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Why the best entrepreneurs say no to opportunities

Why the best entrepreneurs say no to opportunities

episode 1

Shark Tank’s Naomi Simson and Ivan Lim on why getting back to basics is still the most effective form of entrepreneurship.

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Show notes

Shark Tank’s Naomi Simson (RedBalloon) and Ivan Lim (Brosa) on why getting back to basics is still the most effective form of entrepreneurship.

Learn more about starting your own business and entrepreneurship in Naomi Simson’s new book Ready to Soar.

Episode transcript

IVAN LIM: The problem is going – what are the most important things and what are the best things to do? And being willing to give up good opportunities for the best opportunities. I think that has been a process for me, but that’s also been a process for me to instil into the team, to help the team understand this and be able to influence them. So strategically we’re singing from the same songbook, moving in the right sort of direction.

ALI MOORE: From the University of Melbourne, this is Expert Hack, a show about the changing world of work and how industry experts are finding clever solutions to tricky problems. I’m Ali Moore.

Today, you’ll hear why some of the best entrepreneurs say no to opportunities … and how being selective can help you focus on what matters.

Gay Alcorn is speaking with founder of Red Balloon, Shark Tank’s Naomi Simson, and Ivan Lim, CEO and co-founder of designer furniture company, Brosa.

Gay began the conversation by asking Ivan, what distinguishes an entrepreneur from a regular business owner?

IVAN LIM: There’s a lot of problems in this world, right? And there’s different sort of social issues. And I think entrepreneurs are the innovative problem solvers who go out there and figure out how do we solve these problems. But, they’re looking for repeatable, scalable ways to do this in order to make the maximum amount of impact.

And that’s a constant journey of problem solving and testing new things out, testing assumptions and finding solutions. So, it’s a continuous sort of journey. It’s a mind-set, but it’s very different from just being a small business – of which there is nothing wrong.

GAY ALCORN: Well let’s go back to when you both began as entrepreneurs. Was there a moment or an event where you thought I’m going to jump in? I’m going to take this risk, I’m going to be an entrepreneur. What happened in both your cases?

IVAN LIM: It started when I was really young. I mean I grew up in a business family. And so, we sat around the dinner table and – I kid you not – my mother who is a businessperson would sit around the table and we were like 10 or 11, and say “so who has the $100,000 business idea and who is going to buy a house first? It wasn’t like, “how was soccer practice or how was drama practice?”

So, you know I kind of grew up in this environment where being a business owner was somewhat expected of you from the very beginning.  But, we started Brosa really because I bought my own place here in Melbourne and I brought my mom around. And the business my mom is in is property and interior design. And so she went, “Ivan, I love you. You’re not allowed to go to IKEA.”

And I went, “oh gosh what does this mean?” And so, I ended up going down to Church Street, which is where all the designer furniture stores are. And one weekend became four weekends and I was in all these showrooms and meeting all these salespeople.  I thought, if I’ve graduated from IKEA, and I don’t want that same sofa that all my friends have, but I don’t want to spend $15-20,000 on a designer sofa that looks beautiful.

Where do I go in this dearth of opportunity? I realised that there was a real opportunity to bring accessible designer pieces in a painless fashion to customers – right? And so that’s when we decided we could meld the best of furniture with the best of technology to make that a really seamless process.

NAOMI SIMSON: Now my journey to entrepreneurship was actually very, very different. In fact, I always saw my job as that I was going to be a corporate girl.

You know when I graduated from the University of Melbourne, off I went on my career journey and joined big corporations – IBM, KPMG, Ansett (which was an airline). And so that’s how I saw myself and it wasn’t until I had children that I wanted a different sort of a life. I wanted to be available for my children, but also keep working and keep using my grey matter.

And so, I was looking for something else, so I actually became a freelance marketer and this was last century, and it was actually really difficult to find clients and it was either feast or famine. The problem that I saw was that as a freelance marketer, you couldn’t scale a business. Everybody wanted to be with you. It was fee for service. If you didn’t want to work you couldn’t go on holidays.

And so I thought, what is another way of delivering marketing to small businesses who desperately need it but can’t afford it? So that’s where the whole notion of aggregating the industry came from, giving it a brand, and instead of pay – you know – paying a fee of service for hours served, it was like: “no, I will just deliver you customers and you give me a clip of the ticket.”

People think Red Balloon is a wonderful gifting solution – amazing experiences. But, it’s actually a marketing company and all we do is deliver customers, 3.8 million customers, to other small businesses. That’s what we do.

