Welcome to the Business Abundance Podcast, providing
the tools and knowledge to help small business
owners succeed. For additional resources, visit
www .businessabundance .online. Welcome back
to the Business Abundance Podcast. I am Zee and
I am here with Rowan again. Hello. Today we are
talking about flying too close to the moon. We
are talking about ambition. And we're talking
about, is it a bad thing? We just want to understand
if being too ambitious will cause you problems,
I guess. What is the problem if you are too ambitious,
if you're not strategic in your ambition? I had
someone say to me the other day that they thought
ambition was actually a bad thing. Like they
viewed that. trait as a negative thing. So that
was quite interesting because I view it in a
positive light. A lot of people view it in a
negative light. Yeah, I didn't realise that.
Don't fail. Yeah, I was just like... Don't fall
over. No, don't. Don't try. Don't run. Don't
go near that. Don't do it. But I, yeah, I've
always viewed it as quite a positive thing because
you can't move forward unless you are ambitious
about that next step. I guess it's a very simplified
version. I don't know. It was just interesting
to hear someone turn around and go, no, it's
not a good thing. It's nice when you talk to
people in different opinions. It's very valuable
for self -growth. Everyone thinks a different
way. Yeah. But we're going to be talking about
another case study. This one is about Dick Smith
and it was Australia's biggest business collapse
in 2016. So they were a tech company. A retail
store that dealt with electrical retailer. Yeah,
dealt with electronic goods and a lot more. And
they expanded across Australia and into New Zealand.
Their expansion was a success, but they didn't
plan properly. And that led to their downfall
basically. And so we're just going to take some
lessons learned from their situation. understand
what happened and how you yourself as a business
owner or whatever situation you're in can take
away from this and implement in your business
so that you're best suited for success, I guess.
So they started as a small car radio installation
business. Really? Yeah. And they then decided
that they could do it. themselves and then became
big electronic store that we knew it to be across
Australia and New Zealand. In 2012, they were
acquired by a private equity firm and went through
a restructure, went public. And then they had
their aggressive expansion. I think it was 2013.
They increased the number of stores and then
they opened new stores close to existing ones,
which cannibalized sales. I love to that term
when I was just like, that's a great word. No
misunderstanding. Yeah, basically everyone stole
everything from themselves. Inventory management
problems started to show. So they had their own
private label goods. So they labeled everything
as themselves and had really slow moving inventory.
So they couldn't sell old stuff. Yeah. And then
had an overstocking issue. So that tied up. Technology
changing, everything drops in price. Yeah. So
basically they wanted to sell their own stuff
instead of what the market was demanding. Cut
out the middle man. Yep. And then ended up being
stuck with that stuff essentially. So then over
time, their debt levels rose in 2015. suppliers
tightened their terms and in 2016 they weren't
able to secure financing. So that means like
they they basically would buy stock off their
suppliers and they might have two months to pay
or something like that and then the supplier
said actually your bill is getting up there a
little bit we might uh we're a bit worried about
you maybe you should pay us in one month and
they're like oh we can't actually do that. Yeah
yeah so which then force them into voluntary
administration and then liquidation. Wow. Which
was quite sad considering how well they were
doing. Dick Smith. I remember working in electrical
retail and anything that was obscure or hard,
he just didn't have it or he had no idea what
it was. He was like, I'll go to Dick Smith. I'll
have it. And it was just amazing. I think in
Auckland where I worked, every single salesperson
in every single company except Dick Smith would
have said exactly the same thing with complete
faith. Dick Smith had it. And Dick Smith didn't
have any of that stuff. But if they did have
those little odd widgets, they would have been
just so insanely successful. Yeah, just didn't
have the stuff. Yeah. They just didn't. They're
trying to be something they weren't. Didn't understand
the market. And if you missed the last episode,
I highly recommend you go back and listen to
that because we deep dive into that too. Yeah,
I think they got the wrong unconventional ways
to market. They missed out on the whole. who
are they marketing to? And they've gone, we can
do all this because we are Dick Smith and we
can make these products ourselves. And we're
Australian, but we're really just whatever, put
our name on it. And the customer's like, we don't
want that. We want the one we know and trust.
