it. But six weeks after signing the lease, they had rounded up 12 local fashion, jewellery and object designers to show and retail their work. 

They were soon inundated with designers, and it quickly became clear that what exhibitors wanted as much as show space was advice on how to run their businesses.

It echoed industrial designer Gilmore’s own frustration. “Early on, I found I was always coming to Christie and asking her for business advice because I’d never learnt that at university,” she says. “I knew how to be a designer, but I had no idea how to write a business plan. Most designers need help to understand business and get some experience.”

 

Gilmore’s idea for coping with the influx was simple: go online with business support for designers. So Ground Floor Gallery became Ground Floor Collaboration, launching in December 2007.  Its first stage was a free online service for creative talents to profile themselves and their skills and for prospective employers to source talent for full−time employment and project work. 

“One of our core goals is commercialising talent,” Coleman, a former operations executive, says. “We are definitely not afraid of money. We actually like it. There’s all this creative talent in Australia, and there are a lot of people providing grants but not a lot of people talking about how to make money.”

 

“In the industrial age there were factories for production and roads to take goods to market,” she says. “So, how do you take creative goods to market? That’s what Ground Floor Collaboration is. We’ve had so much success putting people in contact, we’re growing exponentially.”

Jobs and profiles are being created in all Australian states, as well as Japan, Spain and South America, and the site accommodates public relations and marketing positions as well as graphic, web, software and fashion design.

Gilmore and Coleman estimate that job−searching and networking will ultimately represent only 25 per cent of the site’s capabilities, and they are preparing for the second stage of the Collaboration project.

It will come in June this year when a cluster of “community” open−source projects goes live.  Also planned is the introduction of aggregating software that would allow decentralised freelance designers to work simultaneously on projects, with the fee distribution based on contributions.

The two anticipate that within six months they will act only as technical facilitators for the site, with the new infrastructure creating a community of talent to replace them as business mentors. “We won’t compromise the ideals of the site,” Gilmore says. “But it’s time for us to step back once we’ve built the tools.”

SARAH NEILL

A Model Profession

The Business End, Engineering:  A Model Profession
BRW.  03 April 2008
Page 57

  

THE SHORTAGE OF ENGINEERS IS SO DIRE THAT INDUSTRY BODIES ARE CHASING PRIMARY SCHOOL CHILDREN.

The next crop of engineers with the potential to effectively counteract Australia’s dire skills shortage may not have taken a single high school science class yet.  Engineering bodies are trying to find new ways to engage the next generations of engineering talent − including focusing on primary school students.

“One of the issues for our industry has been the move away from what are seen as the ‘hard’ maths and sciences and towards the humanities over a long period of time,” the chief executive of the Association of Consulting Engineers Australia, Megan Motto, says.

“We’d like to see the whole process of that turned around right from the primary school age. We would suggest that the teaching of maths and science needs to be a little more innovative.”

While university graduate numbers have remained relatively stable over the past decade, the demand for private−sector engineering expertise has continued to rise steadily.  Motto says that increasing the number of engineers working in Australia under section 457 guest−worker visas and the skilled migration program to bridge this gap is a vital short−term priority, but the most important step will be for Australia to lay the foundation to secure higher graduate numbers in the field over the coming decades.

The Re−Engineering Australia Forum is working to hook primary students on engineering. The group already runs the successful F1 in Schools program, where teenage students design carbon dioxide−powered miniature formula one racing cars. Each year’s competition involves 300,000 Australian teenagers and others from

overseas, and lets them use industry−standard engineering software to design their entries.

REA launched Junior F1 this year as an introduction to F1 in Schools, aiming this time at the imagination of primary−level students. Children from the age of five work with Cosmic Blobs, a three−dimensional design program that allows them to manipulate shapes to design formula one vehicles and place them in virtual environments.

In Junior F1, students are able to see and hold their designs. REA invites children to email their designs for the vehicles and returns a scale model manufactured with the REA’s own prototyping equipment. For most it will be a rare first−hand experience of the connection between the digital design process and a finished product.

