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Do you know of Purplebricks? If you have been in the market for a house or looking to sell a house, you might have encountered Purplebricks Australia—the Australian arm of the British real estate startup.

In this video, I discuss one of Britain’s business success stories: Purplebricks. More particularly, I share with you reasons why it could not replicate its success in Britain.

What is Purplebricks?

Purplebricks is a real estate agency that has a different model of selling homes; it claimed to be a disruptor in the United Kingdom real estate market. Launched in 2014, the online agency set out to disrupt the real estate market by implementing a fixed-fee structure, rather than commission, to make the process of buying and selling real estate more transparent and cost-effective.

Purplebricks rode on its successes in the UK and launched in Australia in September 2016. It promised to save Australians an average of $11,500 under this new model. However, in May 2019, it announced that it was quitting the Australian market, two and half years after entering it with a promise to shake things up.

Why didn’t it work out in Australia?

A press release from the company claimed that market conditions in the Australian real estate market have become increasingly challenging. But some real estate experts believe that problems began even before the real estate market became a challenge.

Purplebricks spent more on marketing than they made in revenue. They spent about AU$20 million to create buzz and attract the market in the hopes of growing the company rapidly. It is difficult to sustain this kind of spending.

They put most of their marketing spend on expensive TV ads instead of focusing their efforts on targeted digital marketing. Not everybody who watches TV will be selling their property at that point in time. Not only is this expensive, but it is also wasteful given their budget and the geographical reach that the company was trying to achieve. Digital marketing, on the other hand, could be executed with specific targets in mind—those who are looking to sell their property or to buy one. And when used properly, digital marketing can be effective in nurturing customers.

In my video, Small business, big problems, I discuss why managing cash flow effectively is important for any business.

They didn’t nurture customer relationships. When you spend AU$20 million in marketing, you should at least aim to nurture long-term relationships with your customers—potential, current, or past. But customers felt that their relationship with Purplebricks remained purely transactional.

They didn’t provide value to customers. Property sellers were required to pay the full fee whether their property sold or not, which left no incentive for Purplebricks agents to sell the properties. The fixed fee model typically works in booming seller's markets, when buyers would gladly snap up whatever is available. But when the market slows down, agents will tend to prioritise properties that they can immediately sell because each property owner pays a fixed fee.

They didn’t listen to their front lines. Purplebricks did not want to change the model to suit the Australian market. There is a difference in the markets. For example, most UK home sellers would gladly handle their own open homes. In Australia, home sellers expect that agents will do this for them. Purplebricks was not transparent about charging property sellers for doing open homes, which surprised many. Their agents communicated this with the company, but the company refused to budge until October 2018, when it became too late for any changes to save the failing company.

The business model itself seems to be the issue. In the outset, a supposedly low-cost, fixed-fee model seems to benefit the customer—AU$11,500 in savings is very substantial. But it only makes sense if the customer gets the service it promises—in this case, if the property gets sold. But it turns out, paying the fixed fee does not guarantee that the property gets sold. The fixed-fee model also does not provide the traditional incentive model that spurs agents to push to sell a property. In the end, it feels as if Purplebricks is the only one gaining from this because it receives a fee whether the property gets sold or not.

What lessons can be learned?

What happened to Purplebricks Australia is similar to what happened to Bunnings UK. In my video, The Bunnings Lesson – What we can learn from it, I discuss how business arrogance can lead to costly mistakes. Business arrogance is when you think that what happens to other businesses could not possibly happen to yours. In reality, it can. It happened to Bunnings. It happened to Purplebricks.

Understand the market. In the case of Purplebricks, failing to address customer concerns despite being raised by the front lines proved to be disastrous for the company. Just because it works in the UK does not guarantee that the model will work in Australia. A product or service is only as successful as its effectivity in solving a problem. Australian property owners face different problems and issues compared to their counterparts in the UK.

The goal should have been to develop a product that suited the needs of the Australian market. In this case, Australian property owners put a lot of value in open houses that are organised by agents. It makes sense to build a model that accommodates this.