Yep. And we want to buy it from Dick Smith. Shot
themselves in the foot. Yeah. Dick Smith's a
retailer, not a maker. Yep. Interesting. In Greek
mythology, Icarus and his father, Daedalus, I
don't know, were imprisoned on an island by King
Minos. I'm saying this wrong I'm sure. So to
escape, Daedalus, a master craftsman, created
two sets of wings made of wax and feathers. He
warned his son not to fly too close to the sun
as the wax would melt. He also cautions Icarus
not to fly too low as the feathers could get
wet in the sea. His warnings however went unheeded.
Icarus was so intoxicated by the experience of
flight that he went higher and higher. As the
wax in his wings melted, he tumbled into the
sea and drowned. Saying don't fly too close to
the sun is a reference to Icarus. his recklessness
and defiance of limitations. I was really wondering
where this was going when you first started that
story. I was like, here we are talking about
Dick Smith and we're coming up with great mythology.
It makes sense though. So flying too close to
the sun. It's interesting because I don't know
the details of the IPO or going to the stock
market or the private equity or anything like
that. But I do know that that's a way to make
money as far as acquire something. Obviously,
list is a way to acquire money. And then when
you're a large company like that, there's valuation
based on perceptions, on possibilities, a lot
of things aside from dollars and cents. So expand,
expand, expand, here's our footprint, sell to
another, you know, the idea is to sell those
shares to someone else. And you can see how they
can go, oh, here's a huge opportunity, a brand,
everyone knows and trusts, boom, boom, boom.
We can go bang, bang, bang, pump this out and
then not quite hit the mark. And then don't get
the buyer because they're not looking for to
have that business in 30 years, which is something
we've talked about probably in our first podcast.
But you know, you got to look long -term if you
want to be successful. And Rupert Murdoch, maybe
he talks a lot about that. It's pretty sad really,
because that was a very famous, well -loved brand
that's just gone. We can do all this stuff. Go
hard, go hard. Yeah. Go on. I don't think it's...
necessarily as relevant for small businesses
that we talk to, but the impact of private equity
in retail, for example, where like financial
engineering can take place, can overshadow operational
sustainability, I guess. So it's just, you've
got to be a little bit careful in that sense.
Good lesson. Interesting spot from small business.
So you can relate that back because people have
suppliers, they pay bills and they pay them.
You know, it's not straight away for some people,
they paid a month later when people think, oh,
we can pay our creditors two months later. You
can. It's a bit annoying. It's a bit rude, but
everyone does it. No one really sees it as being
that rude. Like, oh, we understand, you know,
you'll get there. But fundamentally, you're loaning
that money off them to grow your business. And
if you don't have the cash available to say,
actually, we don't want to do that anymore. You
have to find another supplier to loan you that
money. And in Dick Smith's case, that was devastating
because if their suppliers are, you know, pretty
much what the market wants and they're not going
to give it to the stock anymore. Like they can't
just choose a different one. You can't get another
painter. You can't get another plumber or whatever
to take the role. Um, but it's a very big thing
where people go, we've got all this money in
the bank. We've, we can do this. We can do this
and spend it. But if you're using other people's
money, you've got a huge risk that they get sick
of it and stop giving it to you. Um, and then
what happens? Stuck. Very stuck. Yeah, if we're
gonna look at the lessons learnt as a result
of the Dick Smith situation, we've got the over
expansion without a sustainable business model.
Well, the model is probably get out. Sell it.
Yeah, I imagine it was. But it wasn't. It wasn't
a long term forward thinking. Yeah, and it ended
up quite. Dangerously. So in any sort of change
management, which we do even have a podcast on,
is about change. Just make sure you're well prepared
and people understand what's going on. But I
mean, to be honest with the Dick Smith situation,
though, that was just. poor management. We have
no idea we weren't there, but fundamentally it's
the management. They've got a plan, they're executing
the plan and they haven't done the focus groups.
They haven't got the right information. They've
believed their own hype. They haven't got the
particular funding that they needed to make it
successful. So most small businesses fail because
of lack of cashflow or lack of working capital
injected at the start. So they're no different
in that case. They didn't listen. They obviously
didn't survey. If they did, they didn't get the
right survey or they didn't get the right mix
or they took the wrong feedback. Yeah, they didn't
track inventory or fees properly or mismanagement
of that. Yeah, it was definitely mismanagement.
