A couple of weeks ago after a rather enjoyable Asian fusion dinner at Spice Bar, Mooloolaba, I was served up a fortune cookie with my obligatory after dinner coffee. The words of wisdom contained within hit a nice chord with me… I put those words into my wallet to ensure I headlined this talk today ….. “You will never plough a field by turning it over in your mind.”
Greencross is one of those “you can talk about it or you can do it” stories. Consolidation in the veterinary industry, like many other professional services roll ups was definitely never going to be easy. A vet mate of mine, like many others in my profession, was absolutely definite that we could not bring a bunch of vets together; in fact he stated, “vets are like dingoes, they like to hunt on their own.. forget it, find something easier to do.”
A quick bit of Glen Richards history as background to the Greencross story. I graduated veterinary science from University of Qld in 1988, and then after a short stint in practice in Brisbane, I then went on to complete a research masters from James Cook University in 1991 looking at production and reproduction activity in Braham cattle. With the rural industry looking pretty flat at the time, I then packed my bags and spent two years in London working as a companion animal vet and reading every business book I could get my hands on.
Immediately prior to heading back to Australia in 1993, I rang a practice in Townsville and enquired about buying their little branch practice. They were actually just about to put their main hospital and branch practice on the market. After a quick bit of back and forth on the telephone, we agreed a price and I asked them to keep our conversation confidential and let them know I would be home in two months and we would get the deal done. After a bit of cajoling, I managed to convince my parents and the bank to support my entrepreneurial endeavours.
A week after that important telephone call I stepped onto the trans-Siberian express to journey overland back to Australia via Hong Kong. With only a sea of white snow outside, and bunch of drunk Ukrainian traders inside for company, I set about writing a business plan to develop a network of veterinary hospitals across Australia called Greencross. The original plan had a franchise model with a corporate support team to look after the back end administration thus allowing the vets and nurses to focus their time on client and patient care.
Once back in Australia I set about developing a group of practices in Townsville and shelved the plan until I could get some runs on the board. In 2001 I was fortunate to make a telephone call to John Odlum, a co-owner with Keith Knight, of a group of practices in Brisbane. John and Keith were the first vets that I had come across in many years to be business minded and share a willingness to evolve our practices beyond regional clusters. We invited a few more practices along for the ride and formed a co-operative service company to provide support for our foundation group of 17 practices. Our co-op company then provided backend services including some book keeping, group buying and marketing.
In 2006 we were approached by a couple of white-shoe wearing boys from the Gold Coast attempting to roll up some veterinary practices. They had optioned up 15 practices but they had no idea about practice management and wanted to buy management services from our co-op company. After 12 months of back and forth we eventually agreed to join the agendas, roll our practices into the mix and agreed to take on the management duties of the company.
In June 2007, at the peak of a long running bull market, with 32 veterinary clinics, 300 veterinary employees, ten corporate support team members, some sharp advisors, a nervous banker and a wing and prayer we listed Greencross Ltd on the Australian Stock market after raising $11 million dollars in our Initial Public Offer. The exhilaration was palpable as we watched the share price rise from $1.00 through to $1.42 by the end of the day. After 6 weeks we were at $2.20, by three months we were at $1.40 and after a year, we were sitting below 60cents. We were an illiquid micro-cap in the middle of one of the worst financial crisis ever seen. We were completely irrelevant to the investment community, and on our worst day in 2008, our share price got down to 48cents and our market cap was about $11M.
Actually, I look back and realise that the GFC was a good thing for Greencross. With no one looking at us, with all the original fund managers having flipped out, and only a staunch group of “welded on” shareholders consisting of founders, employees, friends and family, it gave us the opportunity to spend time developing the organic side of the business. We pulled back from acquisitions, focused our time on engaging our people with better HR and education programs, improving clinical standards, equipment and facilities, evolving our management structures, importing more talent to help run the company, and ensuring we had a common IT platform across our businesses to enable us to benchmark and coach our teams.
By 2009/2010 once we thought we had a better and more disciplined approach to managing the company and our practices, we then, with the support of CBA, launched into aggregating with more sustained vigour. Acquiring 1-2 clinics, or about 15-20 clinics a year consistently for five years straight we delivered above 25% revenue and EBIT growth year on year for five years straight with total shareholders returns exceeding 1500%. With the recent merger with Mammoth (Petbarn and Animates) we have seen our share price peak at $10.70 and our market cap rise above $1BN. This has moved us from an ASX300 company into the ASX 200 and the company is positioned in coming years to push into the ASX 100.
Over the last 21 years as I transitioned from self-employed to cooperative to corporate it has been a journey full of learnings, of challenges, of roadblocks, of inspiration and of sincere gratitude to many people that have helped evolve Greencross Ltd into a national network of veterinary businesses and pet stores across Australia.
Brisbane Business News, the organisers of today’s breakfast, have asked me to reflect on Greencross’s success and perhaps table some advice. In this room, I have no doubt there a many stories that are more inspiring and many of you more qualified to offer advice. In the spirit of earning my breakfast I am happy to offer up some of my learnings and share some my experiences.