Another way it could have prevented this pitfall was to inform or educate customers about services that the fixed fee didn’t include. This is important when you introduce a low-cost model. Customers need to know in advance which features and functions will be pared down and which ones you will be offering.

Customer expectations matter. And when you choose which features to take out or offer as a paid feature, you still need to take into account what the customer values. Again, it boils down to understanding what the market needs, what it wants, and what it values.

Rationalise spending. It is unwise to spend more than what you make. And when you spend on something, make sure that you make the most out of it. Make every dollar in marketing spend work—and it works best when you work to develop a relationship with your customers. This starts when you make an effort in solving their problems.

As a new player, the odds are already stacked against Purplebricks. They are already at a disadvantage at having to educate the market about their service. And because they operated a fixed-fee model, Purplebricks does not have the same revenue-generating capacity as their competitors operating on the traditional commissions-based model. To overcome these disadvantages, they needed to attract market share immediately. To do so, they needed to make huge investments in marketing resources. Unfortunately, they didn’t maximise their marketing spending and focused on mass market channels such as TV ads. They were too focused on generating awareness that they didn’t prioritise nurturing customer relationships.

So what could Purplebricks have done differently? They were correct in focusing on marketing and educating their market. But they could have done so more systematically. They could have targeted their marketing dollars in digital marketing or utilised unconventional marketing practices that their competition weren’t fully utilising. Most importantly, listening to people working in the front lines from the start could’ve prevented some of the problems that they encountered.

I’m sure Purplebricks entered the Australian market expecting to make a profit and did not expect to make mistakes discussed above. However, no business has ever expected to make such fundamental mistakes—and it doesn’t mean that business won’t make them. Just make sure that you don’t.

If you are interested to know more about what a business has to go through when facing exponential growth, you can download the first chapter of the book, ”$20K to $20 Million in 2 Years” absolutely free here. The chapter talks about the differences between a good and a great business and puts out questions that make you consider how you can turn your business from good to great.

Read more >

Small businesses can do big things. In this new series of videos, we will look into small businesses in Australia—their humble beginnings, their growth story, and the lessons that we can learn from them.

Today, we will look into the story of Whole Kids, a family-owned organic snack small business based in Melbourne.

Their story

Whole Kids launched their first organic snack range in 2005 in response to a gap in the market. The couple, Monica and James Meldrum, who at that time were not yet parents, could not find delicious and healthy snacks to buy for their nieces and nephews. They found that the range of “healthy” snacks available in the market at that time were not necessarily healthy—they thought many of them were filled with potentially harmful preservatives and were poor in nutrients.

They decided to create their own range of snacks that focused on nutrition and also making sure that they were free from common allergens. The Meldrums spoke to organic growers in Australia and worked with a dietitian at the Royal Children’s to understand what some allergies were.

They also decided early on about what kind of business they were going to set up. They wanted a business that focused on healthy products, on having an impact in the community, and on sustaining a small, family-run business that is fun, friendly, and fulfilling.

In the beginning, the Meldrums worked more intuitively. As the business expanded, the couple wanted to articulate their purpose and values in a statement, and so they engaged a consultant to help them formalise their statement.

Their values and purpose reflect on how they recruit talent and how they source suppliers. They recruit and source based on how they fit with their values and align with their purpose. This, in turn, helped them focus on what they are best at, which is product development and marketing. By working with competent employees and by outsourcing work to suppliers who share their values, they are able to keep their operations small, nimble and family-run—the kind of business they set out to build and nurture.

Today, after using AU$100,000 in savings meant for a deposit on a house, Whole Kids is Australia’s largest certified organic snacks manufacturer for children with an estimated annual turnover of at least AU$6 million. It exports to the Middle East, South East Asia, and most recently, China.

Monica Meldrum is considered as one of the country’s most influential female entrepreneur. And yet they still consider themselves a small, family-run business competing with large, multinational corporations. To date, they supply large orders of kid snacks to large airlines, such as Jetstar and Qantas.