GAY ALCORN: You’ve both moved on from your beginnings but what is it like now? Do you get people asking for advice?

NAOMI SIMSON: It’s such responsibility when people see you notionally as successful, then they think you’re going to understand every business – which you don’t. And so, I literally have people coming up to me in the street. My kids get pitched and their friends are saying: “ask your mum what she thinks of this idea.” And it’s such a responsibility.

So, I had to – I had to be responsible about that, so I wrote [a book]. Are you meant to be an entrepreneur? It’s a very emotional journey of which most people don’t talk about. Are you meant to be a leader? Are you a business owner or do you want to licence whatever you have? And then I talk about cash. What’s it like to be poor. You know to have all the idea, all your money in the business.

I remember Adrian Giles, who was on the rich list, didn’t have two cents to rub together but his business was valued at X.  Because – of course – we put everything into our businesses. I talk about that, because it’s very important that people make powerful choices. They don’t just fall into entrepreneurship, especially with this notion that it’s going to be interesting and exciting. It is a long hard journey. It really, really is. And exits are 1% of what happens in entrepreneurship.

IVAN LIM: Naomi really hits the nail on the head. I think if there was something that I tell entrepreneurs is you need grit. There’s an amazing book written by Angela Duckworth about this concept of grit, of intentional practice, of working through really difficult things. And that might be one of the key indicators of success.

And so Naomi is right. I think it’s an incredibly emotional journey. Like you know, even when I go out and do different things, people are like, “Ivan, it must be exciting running your own business.”  I’m like, I know I have like 10 issues sitting my inbox right now that I need to attend to and it’s like, if I don’t put out that fire, this thing will happen and this thing will happen.”

But, you know if you’re very mission oriented and you believe in what you want to do and you’re driven by that and you enjoy that process, that’s going to help you get further. So, I think – you know – one, people need to have that tenacity. But two, to really build something, they need to believe in it and they want to dedicate their time to it, right?  Because, I think there are easier ways to make money. Honestly. That’s my opinion. Easier ways to make money!

NAOMI SIMSON: And getting a job is one of them.

IVAN LIM: Absolutely, absolutely! Way, way easier! Less stressful, better for your family, better for your friends, and so on.

GAY ALCORN: But then why do it, both of you?

IVAN LIM: Yeah. Well, because I think entrepreneurs are  just wired very differently. Like they’re just naturally always working on new things.

NAOMI SIMSON: And if it wasn’t this, it would be something else. Like when I worked inside corporate, I was a pain in the neck. I was never a very good employee, because I always kept asking why? Why we do it that way? That doesn’t make any sense. Why don’t we do it this way? I was deeply curious. And so, therefore in some ways it was a natural progression for me to be an entrepreneur. Working inside corporate for me was absolutely constraining, because I couldn’t understand why they did it that way.

And also, especially the bigger businesses – the lack of customer focus. I couldn’t stop it. But shouldn’t we talk to the customers? Couldn’t we talk to the customers? They were like “no, no, no. The unions want to do it this way.” But the customers are the ones that are important and they were like, “you go worry your pretty little head about something else.”

So I was an agitator, always. So, actually it made sense for me with my personality to have my own show.

GAY ALCORN: So, can entrepreneurship be taught then? I mean, what’s the role of universities or training in this? Or is it very much an instinct? Is there something you can be taught?

NAOMI SIMSON: Nature versus nurture? Look, I would argue that the role of the university or the role of education is to give the foundations. The foundations of business. But, you cannot teach somebody to have a crack. They either feel it or they don’t feel it. And entrepreneurship is energy.

But too I see too many businesses failing, particularly those coming on Shark Tank. Interestingly enough, sitting on the board of the Faculty of Business and Economics, they said, “how many of those Shark Tank businesses have got a business degree?” I said zero. And therefore I’m really working hard with them to understand the fundamentals. So, I think the role for education is materially important if you ever want to scale your business.

And the number of people that I have seen, who go in to business, who don’t even understand the fundamentals of: what is cash flow forecasts? What do you mean? It says I’ve made a profit, why haven’t I got any cash? They don’t understand those fundamentals and I also think there’s a lot of kind of modelling and understanding of the commercial acumen that is absolutely required through education.

And I think that that’s paramount in the role, but in terms of the energy, the energy usually comes from the problem that’s being solved. If you really see this as your calling, you can’t stop it. But that can’t be taught.

IVAN LIM: Yeah, you get agitated every time you see it. You just say, “that is so annoying. Like that is really, really annoying,” and you just think about it all the time. It’s almost like something hounds you and you can’t escape it.

