How to Save Yourself From a Business System Hairball

Mark Pesce:

“Good afternoon everyone. Welcome. My name is Mark Pesce. I’m a futurist, author, educator, and I’m the host of the next billion seconds podcast. 

“Welcome to how to save yourself from a business system hairball brought to you by Dynamic Business in partnership with Oracle, NetSuite.

“I’ll be your host over the next sort of 40 or so minutes as we explore this topic in two fireside chats. First, we’ll have a yarn with Mark Kelly, CEO of global surf industries. 

“After 20 years in the business, Mark was asking whether he’d made his life better for himself or any of his employees. And that question led to a surprising answer. We’ll hear more about that soon. 

“And after Mark Kelly, we’ll be joined by Robert Pizzie, CEO of easy living home elevators.  We’ll hear about Robert’s journey from a fledgling business to an industry leader in Australia, and ask him what he’s learned about what it takes to scale a business in a very tight labour market. 

“Now, a little bit of housekeeping upfront. All of this is being recorded today. So don’t worry that you’re going to miss something because we’ll have it up on the dynamic business website. You’ll be able to go back and listen to it anytime you want. You will be able to ask questions of both Mark and Robert. 

“There’s a portion of the program at the end where Heidi will come on and we’ll read out your questions. So post your questions in either the chatbox or in the Q&A box. Heidi is keeping an eye on those and she’ll be joining us further along when we’ll share those questions. All right. That’s all the housekeeping.

“We know that if you want to scale a business, you need a good product. You need great staff and you need really solid business systems. 

“Most businesses have no system at all, when they start up, they use whatever they have at hand. And almost everyone starts out by using a few spreadsheets. I’ve been guilty of that I bet most of you have. And most businesses as they grow, they reach the limits of the tools that they’re using. And every time that happens, there’s a scramble and they change their tool. 

“Of course, it never happens for every tool at the same time. Different tools reach their peaks at different points. And so what happens is the tools start to diverge over time, you grab one from over here because it’s what someone used on their last job, you grab one from over here because an employee recommended it. And this one, no one knows quite where this one came from, but it gets the job done.

“It’s all organic, no one really gives it a lot of thought. But of course, because all these tools just sort of arose organically, there’s no way to really manage them all together or to use them as a unit. 

“In fact, a lot of work has to go into making them work together. And so there you are, you have your own corporate Hairball, a Frankenstack of tools that are all from different places. 

“They’re all suited to the jobs they’re doing, but none of them are really compatible with any of the others. 

“That is a hard place to be stuck. Because changing tools takes time, it means costs and it also means that there’s a chance things might blow up, that data might get lost, that customers might be impacted. 

“So businesses tend to kick the can down the road when it comes to changing tools until they can’t. That’s pretty much what happened to Mark Kelly. So let’s take this opportunity to bring the mark into the webinar. Mark is the founder and the CEO of global surf industries. Welcome Mark, tell us how you’re doing today.”

Mark Kelly:

“Pretty good Mark, I’m enjoying life. Sydney was 25 degrees in the water today, so that’s pretty good.”

Mark Pesce:

“It is pretty good. Okay, so tell us about Global Surf Industries. When did you get started? And how did you get this vision that the best day is a day that you’ve been surfing?”

Mark Kelly:

“We started the company in 2002. I’d been working in the surf industry for four or five years before that. I’d worked for companies like Bausch and Lomb and Adidas. All big multinational companies. So I sort of had a big business mindset. But the surf industry is focused on the hardware side. Really, for a lot of us it is still a cottage industry.

“So, we’re just beginning to bring big business skills to our cottage industry, and part of that was having really good business processes.”

Mark Pesce:

“So the business grew from basically a small startup in 2002. How were you doing over the arc of the business before the pandemic hit?”

Mark Kelly:

“So the business has been going 20 years this year, and in late 2019, I’d sort of come to the conclusion that in 2002, we were really a disruptive company in the industry. And we were taking it from cottage industry to a normal sort of product development, now it’s a supply industry. 

“At that time [2019], I thought to myself that the business had sort of run its race. We had a lot of competitors coming in, nipping at our heels, and we’d built an eight-figure business, selling around the world. But, we were selling close to 50,000 boards a year, but not really making that much cash. 

“It wasn’t really making a big bottom line, even though we were turning over a lot of money. I think part of that was inheriting the business that you sort of had yesterday, today all the time. 

“So at the end of 2019, I sort of was at the point where I decided that I was going to close the business and just liquidate everything and go do a university degree in anthropology. And then COVID started. 