What we can learn

Their business model—that is, small operations catering to large corporations—presents unique challenges, which I think that small business owners, such as you, would be able to relate to and even appreciate.

Here are three lessons that the Meldrums share about running Whole Kids:

(1) Be honest with your customers

Any business will run into supply issues—but because Whole Kids work with organic and seasonal ingredients, ensuring a stable supply of raw ingredients makes it even more challenging.

Whole Kids work with fresh natural and organic ingredients, taking into account not just overall nutrition but also common allergens. Some items are seasonal and some items need to pass certain standards—so they can run into supply challenges. This means that they may not always supply the same product in every flight or that they can deliver large batches of particular product units all the time.

What do Whole Kids do? They communicate closely with their clients.

With any supply issues you think you may run into, give your customers a heads-up – it’s much easier to work through that than be caught out last-minute.”

(2) Do the research

When launching a business, especially one that tries to cater to gaps in the market, it is important to understand what the market truly wants in order to create and supply the right product or service. In the case of Whole Kids, the founders spent a lot of time and effort in understanding not just their market, but also ingredients and processes that may affect their product offerings.

Because I spent two to three years researching the market, I understood what ingredients were available and what product gaps there were. It enabled me to launch the product and minimise the risk.”

 (3) Focus on what you are good at and delegate the rest

The founders of Whole Kids are parents to a young family. The operations of Whole Kids remain family-owned and small. In the early stages of the business, their impressive growth stretched them out too thinly. So the couple decided to focus on their core competencies, product development and marketing, and to delegate to other people who specialised in warehousing and distribution.

We immediately thought we needed a warehouse and needed a good distributor and took that on ourselves but it stretched us really thin. We realised there were other businesses that could oversee that side of the operation better than we could. At the five-year mark, we realised we could do things smarter so we could focus on the marketing and the products and leave distribution to someone else."

One other notable thing that Whole Kids focuses on is their vision. They are an example of a small, family-owned business that has a clear vision of what they want to be, what they want to do, and where they want to go—and one that keeps to that vision to drive their growth.

If you are interested to know more about what a business has to go through when facing exponential growth, you can download the first chapter of the book, ”$20K to $20 Million in 2 Years” absolutely free here. The chapter talks about the differences between a good and a great business and puts out questions that make you consider how you can turn your business from good to great.

Read more >

Small businesses can do big things. In this new series of videos, I would like to explore success stories of small businesses in Australia and what we can learn from them.

In this video, I share with you the story of Over The Moo ice cream.

The backstory

Over The Moo is a dairy-free ice cream business and the brainchild of entrepreneur Alex Houseman. Houseman created his business out of his own personal need. He loves ice cream but is sadly lactose intolerant. While dairy-free ice cream is available in the market, he felt that there wasn’t any product that could deliver indulgent and delicious flavor at an affordable price. This led him to develop his own dairy-free ice cream made from coconut milk.

Over The Moo is Houseman’s first business. He quickly recognised that he needed money, advice, and exposure to make it a success. He decided to seek funding in Australia’s version of Shark Tank. In the show, he received three offers but eventually walked away without a deal.

One of the concerns of the judges in Shark Tank during the Over The Moo pitch was that Houseman had not yet trademarked his recipe. Seeing the wisdom in the judges’ advice about owning his ice cream recipe, he immediately worked on fixing this intellectual property issue after the filming wrapped.

However, Houseman’s main concern with the judges’ offers were that they were lower than what he was willing to accept. It was unfortunate that the show was filmed before Over The Moo began appearing on Woolworths’ shelves. Since the judges didn’t take into consideration this particularly important business milestone, their valuation for Over The Moo was lower than Houseman’s own valuation for his business.

As of 2018, Over The Moo was available in 2200 stores, that include Cole’s, Woolworths, and IGA supermarkets. Despite a wide distribution, it maintains a lean business model of just three full-time staff.