On reflection I have come up with the “Richards five pearls of wisdom” or the five Ps that I think helped bring my little vision alive and sustain the exponential growth that we have seen over the last seven years.
The first pearl: Planning
Developing a plan, documenting thoughts and ideas, reviewing the environment, evolving financial models to at least three to five years out, and having the discipline to review the plan and fine tune it on a regular basis, is vital in creating a road map to follow. As we started to ramp up our growth (and cause ourselves some organic growing pains), I was fortunate that my Chairman, Andrew Geddes, introduced my CFO and I to a Verne Harnish, Growth Faculty workshop, called the Rockefeller Habits. Aimed at fast growing companies, known as Gazelles, the one day program resonated strongly with me… it gave our company the tools we needed at the time to control our growth, and ensure a strongly disciplined execution to continue our rapid expansion.
We developed our One Page Plan, established our 10 year BHAG, developed our five year financial forecasts, confirmed our one year goals, cycled through our 90 day imperatives, and commenced our meeting rhythms of an annual planning retreat, quarterly strategic review workshops, 2M (or monthly management) meetings, weekly STORM (strategic operational review meetings), and daily “what’s up” huddles. Around the same time key members of the Greencross leadership team joined me for a walk across Kokoda in PNG. This was a great way to develop deep trust, respect and rapport and helped launch our expansion strategy. We then continued to build on Kokoda via our informal weekly executive breakfasts where we table a variety of issues in a relaxed and informal setting.
During this time we worked harder on our company culture. Core ideology and culture is so important the faster you grow and the larger you get. We did the Jim Collins “Mission to Mars” exercise where we picked five people from among our 500 people that we would send to Mars to exemplify, by their actions and deeds, the core values of Greencross. This gave the leadership team the opportunity to authentically evolve the company based around our core DNA and foundation of the company.
As the CEO it clarified my focus to be able to champion our core values and core purpose; “why do we exist and why are we on the journey together”, and then hold the whole company accountable to our core ideology. At the time I think there were accusations from outside our company that we were developing a cult, but in actual fact we had clued into the single most important concept in building a company. Shared core ideology and an aligned common culture ensured we remained relevant to our people and our clients as the journey progressed.
At the time, latching on to and implementing the Rockefeller Habits in Greencross, gave me and my leadership team the tools we needed to drive hard, expand our market share, grow our practices, and keep the chaos under control. As an aside, the 10 year Big Hairy Audacious Goal that our leadership team eventually agreed to back in 2011 was to evolve into a $1B market cap company that dominated pet care in Australia. Three years after we set that goal, we merged with Petbarn and broke through $1B market cap, seven years early. Our team was receptive to the concept of a step change manoeuvre that helped turbo charge the company.
The second pearl: People.
As a CEO you need to work out pretty quickly what you are good at, and what your weaknesses are. Many of us have big egos so this may hurt a bit and it may take a while! So, pretty simply.... hire people to cover your weaknesses so you can spend the time playing to your strengths. Once you put the team together you then must create an environment that encourages collaboration, trust, respect and collective wisdom.
Liz Wiseman’s work called Multipliers, put it so succinctly; do you want to be the genius or the genius maker. You need to ask yourself do you get 110% discretionary effort and intelligence out of your team, or are you so ineffective as a leader that you create a political environment of distrust, disharmony, and dissonance that gets less than 50% from your people. Greencross went exponential when trust, collaboration and focus was greatest among our leadership team.
The right people, for the right reasons, at the right time was key for our success. We worked as a team, with deep understanding of our industry, to tackle some of the roadblocks and critical issues facing the veterinary profession. Older vets needed a succession plan; younger vets did not want the emotional or financial commitment of owning a practice. Greencross sits nicely as an ethical group that values practices fairly and are willing to be flexible with the retirement plans of older vets coupled with a strong desire to create exceptional workplaces in the veterinary industry for our veterinarians and nurses.
The third pearl: Persistence.
As a leader you need to walk in the door every day and support teams to deliver exceptional outcomes. At times there are people that will question you and doubt you residing inside and outside the company. This is all healthy to ensure that you are mitigating the right risks, allocating resources and capital on the right projects and driving the business in the right direction. Authentic reality checks are important, and staying humble enough to respect and evaluate other people’s opinions and concerns is very healthy.
Heading into 2008 our share price had tanked from a high of $2.20 to a low of 48cents, our bank decided to rope in our covenants and also demand we start paying back capital. Acquisitions had slowed; and we were an illiquid microcap, irrelevant to the investment community.