“As I talked to the staff and told them what I was going to do, they said a lot of them decided to leave and have more job security. Six of the staff I asked to stay on and helped me wind the company down but as COVID got going. But as COVID went on and we were operating with the remaining six staff we were turning over the same net as we were when we had 22 staff. 

“So profitability went from marginal to extreme. We were running at a  net profit of  26% with six people. Some of that comes down to me jumping back on the tools, which I still am. And I’m really enjoying it actually, after 20 years of being in the back of the operations rather than just general management. It’s actually really good to be in the business.

“But in a company with six people that turns over, upwards of around about 20 million Aussie dollars, you need to be. And from that point, it just really sort of made sense.

“But for me, knowing how NetSuite worked, I could really start to look at all automation and make the program or the ERP system function beyond what we’re doing.  That really saves me from employing more people. 

“Not that that’s a bad thing, I’m not anti-employee. But I was at a point where I just really want to make the system work. And for me, I like to think of NetSuite as the human brain. Apparently, we’re only using about 8 per cent of our brain. So I want to avoid paying for 100 per cent of NetSuite, I want to try and get 100 per cent of the value-added.”

Mark Pesce:

“Alright, but we talked about the percentages, right, you have basically about 26 per cent of the employees that you had back in 2019. 

“So you have a quarter of the staff turning to the same amount of money. How did you manage that transition? In other words, I mean,  some of it was organic, but you had six people? Did everyone start doing four times as much work? Or was there a relationship to tools that changed through that?”

Mark Kelly:

“You just have to re-jig. This is a big thing for me now, if you don’t, someone can come and disrupt your business. But if you’re not thinking like that all the time, that someone’s going to disrupt the business, and you keep going as you are, and then someone will disrupt the business and your business will be gone. 

“And so I think everyone in every business should look at their business every 18 months and say if someone was going to start this business again today, how would they do it?”

Mark Pesce:

“And if you were starting again. Wait a second, actually, you did start the business again, in 2020. That’s the thing, right? Because you basically made the decision, you were going to close the business, which put the business on a completely different footing?”

Mark Kelly:

“Yeah, and we did, we announced the customers, we’re gonna call it GSI 2.0. and here’s the process we’re going to do. 

“We don’t do any data entry anymore. I outsourced that to either our web consumers or our customers. And we’ve got a platform where they can log in and do their orders, they can pay their bills online, all that now is reconciled itself through a Suite app that we’ve got. 

“We’ve moved our website to Shopify, we’ve got Celigo running different APIs, meaning we’ve reconciled a lot of the business operations. So we’re just trying to save man-hours all the time. So then the employers that we’ve got are doing proactive tasks rather than just menial things, like just moving data. If you can move data around, you can automate.

Mark Pesce:

“So when did you have that? I mean, it sounds like there was a penny dropping here somewhere around your business. 

“The number of employees and the tools, when did you really get the sense that, wait a minute, this is actually working better than it used to work?”

Mark Kelly:

“It was at the point where in Australia, all the staff except myself and the CFO had left. Then I was turning over, you know, 5 hundred-6 hundred thousand bucks in a month. And I didn’t have any employees. 

“So, we’re making a net profit of 26-27%. I’m still paying myself what I used to pay myself but, our bottom line just went through the roof. And at that point, I’m thinking, this is actually just too good to stop. So I had a think about it, and then I said, “okay if we can run it like this, but then you’ve got to make sure that you’ve got the right people on the team.” 

“So I  spoke to the staff and said, “This is how I want to run it. Are you happy to stay on? Are you happy to run in this fashion?”, and everyone, everyone was up for it. 

“So it has really allowed us to have a manageable, biggest, smallest company. I don’t want to be Amazon, I don’t want to be a massive company. I just really want to serve the customers that we’ve got and let the business be as big or as small as it wants to be. 

“And we’re in a seasonal business. But, we operate globally. So we have summer and winter operating at the same time, it’s a yin yang thing. But for us, now every day is a good day of the month.

Mark Pesce:

So at that time, when you invited the six employees to stay on and run the company. Did you say, “Okay, we’re going to have to do things differently? And we’re going to need to train you in the new systems”. Was that part of that process? Or did they already know? 

Mark Kelly:

“They already knew. So all we did was things like instead of having an Accounts person, who used to call when someone wasn’t paying on time, just gave that all back to the sales guys and said, “Okay, that person’s not going to exist, you guys can do your own debt collection now”. 

