I did a Google search on how many businesses survive for 10 years or more. The first reference I found was an American study that said 96 percent of businesses fail before their 10th birthday. Not a great start – surely the numbers are better in Australia? A similar Australian study found that 50 percent of businesses fail within the first 5 years and 66 percent of those remaining fail before they hit the decade mark.
A slightly more positive way of saying that Lighthouse celebrating its 10th birthday is a rare thing. And we aren’t done yet!
For those of you that don’t know the Lighthouse story, we started as a partnership between the ACT Government and a seed fund provider, Epicorp Ltd, in 2008. The fancy description of our role was to do the ‘heavy lifting’ for businesses with high growth potential. We defined our role as helping existing, growing and aspiring business owners navigate the never-ending challenges that being in business brings – the things like managing staff, finances, finding clients and funding. But key to us was listening and just giving people a chance to offload while not being judged. We had experienced all these issues and emotions ourselves either through our own businesses or working in those owned by our families.
As is always the case with third party core funding arrangements it all changed in 2014. A decision had to be made about whether Lighthouse was wound up on 30 June 2014 or find some other way of making it work. I remember very clearly how that discussion went down. Candice (my now business partner) and I sat down over a cup of coffee on June 23, 2014 looked at each other and said are we going to do this – within 10 minutes we decided that we were going to buy Lighthouse.
We had no idea what that actually meant but oh how quickly you learn about some of the unpleasant realities of taking over a business. We tried to find some literature on how to prepare ourselves only to come across a lot of research saying it is pretty rare in Australia and that Management Buyouts under $50 million rarely find funding. Thankfully that wasn’t the kind of number we were talking about. But we did have to start a negotiation process – quickly!
But before I talk about the challenges, let me say that our board at the time, Mike, David, Ken and David were incredible; as was our informal board member representing the ACT Government. They had pushed us to be the best we could be, provided wise council and direction for 6 years and encouraged us to find opportunities outside our core business to give us greater scope and longevity. But they insisted that we always observe Lighthouse’ principles of openness fairness and inclusiveness; principles Candice and I continue to observe to this day. Some of our suggestions made them shake their heads or laugh really loudly, but they never discouraged us to take a chance, even if we were likely to fail. And they were the ones who convinced us that we could make it all work. In fact, they helped us see that this was going to be a great outcome for us and the business.
What we weren’t prepared for was the never ending sea of administration associated with the buyout. To start with, Lighthouse had a Constitutional structure that required an owner member. We got that, but didn’t realise that we needed this before we could finalise the takeover. So, on or about June 28 we rang our accountant in an absolute panic and all we could say was – help. She was brilliant, told us to calm down and within 12 hours we had a new company, LHInnovation Pty Ltd. I cannot say loudly, strongly or often enough how important it is to have a great accountant and lawyer on your side - at all times. Prior to this we had negotiated a buyout price and process with the existing owner member, Epicorp Ltd. Again we cannot thank Denis, David, Mike, Mick, Maria and Lindsay enough for their openness, encouragement and for treating us with such respect throughout this process. All these amazing people continue to mentor and support us 4 years later.
And then there was the biggest challenge. We did our due diligence around the liabilities we would be taking on and whether or not we could afford them. The most confronting one was inheriting staff we knew we couldn’t afford. We had to make probably the most difficult decision of all and cut our relationships with all staff. Can I say it is very strange issuing yourself with a pink slip, but that’s what we had to do. It was at this time that we decided to keep our core team small (thanks Rachel, Lyn and Jen) and bring in expertise as we needed it. This has enabled us to be agile and very responsive to changes in the market.
Then there was a rental lease that we knew was too expensive, contracts and agreements that had to be novated over to a new entity, the signatory on bills, bank accounts, credit cards that had to be changed, complex and numerous insurance policies to be renegotiated and our entire bookkeeping system restructured. It was an interesting experience to be told by our electricity provider that they couldn’t talk to me because my name wasn’t on the account – but I pay the bill. To push their point we were left in the dark, literally, for a couple of days. Our payment didn’t get processed so they cut the power which meant the internet went out and that’s the way it stayed for three days. We drank a lot of coffee that week.
We all know how much fun dealing with a telephone company can be, but when we received an $18,000 bill because they had decided that we were responsible for a liability our previous owners incurred (although never charged) my bookkeeper calmly said ‘that can’t be right’. My response was somewhat more colourful. It is strangely empowering when you stare down a big corporate and they realise that they can’t push you around. The bill was eventually ‘waivered’.
Everyone complains about their landlords, but we realised early on that if you establish a good relationship with them, in fact with all your suppliers, they will be a great asset to you. Our landlord worked with us to ensure we could afford the rent while we re-established ourselves and got comfortable with our new roles and responsibilities. It is a strange feeling, given that as CEO of Lighthouse Mark One I was responsible for all payments anyway, but now it was our money and we were personally taking on all the risks. It is exhilarating and absolutely terrifying at the same time. About a year in, the air conditioning broke down during one of Canberra’s hottest summers. I was fine, I was in Europe. But I got lots of emails starting with ...... I’m melting..... Our landlord worked endlessly to try and get it fixed over the holiday period and when all else failed he went out and hired portable air conditioning units to make it bearable.
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We are now four years in to being business owners and the challenges continue, but so to do the opportunities. We have a new board, which challenges us to see things differently and reminds us that it is pointless doing the same thing over and over and expecting anything to change – thanks Tony, Scott and Candice. I must say that Candice likes the idea that she can dismiss the CEO – me. We also took on an investor in the early days and we couldn’t have found a better partner. John is a very successful entrepreneur in his own right, but he lets us make our own decisions and set the company’s direction. He does however provide advice based on experience and incredible depth of knowledge on how we can do things better and smarter.
Candice and I have become a stronger partnership because of our common goals, ethics and values. We are comfortable that we don’t always have the same opinion because it makes us focus and come up with better ideas, products and services. We also have incredibly supportive partners, families and friends. Many don’t realise just how important all these things are to the success of any venture.
Over the 10 years we have established some fantastic programs with the help of our board, mentors and advisors – the ACT and Bega Valley Shire Microcredit programs, Teen Start-Up, Festival of Ambitious Ideas, Start-Up Camp Canberra, Virtual mentoring and a unique series of hands-on affordable business and personal development workshops. The consulting side of our business, LHInnovation, is going from strength to strength and we have continued to grow and nurture collaborative partnerships with many organisations in Canberra and the region.
We might be 10 years old, but we have a long way to go and are in this for the long haul. We are looking forward to working towards our 20th birthday and continue to build on the strong relationships and reputation we have developed in Canberra and beyond.
Happy birthday to us!
About Lighthouse Business Innovation Centre
Lighthouse has a strong track record of supporting entrepreneurs, researchers and inventers on the path from concept to commercialisation. Since July 2008, Lighthouse has worked with over 990 distinct enterprises and provided group and peer based services to over 3400 enterprises and individuals. For over five years Lighthouse has successfully delivered business advice, education, mentorship and networking opportunities to help these businesses commercialise their ideas and grow their companies. Lighthouse also delivers programs such as the ACT Microcredit Program for the ACT Government. Visit www.lighthouseinnovation.com.au for more information.