Naomi is right – it is a sort of energy. So, I agree. Like, I think education plays a part in giving you a lot of the tools and the basic foundations that you need, but it doesn’t take you all the way there. It’s an important part, but it’s not everything. And there are certain traits in in an entrepreneur which I don’t think you’re necessarily born with per se. I think it can be nurtured over time, but you need those traits, right? It’s not because you walk into a lecture and you go through a certain course and a unit and you pass that, means OK you’re qualified to be an entrepreneur, because that’s just not how it happens.

NAOMI SIMSON: I also think it’s who you hang out with. So, you know, you growing up in your family, it was that was how business is run. My parents were both in businesses. My mother worked for Lyndsey Cattermole, who’s one of Australia’s great entrepreneurs and my father had his own business. So, seeing the possibility of what entrepreneurship looks like I think is really important as well.

Another part of the role of university when it comes to education, is like-minded people hanging out and creating networks. If I look back to my university days, a very long time ago (LAUGHS) those people are still my friends. Those people are my networks, those people are my go to. So, equally important as the education program, is the networks you create.  And you never know if that person is going to end up an investment banker, that person is going to end up a senior partner in a law firm or an accounting firm, and you’ve got your networks.

I think that that is a very important role that universities play – the cohort that you create and it is a concern that I have in working with the university is a lot of people come to university and don’t necessarily connect. They don’t actually build a cohort around them. And to me they’re massively missing out, you know, because they can actually do a lot of the program online.

GAY ALCORN: Ivan, you’ve been involved with the Melbourne University Accelerator Program. What do you get out of that? How did that help?

IVAN LIM: I think, look, the accelerator program is helpful. What it is is a six-month program. The university decides to invest a small amount of money into promising sort of start-ups that have potential to grow and provide mentorship and a working space.

But I think it is very much this sort of cohort effect, which is you immerse yourself in an environment where everyone is pursuing a similar sort of goal, right? Which is to build a repeatable, scalable business out of something that’s temporary right now, unless you find this repeatable scalable business model. And so I think what you get out of it is a lot of great connections. You get a community of people who have all this learning who are willing to share and support you, and I think that’s one of the great things about the start-up community that’s growing in Australia. It is a very generous community that spends a lot of time giving back and I personally feel the responsibility as a founder to be able to give back because, I think the ecosystem only grows if we’re all in it together. And there are many different parts of the ecosystem; whether that’s funding, whether there’s other great entrepreneurs, whether it’s talent – but we all need to be able to contribute to that, because the longer-term growth of the ecosystem means a healthier viable industry for all of us trying to build things.

NAOMI SIMSON: And it is the backbone and growth of our country. That’s where the growth comes from. That’s where employment is coming from. So, the ecosystem is very, very important and not something that was around when I started my business, because it was such a long time ago. I think if there’s one thing I note is that really there is a lot of generosity in the start-up community.

GAY ALCORN: So, this is also important for Australia in its future. I was just interested, Naomi in – has government got a role? Have we got the policy setting rights to help, or is it is it just get out of the way really for governments to let you go on with it? How do we compare with what other countries are doing in this area?

NAOMI SIMSON: Countries is lots of countries – some are doing it well, some are not doing it well. I would say Israel is doing it incredibly well. I think that we’re neither in nor out. When it comes to our government, they put lip service to it on occasions.

But you know, on the whole, most founders that I know are successful despite the environment in which we operate. I just don’t think that we’ve really done it well in terms of, you know, workers. I mean, what did they just do with 457 visas? I mean, really you know, I had – we are always looking for tech developers. More than a third of our workforce are either developers, UX designers, testers, QA, all of these people, they’re almost impossible to find and terribly expensive.

Some people choose to come to Australia for a lifestyle. And it has always been a great way for us to grow our business and grow the economy, because we’re paying people, they pay their taxes, and then they go and spend money in our economy.

IVAN LIM: Well, I echo Naomi, right because I myself am an immigrant. You know, I was born in the UK. But I grew up in a country called Brunei. And then I moved here, when I was probably 17 or 18, so I’ve been here for 15 or so years. Whatever it is.

And the reality is, that immigration is an important part of developing any economy. I think, when you look at the really successful ecosystems out there in the world, like in Silicon Valley some of the most successful CEOs of some of the most highly valued companies are immigrants. Right? And they came in, and immigrants are – you know – hungry. They are innovative, they look for new ways in order to create a better life for themselves.