Motto agrees that this understanding of the practical aspect of engineering is central to attracting children to the industry.  “One of the great benefits of engineering as opposed to most of the other professional services is that you can actually see what you did at the end of the day. You can walk through the door of the building; you can cross over the bridge. It’s a very tangible career.”

The ACEA has already begun its push to demystify engineering as a career to secondary school students, launching the 20−minute Design Your World film on DVD last year to show teenagers what an engineer can produce.  “Most kids know what a doctor is, they know what a lawyer is, they even know what a forensic scientist is,

but they still don’t really know what an engineer is,” Motto says. “It’s a great misconception in schools that engineering is about being down a mineshaft, being a train driver.”

At least one copy of the DVD sits in every secondary school in Australia, but Motto says that to succeed in producing more engineers, this kind of education needs to be complemented by initiatives at the primary school level.

ACEA is also keen to redress the reduction in practical science and maths activities in the average Australian primary school. “Ultimately, we’d like to see more experimental learning to get children enthused,” she says. “We’d even like to see more parental involvement in the teaching of science. The same way you have a reading group once a week, we’d like to see parents come in and assist with supervising the kids in experimental learning.”

Motto sees this as vital, and it will be the central theme of the ACEA’s discussion and lobby work with school and parent groups in the second half of this year. “The number one influencer of subject selection and career choice is still parental,” she says.

Motto is satisfied with the response the program is getting from primary school students, but proof of success is at least five to 10 years away. “The response has been really fabulous, but the real test of the matter will be if it translates to subject selection and whether people are taking more science subjects and then going into engineering at university.”

SARAH NEILL

Lifecycle: Metalicus

Lifecycle:  Stretch
BRW.  6 March 2008
Page 73

 

QUIRKY AND POPULAR FASHION BRAND PLANS OVERSEAS EXPANSION

Melma Hamersfeld, Metalicus
Position:  Founder

Milestones:
1992:  Produces prototype garments in stocking fabric
2000: Adds stretch wool and cotton garments
2004: Melbourne concept store opens
2007:  Brand acquired by PAS Group

Metalicus is a brand built on an unconventional idea:  outerwear made from stocking fabric.  Now the steady growth in popularity and sales of these unusual garments during the past 15 years has attracted private equity investors.

The PAS Group bought the business in November 2007, adding to its existing stable of apparel brands, and 2008 will see the brand taking steps towards faster growth and further international expansons.

Founder and designer Melma Hamersfeld produced the first Metalicus garments in 1992, convinced there was potential in two-way stretch fabric.

“When I put it on I knew it was something I would always want to wear,” she says.  “It would be the first piece that you would put on in the morning and I just knew that long-term, it was going to be an absolute winner.”

The garments’ limited hanger appeal made it essential to nurture relationships with retailers, agents and distributors.  “I knew customers had to be able to see and sear the products,” Hamersfeld says.  “You just have to get one piece on people and then they’re hooked.”

Now the brand sells through five dedicated stores in New South Wales and Victoria.  Its flagship store in Melbourne opened in December 2007 and PAS plans to open another flagship store in each Australian state, and one in London. 

The fashion label produces its signature body-skimming garments in myriad colours in cotton, viscose, wool and meryl microfibre as well as the original “stocking” nylon Bodytight fabric. 

Although the Bodytight fabric can now be manufactured overseas, Metalicus continues to make most product ranges in Australia.

The label works with only two mills on their other fabrics, collaborating closely to create fabrics that meet their designers’ specifications, and in 2007 a dedicated research and development manager was appointed to continue the process.  Designs are garment-dyed post-manufacture to ensure exact tones.

Hamersfeld predicts that the PAS Group acquisition means that the brand’s growth is ready to accelerate.

Metalicus currently sells through more than 400 stores domestically, and more than 200 internationally.  Turnover is increasing by a steady average of 50 per cent annually.  The original Bodytight range sells alongside the Mini Metalicus, Miss Metalicus and Basics ranges.

