Is now the time to invest in your business and get ahead of the market?

Paul Lewis
Private Clients Partner

Master of Business event
Hosted by Paul Lewis, PwC Private Clients Partner, "Is now the time to invest in your business and get ahead of the market?" asked three leading private business owners how they created growth through bold investments.

Facilitated by Amanda Gome, CEO and Founder, Smart Company, the Master of Business panel included:
  • Ian Robinson, CEO and Founder, Beacon Lighting
  • Bede Noonan, Director, Geotech Group
  • David Lundberg, Managing Director, Altus Traffic Management.
The Master of Business Series was created for private companies to hear from experts who understand the unique challenges and opportunities they face. Our research and our dealings with clients are telling us that now is the time to prioritise investment strategy.

Whilst growth can be achieved organically, a successful growth strategy involves well planned and executed investment - whether it be in capital, people, domestic or international distribution and expansion or acquisitions. Investment options can be a risk and at times it's easier to put them on hold.

Host Paul Lewis, PwC Private Clients Partner, highlighted a number of key findings from the latest PwC Private Business Barometer Pulse that indicate now is the right time for successful investment:
  • Entrepreneurs reported growth - perhaps not at the same level as pre-GFC levels, but certainly an improvement on GFC times - and were expecting that growth to continue
  • Balance sheets are healthy; working capital is in good shape and gearing is as low as it's ever been
  • Around 80 per cent of businesses surveyed reported that they had access to funding if it was required.
So why, then, did 68 per cent of respondents to the Barometer Pulse have no investments planned over the next 12 months, the lowest number of planned investments recorded since the survey was launched six years ago? Because business confidence - particularly in the economy - is low.

We posed a number of questions to the panel investigating how they grew their businesses to a position of competitive advantage by going against the grain - investing strongly and continuously.

How do you know when to expand, or move forward with a project?

David Lundberg, Managing Director, Altus Traffic Management: "We are highly competitive and back ourselves to go harder at the ball on servicing our customers. Growth is in our DNA, we wanted to be a national player from day one, and we'll search out competitors who are weak on service and hit them hard. Price may offer some suppliers a short term win, but we know that ultimately its service that keeps clients coming back to ALTUS".

Bede Noonan, Director, Geotech Group: "Bigger projects are our natural organic ability to grow… it's been challenging getting into that environment, getting recognised and getting clients to take you seriously. But it's a far quicker and cheaper way than acquisitions with significantly less capital required to move into those larger projects, but you get the risk that comes along with that. It's about managing it."

Ian Robinson, CEO and Founder, Beacon Lighting: "You've got to be positioned to take a crunch in sales and a crunch in profitability and make sure you're strong on cash. You've got to invest in the future all the time; our marketing fund is six per cent of our sales and there's no way in the world we'd stop investing that, regardless of how difficult the economy was. If times are tough it's certainly the right time to get market share."

Private equity… Bringing more than money to the table?

Bede Noonan, Director, Geotech Group: "Private equity forces you to think beyond your own personal position and regard the company independent of yourself. It was certainly an important psychological step we took…helping us view [our personal investment] in the business as a third party investment."

How did you fund the growth of your business?

Ian Robinson, CEO and Founder, Beacon Lighting: "Through retained earnings and making sure we have adequate banking facilities to have sufficient cash. I think the real secret is to make good profits… if you're going for growth it hurts your profit, so you've got to balance growth with profitability. If next year's profits are going to be less than the previous year, don't do it. You've got to continue to grow the profits and then you can afford to continue to expand."

When is the best time to expand into overseas markets?

David Lundberg, Managing Director, Altus Traffic Management: "We thought we needed some additional knowledge and ideas for Australia to ensure we didn't top out in this market. So we organised a fact finding mission to the USA with the idea of bringing back something new in traffic management or risk control. However, we found an even less sophisticated model over there, so decided to have a crack at that market too.

"The USA was a case of bite off more than you can chew and then chew like crazy. We were earning great margins so it made sense to invest there. However, getting external funding was next to impossible so we self funded. This stretched the Australian operation because we diverted funds which would otherwise have been invested here. It was a substantial risk, especially when the US market got really tough, but now it's looking very juicy indeed!"

What advice would you offer businesses considering investments over the next 12 months?

Ian Robinson, CEO and Founder, Beacon Lighting: "There's great opportunities here, you just have to be aware that the Australian dollar is really putting a handbrake on the economy. That's probably why so many businesses are looking outside Australia for opportunities - those markets will turn."

David Lundberg, Managing Director, Altus Traffic Management: "If someone asked me where to invest as an entrepreneur now, I'd push into infrastructure, recruitment and technology - align yourself with these segments and then go for it. For infrastructure in particular, there's never been a better time to invest".