And I think you know it’s important to recognise that. And in coming as an immigrant myself, I’ve lived over half my life away from home. It’s not necessarily a threat. I think there’s a lot of opportunity that comes from great people with great skills coming into an economy wanting to contribute and build up the local economy here. So, I totally agree.

We struggle for talent. One of the hardest things for any start up is finding great talent. And it’s not just going to be solved by immigration, it’s also an investment into educational institutions to make sure that we have the most qualified people in order to build this new knowledge economy. But an important element is bringing in great talent into the economy.

GAY ALCORN: You have quite a high public profile. I just was interested in in this era of social media here of branding everything, how important is that being an influencer as part of your business?

IVAN LIM: Well, I’m going to let Naomi take this one, as she is far more of an influencer than I am.

NAOMI SIMSON: Look, it actually comes back to very, very early days of Red Balloon when somebody called me and they said, “I’m on your website and about to make a purchase. How do I know if you’re real?” And I said, “Well of course I’m a real, I’m the CEO.” And she said, “well, how do I know you’re not the janitor?”  Well, of course I was working from home, and I was the janitor as well as the CEO, but what I realised at that moment was – I needed to build trust.

I needed to build trust for what I stood for, because people were spending their hard-earned cash on the hope that, you know, the jet boat ride or whatever was going to be there down the tracks. I needed to build trust in the person behind the brand. And, as a marketer, it’s the kind of the easier way to go when you have no money to build relationships and so forth. But I launched Red Balloon way before social media. So, the way that I did it was, I went to networking events and I did speaking engagements, and I just met people to build trust and that’s why I started doing it. But as it went further on, it became increasingly important to be a role model for others. And when I was asked to do the TV show Shark Tank, I said to them, I said, “I’m not going to do it if I am a token female.”

I said, “unless there is another woman.” It’s very, very important. Because having both Janine and I – and we never agree on anything. And I think that’s really important, because we’re not just saying, “oh half of our community, which is women, they all think that. Oh, that’s just girls’ business. Blah, blah, blah.” One of the things I love about Steve Baxter – not that I said that out loud – because we clearly fight like children the whole time. But, he doesn’t see gender when he does his investments. Nor, does he think that is a girl’s business.  And, he invested in a photographic business when the founder was seven months pregnant, and the only question he said was: “do you believe in the future of your business and the role you’re gonna play in it?” She said absolutely. And that was all that was important to him.

And I think, I think it’s really important when we can take gender out of the conversation and we only get gender balance when I get to lead men, as well as women. And that for me is what I’m pushing for. But, if I’m not prepared to stand on a stage, sit on a set and be that for others then I can’t say well why haven’t we got a balanced voice – because I didn’t stand up.

GAY ALCORN: Is gender still a discussion? Are most entrepreneurs’ men? Is it still a discussion within people who are entrepreneurs?

NAOMI SIMSON: It depends where you look. Silicon Valley is a disgrace. It is an absolute disgrace and also how they treat their female founders. I don’t think that’s the circumstance in Australia, because we also have far more support and infrastructure to support both genders here in Australia. And I think the other thing is that we know that your market is at least 50 percent women.

IVAN LIM: Way more than 50 percent!

NAOMI SIMSON: So, if you’ve not got the right talent on your team that represents your audience, you’ve got a really missing conversation.

IVAN LIM: It’s still an issue, I mean obviously. I think it’s very important. I grew up in a family of very strong women. So, it still astounds me how there can be such gender biases. So, I think definitely Australia is doing better than Silicon Valley. But I think there is a lot more that can be done and the fact that it’s still something that needs to be emphasised shows that it’s a problem.

Because this shouldn’t be something that we’re having to make a big fuss about. You should be something that people shouldn’t see gender and think, well female or male, there are discrepancies between the two.

In terms of my own personal profile, I come from a business perspective, so similar to Naomi. I think trust is important, but also, for hiring talent. I think we live in an economy right now where millennials move jobs very, very often. You know if you get them for two years, you’re lucky. And so, you know, I think people are really very mission driven. They want to work and contribute in a business or an organisation where they’re making something meaningful.

Being in the public and being an influencer, I think, is a big part of us attracting talent. Because, you know, you go into a business not so much for what the business does, but also for the people that you’re working with. And I think that’s really, really important. And I think also from a very personal level as well, I really do believe in building a knowledge economy and what we’re doing in the future here in Australia. And, I think if I can lend a voice, in order to be a considered opinion around how we go about building the future of Australia’s economy, I think that’s really important as well.

GAY ALCORN: So, what’s the one biggest challenge facing your business now, Ivan?