Metalicus has also signed a new deal with Neiman Marcus in the United States, and new stockists will come on board, particularly in the brand’s primary export markets: Canada, the United Kingdom and the US.

Hamersfeld is content to take on a creative consultant role and directorship as she entrusts the label to the PAS Group, which has already had success with fashion brands including Review and Fiorelli.

“The business is booming and I think it’s the right time to leave,” Hamersfeld says.  “I’ve wanted overseas to embrace and understand it and that’s how I’m leaving it.”

“Why wouldn’t you be happy?”

SARAH NEILL

All in the Firm

The Business End, Business Services:  All in the Firm
BRW.  February 21 2008
Page 57

 

LEGAL PARTNERS MUCT BE PREPARED TO ACT AS MENTORS TO DEVELOP STAFF RELATIONSHIPS AND ENCOURAGE CAREER DEVELOPMENT.

Legal brilliance alone may no longer be a golden ticket to partnership in Australia’s law firms. The role of partner in contemporary law firms now demands a mix of management and mentoring as well as legal practice.

“When I started in the law more than 20 years ago, you were a successful partner if you were able to foster outstanding relationships with clients, and if you were an excellent lawyer,” Freehills managing partner Peter Butler says.  “Those things are still true, but there’s another level now, which is the need to be able to foster and develop relationships with staff.”

This amounts to a big challenge in the well−developed Australian market, where partners already operate at high levels of legal competence and deal with intense competition for clients.

For Freehills, the expanded definition of partnership mirrors a larger shift in organisational culture.  The firm seeks explicitly to foster “outstanding” experiences for staff in the workplace as well as for clients. 

“Staff attrition is one big focus,” Butler says.  “We go to a lot of trouble to recruit people at university level and laterally, and it’s terribly expensive and damaging to the culture of the organisation to lose too many.” 

Partners need to be able to offer graduate recruits and solicitors mentorship in legal specialties and, more generally, to encourage career development both theoretical and practical.  Solicitors shadow partners at client meetings without amassing chargeable hours to strengthen their own relationships with clients and to learn by observation.

Staff attrition rates have fallen by 5 per cent since Freehills launched its vision two years ago.  Greater support at partner level has also altered the pattern of attrition, with fewer staff choosing to leave in their first two years. Those who do depart do so later, most often on a leave of absence to gain experience in law firms overseas for a predetermined time.

Partners with more developed management and leadership skills are able to shoulder higher levels of leverage, especially valuable given the link between increased leverage rates and increased profitability for the firm as a whole.

Butler notes that Freehills operates with four solicitors to each partner, up from about 3.5 in 2006, a rate which doesn’t compromise the time that partners can devote to their practice, solicitors or direct contact with clients.

The new role adds another dimension to the process of partner selection, demanding senior associates display legal excellence as well the ability to relate well to clients and to engage with staff as a coach, teacher or supervisor.

New partners at Freehills are able to develop that natural aptitude in a formalised partner development program, comprising courses focusing on leadership and management skills.  Almost all 218 partners have completed the largest of these: the two−day Chrysalis course explores the role of emotional intelligence as a complement to intellect in promoting success.

For Freehills, the need to source staff with the potential to fill the wider role of partner influences the first rung of the interview process; newly hired staff need to demonstrate the potential to grow into all aspects of partnership.

Butler believes these talents should be nurtured well before a solicitor applies for a graduate position. “I’d love to see more content at a tertiary education level that allowed young lawyers or aspiring lawyers to develop skills in the areas we now know are critical: emotional intelligence, dialogue skills, ability to persuade, interpersonal skills,” he says.

The evolving role of partners in the firm will continue to benefit business, Butler adds.If the plan is fully realised, “I know that from a competitive point of view we will be the best by far. “But, equally important, the culture in this workplace will be outstanding and the demand for that sort of environment can only be a good thing.”