To make matters worse, my CFO at Greencross Ltd decided that I was too inexperienced and was running the company on blind optimism. (This was despite beating our prospectus guidance by 37%). He was ringing and writing to the chairman on a weekly basis suggesting I needed to go. The board were certainly getting agitated. Funnily enough I noticed a book in the Sydney airport newsagency called Corporate Warfare. It was a great read about how internal politics and toxic team members can destroy the best companies. The advice in the book was that you need to assess the situation and to act decisively. Your worst fears were probably underestimating the extent of the damage that toxic people can have on delivering your plans. Once I discovered the depth of the CFO’s concerns and the extent of his toxic view of my leadership, I had no choice but to enforce an amicable separation almost immediately. “I go or he goes.” Thankfully the board backed me.
This gave me the opportunity to regroup, re-establish my leadership team, import some new talent, rewrite our five year strategic plan, change to a more supportive bank (the CBA), expand our board, and start engaging with the investment community through endless rounds of one on one meetings. Persistence has helped deliver the last five years of exponential growth.
The fourth pearl: Patience.
It seems every second entrepreneur you meet wants to be the next overnight millionaire or billionaire playing in the tech, biotech, mining or real estate development space. For most of us, it is a ten to thirty year sustained effort and execution to become an “overnight success”. Often I will remind our leadership team that we have limited resources (time and money), let’s apply them to the right things. In the early days we often played whack-a-mole smacking issues as they popped up and we also spent a lot of time chasing opportunities all over the place. I found that I kept having to remind myself and my team of the young bull/old bull joke. The young bull spots a paddock full of heifers and suggests to the old bull they race down and grab a few; the old bull replies, lets walk down slowly and grab them all. We were of the view that we were setting up Greencross to last, and that we need to walk down slowly to ensure we did it right.
The more focused, the more disciplined, the more planned the approach, the better you are positioned to win in the great game of business. My advice, slow down, rushing into battle with a greedy disposition will only help to find the land mines faster. Ask yourself, What big problem are you trying to solve in your industry and what unique position are you trying to establish with your customers?
At Greencross we knew the average female vet lasts five years in practice, the average male vet lasts 10 years, the average practice owner is burnt out and sick of being a vet, many practices are underequipped and undercapitalised, and like many small businesses, lack the resources to really support their teams and manage their practices effectively. The Greencross approach was to tackle an industry roadblock to provide better business support, offer a better succession plan for older vets, offer more challenging, exciting and resourced workplaces for our teams, and most importantly, offer a better product and service for our passionate pet owners.
Every time we acquire a practice we ensure we spend time “on boarding” the new team, discussing our vision, our core values, our history and the journey that we are on to create a better way of practising veterinary science for our people and to offer a more consistent and higher standard of veterinary care for our pet owners. We reinforce the concept of the journey and that we will always be fine tuning and improving how we do things and that with sustained effort and input from all team members, we will continually evolve a company that we are proud of and is relevant to our teams and pet owners.
The fifth pearl: Purpose with Passion.
The buck stops with you when you agree to take on the role of CEO. The board, the shareholders, the team members, the leadership team, the line managers, and the customers/clients are all quite rightly holding you accountable and responsible for the performance of the business, for the delivery of the service, for the quality of the product, for the morale of the workplace, for the engagement of the team and for all outcomes horizontally and vertically across the company; including the share price.
One of my board members pulled me up the day our first CFO moved on. Performance Equals Freedom he stated as a subtle hint. A year later, when I tabled our updated strategic five year plan with the board, one of the other board members less subtly stated that if you don’t deliver, you know you have to go.
The most important ingredient in leading teams to deliver exponential performance is having passion for the purpose and being able to communicate that purpose across the organisation. The communication has to be infectious, inspiring, sustained, focused passion for the journey. It must articulate clearly why we are all here grinding out hours day in day out and delivered with a passionate belief that inspires people to give that 110% discretionary effort. That passion needs to cascades down through the organisation to help assemble the team to fly in formation toward the stated vision and goals.
As the leader of Greencross, I continually reminded our people of our vision that we are building a collaborative network of veterinary hospitals across Australia that allows our people to deliver higher standards of veterinary care and enables us to deliver exceptional customer service through better training, education and access to the best products and services. I often found myself at management meetings and when on boarding new clinics, talking endlessly about our core values and core purpose and why we are all on this journey together. Passion for the purpose must be authentic or the team and the customers will catch you out.
Just to recap: Those five pearls of Richards’s wisdom:
Develop a plan, review it regularly, and fine tune it at least every 90 days.
Attract, retain and inspire the right people to share your journey.
Be prepared to dig deep at times. Persistence pays off!
Have patience and walk down slowly to build a company that you are proud of and will be around in 10-20 years’ time.
Live and breathe your company’s core values and ensure you have passion for the purpose and passion for the journey.
My final piece of advice. Aggregating and consolidating businesses just for money is pretty hollow. Pulling a few businesses together and putting a big ribbon around them does not lay the foundation for a company built to last. It is one of the main reasons why most professional service roll ups fail. The wrong people, for the wrong reasons, the wrong way! Giving that statement a more positive inflection…. Consolidations, and probably business in general, is about pulling together the right people for the right reasons and executing the right way.