If they had a lot of old stock, if that was a
reason listed, which it was, then no one's looking
and going, okay, well, that stock costs us $300
and it's only worth a hundred now, but we still
need to make a profit on it. So it's going to
set our shelf at $400. No one's going to buy
it. Like just get rid of it for a hundred bucks.
take the money back. Yeah. Yeah. For small business
owners, I guess I'm trying to think about what,
if I were in their position listening, what would
I do? I would go and have a look at the, all
the inventory that I have, um, and figure out
how much is it costing me to have it there? Yeah.
Spot on. So If you've got something sitting around
in the shed out the back and it's been there
for two years for a rainy day, well, it's probably
500 bucks that's just sitting there. Like, do
you just leave 500 bucks sitting around? 500
bucks today is not worth 500 bucks in three years.
So like what have you got that's moving? If it's
not moving, get rid of it. Even if it's a loss
on what you paid for it, at least you got the
money back and you can do something else with
that money. But you've got a cash flow is highly
important. So making sure when you do spend cash
on something, how soon do I get it back? Was
it? days to cash. It's in the books you read
the other day. But yeah, so you can have a negative
days of cash. So someone pays you in advance
before you spend anything. And you could have,
I buy the stock, it sits around for six months,
then I sell it and then someone pays me for it.
And you've got six months before you get your
cash back and your profit. So that's a big lesson
to learn just because you've got something that's
worth something. If it's sitting there doing
nothing, it's money you can't spend elsewhere.
Yep. Yep. Or not even your money. Correct. Yeah.
Uh, yeah. And then second or whatever point we're
up to strategic planning, uh, when it comes to
strategic planning, I think it's just a important
to notice that when you try and make change or
you try and develop your business in any sort
of way, or even just run your business, it's
important to have a plan. You can't. Well, I
had a plan. They did have a plan. Yes. Uh, they
didn't manage it well. You would think that it
got to the point where they're like, yeah, this
is not working. Yeah, they were committed. It's
like the plan is a good plan, but what makes
a good plan? So you use experience, you use information.
You don't just go, oh, we could do this. And
this is what's worked in the past, which is pretty
much what the plan was. And maybe they had some
information that thought it would work better.
You know, things change in industry. But at what
point, like you said, do they look at it and
go, this isn't working, we need to pivot and
do something different. So that the point for
businesses there, like even though your plan
sounds fantastic, at some point you've got to
learn when to let go and go, it's not working,
what can we change to get it working? Because
bigger isn't always best. So the case we use,
they cannibalise their own market by opening
stores next door to each other. We were talking
about this earlier. What next door like? Like
within the sort of catchment area, right? Okay,
that's not working. Let's shut some of those
stores down. That's going to have a cost, but
we're going to reestablish profit, profitable
operations. Then we can probably reestablish
finance. We can reestablish investment, get the
cash back. You know, there's some point they
must have been able to look at things and go,
well, this plan isn't working. But potentially
that's. They couldn't or they didn't want to.
Yeah. It's a process that you need to be able
to be flexible with. Yeah. Something I talked
to people about quite a lot is just don't be
too proud. Like if it doesn't work, that's fine.
Like you talk about people that have failed.
There's something that Michael Jordan says, like
you can sort of see Michael Jordan's highlight
of basketball, just all these match winning shots
on the buzzer, you know, just dunking on people
and like the legend. Yeah. You know, this huge
brand to himself of success and awesomeness.
But you hear him talk, he's like, I've failed
so many times. I don't even know, like I've missed
27 game winning shots and we've lost. But without
the failure, I can't be great. So it's been proud
to go, not being too proud to go, I can't do
that. I've got to keep going to prove that I'm
right. But go, oh, that didn't work. I'm wrong,
but let's fix it. And then I'm still awesome.
Don't just push through regardless. Yeah. Just
have a really good understanding of what you're
doing and where you're going, but be flexible,
be humble. Yeah. And also understand who your
client is. I mean, we hammer on about this in
every single podcast. People are people. But
you can't seriously expect your business to succeed
or as a very low percentage of businesses that
would succeed if you're not. Well, no, they wouldn't.