SARAH NEILL

i-D Magazine

Review: i-D Magazine
Two Thousand February 20 2008

February is when i-D puts an issue together just for the boys. This one is packed with menswear editorials from trench coats to pyjamas, and interviews with ‘men’s men’ like actor Javier Bardem and food face Fergus Henderson. Read about clever men making clothes (designers Thom Brown and Simon Neil Barrett) and beautiful men wearing clothes (the new crop of male models), men skating, men taking photographs, men spinning records and men with beards (i-D says they’re back in fashion, duh).

It’s a return to form after a few lackluster issues. And it has a lingerie cover, which kicks it over the bland covers on shelf.

SARAH NEILL 

Published online here. 

Punk House - Interiors in Anarchy

Review: Punk House - Interiors in Anarchy, edited by Thurston Moore
Two Thousand February 15 2008

Sometimes home is just a place to sleep and cook and assemble ikea furniture. Sometimes home is peppered with stacks of fake human skulls, or four wood-lined walls in Oregon named the Fuckpit. 

Timothy Findlen and Abby Banks spent three months driving across the United States staying with any punk who would take them in to see what happens when you close your eyes and take one big step away from the mainstream.

In between drinking forties and playing dodgy bars for gas money they collected a book of interior photos. Opening it is a hilarious, beautiful and disgusting reminder of how much there is in the world (and down the street) you haven’t seen.

SARAH NEILL 

Published online here.

Tech Heads

Fast 100 Profile: Tech Heads
BRW. October 25 - November 28 2007
Pages 70-76

      
     

THE I.T. SECTOR HAS PROVEN TO BE AN ATTRACTIVE PLACE FOR START-UP ENTREPRENEURS.

IT is booming and new and creative business models are flourishing as a result. There are 29 technology and communications companies on the list, including 18 debutants, making it the list’s biggest sector. Many of the IT entrepreneurs on the Fast 100 are on to their second or third business ventures, having sold previous start−ups. They include Distribution Central’s Scott Frew, who sold his first distribution business, Lan Systems, to South African IT giant Datatec for $30 million in 2000, just before the dotcom bubble burst, and Telcoinabox’s Damian Kay, who sold his Your Telecom business to Australian telco Commander Communications last year.

Company: Itcom Australia
Rank: 2 
Founders/chief executive: Graeme Ross, Damien Ross, Gary Lorden
Revenue: $4.80 million
Growth: 280.4%

Graeme Ross was primed for retirement. After a stellar 13−year run operating his own information technology recruitment firm, the 60−year−old had scaled back the company to two−and−a−half staff and was ready to go fishing. In discussion with two young recruitment professionals one day about the inadequacy of contractor management firms, Ross was lured into ramping up again, this time with two young partners to handle the grunt work.

In July 2006, Ross poured $300,000 into new office space and equipment. Had he known how explosive the firm’s growth would be − Itcom hired 13 people in as many months − Ross would have leased bigger premises, more phones and more computers. Six months later, he invested another $150,000 to expand the operation. “Moving during a growth spurt is painful,” he says. “In hindsight, I would have overstated the amount of space so we could grow into it.”

The management trio complement each other. Ross has the networks and kudos to draw the industry’s old hands. The younger partners, his son Damien, aged 33, and Gary Lorden, aged 30, understand what makes the fickle generation Y tick. Ross provides the financial backing and management expertise, while Damien and Gary handle the operational and sales side. “This model wouldn’t have been as effective if the information technology and telecommunications sector wasn’t booming again,” Ross says. “That said, we’re in a very competitive market and you have to differentiate yourself.”

Itcom has a register of about 100 active contractors. Ross says a combination of a global economy and IT being a portable career makes winning and retaining good staff difficult. He is obsessive about accounting details, citing errors with contractors’ pay as the fastest way to unravel a hard−earned reputation.

Overseas expansion is also on Itcom’s radar, in response to growing demand to handle clients’ requests for IT staff across international markets. Ironically, finding staff has become Itcom’s biggest challenge. “We discuss work ethics with potential hires before even broaching the subject of money.” Ross says he would rather slow the growth down than abandon his business values.