What we can learn

1. Hard work and strategic planning pays

Houseman is a former marketing consultant, but it proved to be a difficult sell in the beginning. Houseman approached every supermarket and tried hard to convince them to carry his brand on their shelves. He started with independent supermarkets and eventually made strides toward large chains. His hard work, strategy, and very good ice cream proved to be a recipe for his current success.

Houseman said in an interview, “As I have learnt, a successful business is only one per cent good idea, and 99 per cent hard work and commitment.” This rings true for any business, but moreso for a business operating in a very competitive industry.

The ice cream business in Australia is a AU$1.1 billion industry dominated by major players such as Unilever and Baskin-Robbins. While Over The Moo is considered vegan ice cream, Houseman does not consider it as a health product as it contains the same amount of fat and sugar as a Ben and Jerry’s ice cream. This is to deliver the same indulgent flavor as regular ice cream to those with special dietary needs. Its product caters to a very specific niche: those who are lactose-intolerant or who follow a plant-based diet looking for a sweet, indulgent treat.

2. Check your cash flow

After Shark Tank, Over The Moo earned a gross profit of $1 million, but its net profit was zero. Houseman’s initial spending went to growing and expanding distribution.

Houseman confessed that he was lax with cash flow in the beginning. When he felt that this became an issue, he sought advice from other people and created an advisory board. He also took short courses on financial management. His efforts paid off.

Houseman consistenly advises having a tight watch on cash flow in his interviews. He says of his early experience with the business,

“I wish I’d known earlier how to forecast cash flow better. It’s terrible when you put all that effort into growing and promoting the business, then don’t have the cash flow to keep up.”

“At our worst, we had literally $45 in our bank account. All the while we have thousands of dollars in wages and product expenses every month. Being able to balance growth versus cash in the bank is the most important thing I have learnt regarding starting Over The Moo.'”

In my video, Allow Sales to Trump Everything, I share why cash flow management is important and how a fast growing business experiencing record sales could get into trouble if it does not manage its cash flow problems.

3. Fine-tune your product, and make sure you own it

It took Houseman 4 to 5 months of research and product development to get his ice cream recipe right. But despite doing all of the work developing the recipe, he initially shared the intellectual property of the recipes with the manufacturer he worked with. After failing to get a deal on the show and seeing that the ambiguity in the IP could become a costly issue, he immediately took the necessary steps to ensure that he had full ownership of his ice cream.

Houseman also knew how much his business was worth in his mind.  He was willing to listen to other people (i.e the Judges in Shark Tank) and was able to make an educated decision on the business value and decided not to take up their offer.  He probably knew that his product was going to go into the shelves of the major supermarkets, but could not yet reveal it to the judges at that time due to confidentiality issues.

Having said that, I have also met business owners who have inflated values of their business that were not based on market valuations. You need to be aware about the difference between your valuation of the business and how the market values your product—and you need to learn how NOT to get emotional in the process.

If you are interested to know more about what a business has to go through when facing exponential growth, you can download the first chapter of the book, ”$20K to $20 Million in 2 Years” absolutely free here. The chapter talks about the differences between a good and a great business and puts out questions that make you consider how you can turn your business from good to great.

Read more >

Small businesses can do big things. In this new series of videos, we will look into small businesses in Australia—their humble beginnings, their growth story, and the lessons that we can learn from them.

Today, we will look into the story of Mountain Bikes Direct and it’s unique business model that allows employees to work while pursuing their shared passion for mountain biking.

Their story

Mountain Bikes Direct is an Australian-based online business selling mountain bikes and related products, such as parts, accessories, and clothing. It considers itself as a pure play company or a company focusing merely on a specific niche—in this case, products related to mountain bikes.

However, while this 8-year-old small business caters to a specific niche in the sporting goods market, it turned over AU$10 million in annual revenue in 2018.

This is impressive considering that this online-only company operates with only 14 employees—4 of which were only added in the last year. They pride themselves with their topnotch customer service. They are not only able to supply the largest range of mountain bike parts, clothing, and accessories in Australia, but they also provide expert knowledge to their customers.