“They get paid a base salary plus commission, and their commission comes when the customer pays. So why weren’t they in charge of it the whole time? They’ve got access to all the NetSuite data about payables. 

“There are just some things in business that you inherit because you put those systems in place. But in 2002, the world was a completely different place than it is now. And we were still operating a lot of the business in the 2002 mindset. 

“So, the company’s profitability scaled down over time, but it’s because we weren’t really disrupting ourselves, even though we were using the correct tools.

“We were using zoom years and years ago. We were probably one of the first customers in Australia of zoom. We’ve always used great tools, and we’ve always had a global business. 

“But, I was just layering things on and creating jobs for people rather than using the platforms and really thinking in a disruptive way to how to run the business. So I think it’s a really good thing for everyone to think about.” 

Mark Pesce:

“Which for your business, for global surf industries, which parts of NetSuite are most core to that ability to be able to disrupt yourself? What are the most important parts?”

Mark Kelly:

“This is a really interesting thing about NetSuite. A lot of people I’ve referred to NetSuite, they’ve let their CFO do the implementation.

“And if you want to shoot yourself in the head, do it that way. Because it’s not just a financial and accounting thing. It’s all parts of the business. So you need all the people around the room, a lot of it should be the CEO making the calls.

“Because at the end of the day, it’s not just accounting, its sales, its warehouse people, its operations, its customer service, they all use this one platform. And the best thing to do is have everyone understand what the dynamic tool is you’re using, so you can get the most out of it.

“I think that the biggest part of NetSuite is getting everyone to actually understand the power of what they’ve got.”

Mark Pesce:

“I like that warning to not let the accountants design the process flow for the rest of the organisation. I think that is very well observed. 

“All right, we’re now sailing into roughly the post-pandemic era, right? The restrictions are now really being scaled back in Victoria and New South Wales just today. Are you planning on adding more employees? Or do you reckon this is the new normal for you?”

Mark Kelly:

“Well, I’m not sure I’m moving in the post-pandemic stage. So I’ve got a totally different mindset from you. Here in Brookvale, we’ve got businesses right beside us that are getting disrupted every day. For example, the guy who runs the business next door, one of his kids has COVID, so he’s locked down for several days.

“I think this stuff is gonna last. Last month, there were 12,000 school kids who got COVID. So we’re not moving into the post-pandemic stage, just yet. 

“But for me, within the next year will probably bring one more staff member on to help run the global business. I’ve put a lot of pressure on myself. I don’t want to be out of action for a week because that would be good for me, but it probably wouldn’t be good for the business either. 

“So I think for me, it’s just a little bit of risk management. And I’ll bring someone on the operations side of things to run the business globally. So that’ll be it.”

Mark Pesce:

“But you’ll top out at seven employees, and you’ll still have this really strong, really profitable business.

“All right. Thank you, Mark, we’re gonna have you back in just a few more minutes to answer some questions from the audience. Just a reminder that if you have questions, drop them in the chat or the Q&A box. And we’ll have Mark back after we talk to Robert. 

“Now, growth can be one of the biggest stressors in a business. In a business when things are growing fast, everything’s working well, until it doesn’t. Business processes can degrade very gradually so that you don’t really even notice that things are getting incrementally harder. 

“And that’s because people will keep on doing things the way they’ve always been done even when that is now no longer working when they actually do need to change because they’re breaking the business. 

“One individual who has faced a few of those challenges is Robert Pizzie. Robert is the co-founder and CEO of Easy Living Elevators. Robert is going to join us to share what he’s learned about how to grow a business to a national scale.

“Hey, Robert, good afternoon.”

Robert Pizzie: 

“G’day Mate.” 

Mark Pesce:

“Alright, so tell us about easy living home elevators.”

Robert Pizzie: 

“Well, we started in 1998, as a couple of wide-eyed young men who had some great ideas about what they wanted to do in the home elevator space. And then we quite astoundingly grew very quickly. 

“I was in the big corporate space, working with big elevator companies, so I’m industry trained. I’m a technician by trade. And when I was in the sales office, people would ring up and say, Do you “big lift company” do lift in houses? And of course, I said no. 

“So identifying a niche, being a little bit frustrated with big corporate, off we went and the rest, as they say, is history.”

Mark Pesce:

“How fast did things grow then? Did you take off like a rocket?”

Robert Pizzie: 

“Yeah, well, talking just sales numbers, we sold three lifts in the year 2000. We sold 28 lifts in 2001, 48 in 2002. And then from there, we sell about 600 to 615 lifts a year.”

Leave a Reply

Your email address will not be published.