Company: Brennan Software
Development Rank: 5
Founder/chief executive: Dave Stevens
Revenue: $1.36 million
Growth: 197.5%

Almost every business faces unexpected hurdles in its start−up and growth stages.  For Brennan Software Development founder Dave Stevens, it was a lack of attention to cash−flow management.

But surviving and learning from early mistakes and adhering to a firm vision have paid handsome dividends for Stevens’ Queensland IT services company, which ranked 5 on this year’s BRW Fast 100, up from 28 last year.  Sister company and internet service provider Brennan Voice & Data also features on the Fast 100 this year, ranked 70.

Brennan Software Development was founded in 1997 with a focus on providing business solutions, rather than hardware and software, to mid−market firms of between five and 50 staff.

While working as a contract software trainer, Stevens sensed that medium−size clients were being overlooked by large service providers and were dissatisfied with the level of service that smaller firms provided. “I knew there was a huge untapped market out there,” Stevens says. “There was a screaming need.”

“We’re driven by what the market tells us in terms of what we offer, but we’re also a mid−market company,” Stevens says. “We’re growing fast and, as we discover new requirements for ourselves, we design solutions for our clients and then roll them out.”

While organic growth remains a high priority, more strategic acquisitions are also planned for the next 12 months, bringing in new geographical coverage, products and capabilities to the group. In early October, Brennan bought Queensland telephony service TSA Communications. The acquisition will lift the group’s annual turnover by $5 million and add another 1000 customers.

“We’re more focused now on being a healthy business with a single vision,” he says. “We were already successful, but for me that was just the tip of the iceberg. There’s still so much more to do.”

Company: Paycorp
Rank: 6 
Founder/chief executive: Adrian Roche
Revenue: $5.41 million
Growth: 185.2%

As managing director of Paycorp, Adrian Roche heads up a business providing a combination of electronic payment processing, billing and business continuity services, and dealing with more than $6.5 billion worth of payments a year. Achieving that growth in only six years was made possible by Roche’s belief from the outset that his business needed to be prepared for anything.

With no technology experience but a background in financial services and capital markets, Roche was uncertain about the potential challenges facing a start−up in information technology, particularly for a mid−size company with designs on big business and financial institutions. “My vision has always been to operate like a large publicly listed company. My experience in management gave me the foresight to say that we needed to be ready for anything and we need to have all the right systems and processes in place,” including ISO:9001 accreditation (which specifies how to implement quality management systems that meet regulatory or customer standards).

In 2001, Paycorp released its first product, RentPay.com.au, an electronic payment system for real estate agents and tenants. Paycorp chose to license the software platform needed to support the web portal, to draw on more experienced software developers’ skills and avoid losing valuable time and funding developing in−house.

The product needed to be adaptable to new industry applications as they were identified and new markets opened up. “I had seen the mistakes that others had made building complex software applications for one industry vertical, but not being able to apply it across a number of industries,” Roche says. “My objective was to start with the RentPay product, but I also believed there had to be other circumstances where we could apply this kind of solution.”

Paycorp now employs 25 full−time staff and 50 contractors. The business model first tested with RentPay, using the core software platform as a payment hub supporting a customised application or web portal to suit the client, has been used to create products for the travel, education, telecommunications and banking sectors. The multi−currency application GlobalPay was born from collaboration with international travel company Travelex, and StudentPay was created to meet the needs of education providers.

Roche expects Paycorp to continue growing quickly and exponentially. Key management staff bought out the original investors in 2006 to ensure that the business was free to concentrate on developing new products and new markets, rather than growing towards an exit strategy. Paycorp also rebranded in 2005 to reflect the range of services offered more accurately; RentPay.com.au still supports tens of thousands of clients, but is dwarfed by the more invisible services Paycorp provides to corporate clients. Maintaining that brand will always be critical in the payments industry.

Roche looks forward to Paycorp maintaining its rate of growth and becoming the dominant electronic payment−processing provider in Australasia in the next three years. “We’ve been in the industry for so long, people trust us. They know the discipline and the professionalism that we apply to what we do.”