If that’s not impressive enough, consider this little tidbit: this small team rarely even sees each other. That’s because Mountain Bikes Direct does not have a central hub or office—they all work remotely, but communicate and collaborate regularly through platforms like Slack and Asana. The team resides all over Australia: the Gold Coast, the Sunshine Coast, Brisbane, Melbourne, Mount Beauty, Canberra, and even Colorado, USA.

Every single member of the Mountain Bikes Direct team is a mountain bike expert who continues to passionately pursue their love for mountain biking, thanks to their unique culture and work set-up. They are all required to be online and at work at a pre-determined set of hours—but beyond these hours, team members are free to pursue their hobbies and interests. They are not even required to respond to queries sent outside of their work hours.

Each team member works remotely from home and provides customer support through chat. And because they are scattered all over Australia and with one team member based out in Colorado, the team is able to provide almost round-the-clock customer service support.

What we can learn

  1. Build a business model that supports your business and life goals.

Before setting up Mountain Bikes Direct, the four founders owned and ran a brick-and-mortar mountain bike shop. They realised the limitations and challenges of operating a physical store, and so they decided to sell the physical store and focus their attention online.

While an e-commerce business provided a different set of problems and challenges, they felt that this business model allowed them to pursue their business and personal goals. For example, being a purely online store meant that they could provide a wider range of parts to customers because they do not face the challenges of keeping inventory in a limited space of a physical store.

They also don’t need to deal with overhead costs associated with running a business in a physical space. This is certainly an advantage particularly because the cycling retail industry is a highly competitive industry, as large international competitors are increasingly slashing retail prices to earn market share.

The other obvious advantage of going online-only is that it eliminated the time restrictions of running a physical store. They didn’t need to show up in a bike shop day-in, day-out to run the operations during store hours—or stay after hours to check inventory and do back office operations. They instead used the time to pursue their hobbies and passions, and it provided them with more time to be with their family.

Jen Geale, one of the co-founders, said, “Over time we realised that we wanted to focus on e-commerce for reasons both business and personal, so Michael and I took the lead on creating a new brand, Mountain Bikes Direct, that was online-only.”

  • Provide the right infrastructure to support your business model

One of the challenges of having an online-only business is the lack of face-to-face interaction with customers. In the early days of their operations, people would call their hotline just to see if there were people behind the website and to check whether they were a legitimate operation. The team quickly realised that the best way to handle these issues was through better communication.

They re-designed the website to include many trust signals and answers to frequently asked questions. They eventually took out their hotline and replaced it with live chat that allowed the team to provide a personalised and real-time response to customer queries. Best of all, they are able to serve more customers. And thanks to the different locations of their team members, there is always someone you can have a live chat with at the Mountain Bikes Direct website 17 hours a day, 7 days a week.

Geale strongly believes that their structure truly supports the business goals they are trying to achieve. She says, “Being online-only means we can offer a more comprehensive service time-wise. We can help more customers. We can help customers simultaneously. We can provide expertise between six a.m. and eleven p.m. seven nights a week.

  • Hire based on goals, and keep them motivated

To make sure that they could grow the business sustainably, the founders realised that this meant they had to build a lean team of mountain bike experts who are passionate about nurturing a mountain bike community. This means that anyone working with Mountain Bikes Direct, including its founders, should have the time to pursue their shared passion, which is exploring the great outdoors on their mountain bikes.

How can you remain an expert in mountain biking if you don’t pursue a mountain biking lifestyle? It only made sense to create and nurture a team that works in a flexible environment: a team that “gets to work hours that suit their lives.”

This unique working environment is responsible for a staff retention rate of 100% in the last couple of years. Because Mountain Bikes Direct provides a flexible working arrangement with clear guidelines on what is expected of them, team members are motivated to work.

In my video, How to motivate employees the right way, I shared how providing employees with a reasonable amount of autonomy can lead to highly motivated employees. As team members are able to pursue their passion for mountain bikes, team members are able to provide expert advice to their customers. This creates a virtuous cycle that benefits customers, motivates employees, and enables the growth of Mountain Bikes Direct.