IVAN LIM: Scaling. Scaling is very, very challenging. I remember when Naomi and I first exchanged emails, she mentioned Verne Harnish and scale up.  We spent a lot of time looking through it, it’s an amazing sort of like methodology around, how do you scale a business right.

Because it’s one thing to kind of get from – oh you’ve got some initial customers and things are exciting. But taking a business from, you know, that sort of small stage into a really big business is a very different mindset, a very different set of skills and a lot of rigour and discipline and focus. Focus is incredibly important. And I think being entrepreneurs ourselves means we have no lack of good ideas. We don’t have a problem finding good ideas. There’s an idea a minute. You have lunch, and you’ve got a whole list.

The problem is going – what are the most important things and what are the best things to do? And being willing to give up good opportunities for the best opportunities. I think that has been a process for me, but that’s also been a process for me to instil into the team, to help the team understand this and be able to influence them so strategically we’re all singing from the same songbook. Moving in the right sort of direction, so that’s my biggest challenge right now.

NAOMI SIMSON: Verne says it’s what you say no to, that will make you successful. Because there’s no shortage of opportunities and ideas, and that’s why for us in strategy, we have to have just our three pillars. And if it doesn’t fall within one of those pillars we’re not doing it, because it’s about focus, but it is also the ability to execute well. And if you don’t execute well, you will never scale your business.

GAY ALCORN: Naomi, you’ve restructured and bought into an artificial intelligence product from Israel to help your business. Why?

NAOMI SIMSON: Look, you know, we always want more customers. And so, the reason for bringing in Albert AI was because the cost to acquire a customer has skyrocketed and it’s unsustainable.

So, whereby one used to spend money with Fairfax and News or the networks and now it all goes to Google and Facebook. So, when I started playing with AdWords a long time ago, 2003, when it first launched, it cost us five cents to get a customer. That went up to $50. We cannot make money. It’s not scalable. So therefore, we had to say, well how can we do it better? And with lots of people, lots of experts – very expensive –  we managed to get it down to $28. That’s still unsustainable, because my cost to service is still so great. So then we said there has to be another way.

And that’s why we found Albert AI in Israel – out of the military intelligence there. It’s been around since 2010 fine-tuning the product and, you know the first month we put it in, I think we got an acquisition rate of $16. Then it went down to $12 and last time I looked, it was $7. I’ve got an absolute sustainable business that I can then scale on other businesses, if I can find customers that cheap.

So you know, marketing is so not about the idea anymore. In fact, it’s very, very hard to get cut through. It’s about living in your customers’ shoes, but knowing where they hang out, and how they want to engage with you. And that is a relentless task and they shift like the sand.

GAY ALCORN: So, is it even possible to look ahead in 10 years’ time, and say what are the skills that the entrepreneur of the future is going to need? I mean obviously we still need the passion, they’ll still need the drive and the risk mindset. But are things changing so quickly, it’s almost impossible to know what different skills might be required if we look ahead?

NAOMI SIMSON: Skills versus behaviours and talents, I think are two different things. And if I look at all of the things that will completely disappear, it’s all the things that are transactional or compliance based. So, you know, at the moment being in small business you must be across all sorts of compliance and governance issues. You have a responsibility as a director and often those things are things that will undo a founder – whether it’s just making sure they do their GST return, or whatever it is (and I have had businesses go out of business, because they’ve forgot to pay their tax and they didn’t have any cash to pay their tax, and it’s very hard to raise money to pay tax).

So, you know, I would say it’s that level of compliance and governance that will just disappear. It will be almost automated, it will be absolutely transparent.  You know they say that Watson is the cleverest lawyer on the planet, and you know those sorts of transactions versus the negotiations.

So where is it the art versus the science? And I think that that will be the real difference. Relationships is what makes an entrepreneur, how they build relationships, how they build reputation – that will remain very important in an entrepreneur’s success.

IVAN LIM: I very much agree. I think you know we still live in a world where there’s human interaction. I think there’s still human sort of relationships that you need to build. And I think, I wouldn’t be presumptuous to say that I know what the future will hold in 10 years’ time. I think there’s definitely different skills that will probably be in demand, but that will shift in the ten years further from that.

I think we live in a world where things move very quickly, but we also live in a human world. And you know entrepreneurs are builders, you know, they’re constantly looking for ways to build new things. And so, having the relationships and the skill sets and so on, combining those things to build the right things will be important – no matter what age we’re in.

ALI MOORE: If you enjoyed this conversation, on our next episode we hear why one politician is calling for public policy to be based on hard evidence.

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