Company: Telcoinabox
Rank: 7 
Founders/chief executive: Damian Kay, Morgan Duncan, Damien Gould
Revenue: $20.10 million
Growth: 183.2%

That the complex world of telecommunications would one day be simplified and compressed into a franchise model is almost unthinkable. Yet that is precisely what Telcoinabox has done.

The three−year−old wholesaler is marketing itself alongside Bakers Delight and Pets Paradise to prospective franchisees as a high−margin option for people who are good at sales and know zilch about telecommunications. “Our average margin [on sales] is 35 per cent at the moment,” founder Damian Kay says. “We could see margin erosion of 33 per cent in this business and still make a profit.”

Telcoinabox has about 20 different suppliers from which it buys everything from office phones to call time for mobile and landlines, broadband access and wireless data cards. Franchisees buy in for $50,000, which gets them training, products, a billing and customer management system, credit facilities (such as BPay and Visa), a laptop, and an MYOB accounting package with ready−made templates.

“All franchisees have to do is get customers, keep the customers and collect the money,” Kay says. “We shield them from all the industry crap and take a clip on everything they sell.”  Telcoinabox gets a fee on all the facilities franchisees use. It pays Westpac bank 0.87 per cent for the use of its credit facility, for example, and sells it to franchisees for 1.6 per cent.

It also charges them a 2.5 per cent fee for using its million−dollar computerised billing system. The company has 80 franchisees operating around the country, none of which operate under the Telcoinabox brand. Some are particularly successful at mining niches, such as pubs and clubs, or charities.  Recruiting quality franchisees is not easy. “We make no apologies for the rigorous process we put potential franchisees through, as poor performers end up costing us money in the long run,” Kay says.

Telcoinabox itself has grown to 40 staff. In February last year, the wholesaler started offering its range to experienced service providers in the telecom market. This proved a hit and the division now accounts for 30 per cent of revenue.  Kay is mildly concerned about copycats, but says Telcoinabox has acquired a number of rivals over the past two years, in an effort to eliminate competition and achieve scale. He believes it has a big enough head start to deter challengers.

After two years of long working days, Kay and fellow Telcoinabox founders Morgan Duncan and Damien Gould have a new challenge: handing the day−to−day operations to a senior management team so they can assume a strategic advisory role. “We’ve seen a number of businesses fail in this process, so we are mentoring our chosen managers over a 12−month period to take over day−to−day control of the business.”

Company: Distribution Central
Rank: 8
Founder/chief executive: Scott Frew
Revenue: $28.53 million
Growth: 169.0%

Scott Frew and his crew are at it again. In 2000, Frew sold his computer distribution business, Lan Systems, for $30 million to South African giant Datatec.

In addition to Frew fattening his wallet, Lan Systems’ senior management team also held equity in the business and made money from the sale. Frew took off to Europe, sat on a few company boards, and has now stormed back into the Australian IT distribution game, flanked by his former lieutenants, to set up Distribution Central.

But IT distribution has changed. It used to be about one of two things: time−and−place delivery or value−added services. Time−and−place is a game of logistics − having the right amount, of the right product, in the right place, at the right time.

Value−added service requires a degree of higher brain function. It includes, for example, steering customers through 100 variants of Microsoft software licences towards the best one. Excelling at one of these models is not enough any more, Frew says. “Technology is so complex these days you have to do both. For the average Joe on the street, technology is easier to use, but getting it to that point is much more complex [for the integrators building the systems].”

Distribution Central picked three areas of computing to specialise in: security, storage and networks. In three years, it has grown to 40 staff and signed 18 suppliers, of which 85 per cent hold exclusive distribution agreements with Distribution Central. Marketing director Nick Verykios says a big−name manufacturer is primed to sign an exclusive arrangement that will double Distribution Central’s income.

The company also plans to branch into software distribution and Frew is toying with the idea of a public listing. Frew describes his staff as “the only differentiator you have”. Having learnt his lesson at Lan Systems, Frew has given all senior managers 10 per cent equity in the company. He’s also out shopping for eight new recruits.  

AGNES KING AND SARAH NEILL.