You need to understand who you're. dealing with.
You need to understand what they need and you
need to be able to provide that. So Dick Smith
has this great brand. They have all these customers
that believe in them for whatever reason as the
place to be. So in my case, my association with
Dick Smith, they had all these little knickknacks
and adapters and batteries and chargers and stuff
that were nowhere else, which wasn't true, but
they had a lot of stuff. But their market believes
a certain thing. And then they go, oh, we want
to be the big boys. We want to sell Sony TVs
and the Panasonic TVs, whatever. So interesting
thing though, so we're talking a lot of negative
things about ambition, I guess. So saying it,
is it a bad thing? And we're just talking, well,
it is a bad thing because someone sent you back
in the day, your friend the other day, you know,
and Dex Smith, they aim too high and they failed.
So, you know, no good, no mismanaging, but you
know, what if they succeeded? Yeah. would have
been awesome. Yeah it would have been awesome
and maybe their plan was great and literally
the industry changed or you know technology came
through and then the prices of these things just
dropped so quickly they left this old stock and
they didn't expect it. So there could be reasons
but I think the story before Greek mythology,
so flying is great but just don't get carried
away. Yeah. And the other bit, the interesting
thing was don't go too low. That's exactly what
I was just thinking. Yeah. Don't go too low as
in don't, don't be too careful. Yeah. So like
a little story is, okay, we've got this great
opportunity. We've got this means to do something.
Go enjoy it. Have fun. Do the best you can, but
Don't go too high like don't overextend yourself
Keep it within reason and I find it for a lot
of people that we've dealt with through the years
is that they go start going well and They're
like oh we could do more we can do more we can
do more like and it's like each week They're
trying to do something new Or after a year they
they might have doubled their turnover for example,
which is huge, right? But then they're like,
oh, but we could be doing all this more stuff.
I know we could have more clients At what point
would you think you're successful? Yeah, are
we aiming too high? Yeah, and are we sort of
overextending ourselves? And you can always do
that, but then at some point you're so geared
up. You've got so many balls. rolling and you'd
never sort of sat back and reap the rewards for
a while. You don't have that little safety net.
So I think it's, you know, when you do have success
and you've aimed to do something and you see
it, just sit on it for a while and let it go.
And is that what we're getting? Is it actually
working like we thought? Yes, it is. Get the
reward and then actively plan your next step
rather than just keep on reach, reach, reach,
push, push, push. Yeah. Yeah. It's a fine line,
isn't it? You don't want to be so ambitious that
you just... Over do it and can't put any attention
into anything Therefore nothing succeeds or you
don't want to go so Careful that you don't end
up doing anything at all. Yeah, and then you
may as well have tried and failed Yeah, I mean
that's the better option because at least then
you've learned instead of just staying doing
nothing and Learned nothing. Yep. I mean doing
nothing is a choice, too Yeah, well doing nothing
is an action. So like you can't do nothing. It's
like we can yeah You're allowed to. Yeah. Yeah.
You know, like in cricket, for example, I play
cricket. So if a bowler ball is a really good
ball and if I try to hit it, there's a good chance
I edge it and get caught and then I'm out. It's
not going to hit the stumps. I can leave it.
Sounds pretty boring, but I'm not out. I was
probably going to score. The best choice is to
do nothing. So you do nothing. I think in golf
too, like you hit the balls into the trees. I
call a safety drop personally, which is I'm too
stupid to responsibly tap the ball back onto
the course to then take a longer shot. So like
a mulligan? No, safety drop. Okay. I will instead
try to thread the 30 -centimeter gap between
eight trees and smoke a ball trying to hit it
200 meters. So I call it a safety drop because
if I do that, I'm most likely going to hit a
tree. It's probably going to ricochet and hurt
me. Yes. Very wise, but that doesn't count as
a shock. So it's a safety related issue. Oh,
yeah Anyway, the point is it's that's not an
action. Yeah, but there's the sensible thing
to do because you're a good golfer is what? The
safety shot. No hit it through the trees straight
through the tiny little gap or get back on the
course Yeah, get back on the hole. Yeah. I say
that with hesitation. Yeah, yeah, yeah. You know,
like, you know, you know, it's boring. That's
all that's proving the point though. Everyone
goes, oh, we could just, I can see it happening.