If you are interested to know more about what a business has to go through when facing exponential growth, you can download the first chapter of the book, ”$20K to $20 Million in 2 Years” absolutely free here. The chapter talks about the differences between a good and a great business and puts out questions that make you consider how you can turn your business from good to great.

Read more >

Small businesses can do big things. In this new series of videos, we will look into small businesses in Australia—their humble beginnings, their growth story, and the lessons that we can learn from them.

Today, we will look into the story of Billie Goat Soap and its founder, Leanne Faulkner.

Their story

Leanne Faulkner, whose youngest son was born with eczema, is the creator and founder of Billie Goat Soap. Her young son used steroids to treat eczema, and she was concerned about the effects of long-term steroid use. This led her to do research on how to naturally treat and manage eczema.

Faulkner described herself as a frustrated farmer—her family owned a few acres of land and had dairy goats in the property. She researched about the benefits of goat’s milk in treating eczema, learned how to make soap from goat’s milk and natural oils, and used her homemade soaps on her son. Seeing the results on her son spurred her to start her goats milk soap company in 2005.

Faulkner used her communication and selling skills to bring the first batches of Billie Goat Soap into the market. She was very strategic on who, when, and how to approach about her product. She started introducing her products to health food stores, then farmers markets, then retail and gift stores, and finally to department stores.

Faulkner worked in organisational development and employee training prior to starting her company, and she used her background to grow her sales team. As a small company, she didn’t have the resources to put a sales consultant in every store. Instead, she trained the sales personnel in the retail stores that carried her product. She built strong relations with these sales people, even going so far as sending a bouquet of edible blooms in every counter with a personal card attached.

By working and leveraging on available resources, Billie Goat Soap grew and sold across Australia. It also successfully expanded its product line to include balms, skin care, and even a baby care line. At its peak, Billie Goat Soap turned over AU$2.4 million annually.

Unfortunately, a stress-fueled breakdown brought by a retail slump and the demands of running a small business led Faulkner to step down from her post and sell her company to The Heat Group in 2012. Today, Faulkner advocates for moremental health resources to support small business owners.

What can we learn

Not all small businesses have a happy ending, but there are lessons that we can learn from Billie Goat Soap’s story.

(1) Forecast what is needed to grow

Faulkner advices small business owners to plan appropriately for growth—specifically, having the right amount of funding to drive business development and expansion. While funding is important, I think the example of Billie Goat Soap also shows that having the right skills, such as management and leadership skills, is also very crucial.

And so, when we plan for growth, we need to also consider the resources needed to grow. In my video, When does your business benefit from seeking professional advice? (link forthcoming—not yet published), I share advice from Howard Schultz, the founder of Starbucks, who believes that planning to grow entails planning to hire or work with people who have the skill base and experience that matches your growth objectives.

(2) Communicate to your employees, to your customers, and to your suppliers

Clear communication helps to ensure that anyone connected to the business knows what the goals are and understands how the business aims to achieve them.”

Build a relationship with the people you work with. In Faulkner’s case, she took the effort to build strong relationships with the sales people working in the retail stores who played a major part in growing the revenue of the company.

How can you continue to build strong relationships with your employees, your customers, and your suppliers?

(3) Look after yourself

Faulkner is an advocate of mental health. She has been vocal about her stress and anxiety—and how this affected her mental health in 2011.

In my video, Overcoming Entrepreneurial Exhaustion, I discuss three things that entrepreneurs and business owners can do to overcome exhaustion. That said, mental health is a medical issue. Whilst we expect to look out for and manage stress that comes with operating a business, bringing consultants and expending your team can help in many areas. But there are instances when stress starts to change who you are.

If you feel that the stress of running a business is getting to you, please seek help from a professional because they are trained to listen unconditionally and provide much needed intervention.

If you are interested to know more about what a business has to go through when facing exponential growth, you can download the first chapter of the book, ”$20K to $20 Million in 2 Years” absolutely free here. The chapter talks about the differences between a good and a great business and puts out questions that make you consider how you can turn your business from good to great.

Read more >