Just go through there. You might just draw it,
fade it up. Yeah. Yeah. But I know I should just
go there. It's a bit boring, but then I could
just hit the ball down there. Yeah. Which is
the same. I'm going to be safe. Yeah. I didn't
realise this till the other week. Like I was
going, why do I keep doing this? It's fun. That's
why. But. Like shot wise, I could just tap it
here because it's still one shot to the green.
But if I hit it through all these things, I'm
not on the green anyway. So I still have to do
at least another shot. So I might as well just
tap it there. It's really boring. But in business,
I think that flying to the coast of the sun is
we can go for that Hail Mary. But doing nothing
or just doing like a little sidestep might actually
set us up to have a really good opportunity with
smooth sailing. And then I guess vice versa was
what you just mentioned before is the water.
Yeah. Yeah. Yeah. If you do nothing. Well, not
do nothing, but aim too low. Aim too low. Yes.
Yeah. So we've got these great wings. You need
to be flying with the wings. Yeah. But there's
no point hanging next to the water. Like get
a boat. Because if you go in the water, you're
going to drown. So that's the thing. If you're
sitting there in business. Sitting there doing
nothing, sitting on the train tracks. What's
this saying? If you sit on the train tracks and
just stay still, the train will run you over.
So sitting in business, sitting there doing nothing
and you see it and my pet peeves, the local chamber
of commerce is filled with the retail shops complaining
about the sound dying and no one coming to the
shops anymore and they're not doing anything
to change their business. Excuse the tone, but
you don't see that a lot of times. But they don't.
They complain about all the things that have
changed in the last 20 years and why people don't
come to the shops anymore and none of them are
changing. So they're sitting still doing nothing
and getting run over by the world and then they're
upset about it. So, you know, you've got the
wings. You have to have some form of ambition
and you can't just go, I've been successful and
I'm going to stay here. Yeah. Yeah. Everyone
will come back to me. Yeah. Yeah. It's pretty
amazing little story really. Someone made that
up back in the day. It's pretty deep. Yeah, yeah,
I think it is good when when we talk about wings
I'm trying to think about like maybe that's a
new employee with some ambition or You've got
a bit more profit or you've been received a grant.
You've got an opportunity that's presented itself
You've got a new customer base like there's so
many opportunities out there You just got to
identify them and figure out which one you can
practically do yeah Yeah, exactly and there might
be three of them might be fantastic and you do
them all but which one if you can Can you really
do one? We talked about it with Carla podcasts
ago, people pleasing, like overextending yourself,
but yeah, does it make sense to do all three
and you potentially muck it all up or do you
just take the win on one? Yeah. Yeah, and if
you feel like you don't have the resource or
ability to get one, but you know the opportunity
is there within Graf, then acquire the resources
to do it. Yeah, or give it to someone else that
you like. Yeah, that's true. Hey guys, check
this out. Yeah, there's options and I think the
whole ambition is a bad thing comes from, you
know, again, we talk about this quite a lot too,
but you get taught to be in a factory mindset.
When you grow up you're gonna do this and that's
when you do your whole life till you retire You
know, what do you want to be when you grow up?
And that's you literally gonna do that all day
nine to five. No one's talking about changing
that But that's how the world works. You know
people need to do things and there needs to be
order So ambition is against that system because
if everyone had ambition to be the boss who's
doing the work? Yeah, everyone's unhappy, right?
So That's not saying that Ambition is the best
thing a lot of people prefer not to have the
ambition and to have the safety of being at home
and knowing that they're protected and everything's
safe and everything will be the same. And that's,
that's a value and it's human nature as well.
So I think it's not a bad thing or a good thing,
but I think if you're in business, you need to
have some ambition because otherwise you're wasting
space and you're, you're, you're preventing other
businesses from succeeding. Yeah. Couldn't agree
more. That's an interesting, interesting, um,
case study. I'm actually keen to do some more.
I feel like the last few podcasts have been pretty
interesting and just assessing. So if anyone
has any case studies they'd like us to chat through,
send them through. We can have a chat about them.
She's keen. Very good. All right, guys, we will
leave it there and we will talk to you in the
next podcast. Bye. Bye.