Oceans apart

What challenges do exporters face?

The tyranny of distance isn’t really a problem when it comes to exporting for Fast50 companies, apart from the time spent on aircraft. Companies like NextWindow (see page 48), and 4RF make sure they hire local experts to represent them. In NextWindow’s case, that meant hiring a US veteran to represent the company in its largest market.

“Our markets are pretty well defined,” says CEO Al Munro. “We do tradeshows and call on customers, but selling out of New Zealand — apart from the travel — isn’t that big a barrier.”

PolyMedia, in the Fast50 for the second year running, this time at number 24 with revenue growth over two years of 255.7%, provides software development for US companies from its Nelson base. A major project was the design and development of a real estate transaction system, one of the largest in the US, which has 60,000 documents added to it daily. The company is also working on an interactive information platform for Maui motorhomes, which will use a flat screen and allow access to entertainment like DVDs and games, and online information. The system will be deployed in the Maui fleet throughout New Zealand and Australia and the company is talking to US operators.

One strategic question which cropped up for companies was how they could use New Zealand as a competitive brand advantage overseas. Ironically, PolyMedia CEO Richard Clarke strikes more parochialism in New Zealand than he does offshore. The company doesn’t have any corporate customers in New Zealand for software development because corporates in Auckland or Wellington prefer to outsource work to local developers.

“But we have a large team working for a large US corporate on a system the size of which there would be few in New Zealand so we have a lot of experience and credibility there. But if a corporate from the US is willing to send work offshore, New Zealand is quite attractive although not as cheap as, say, India or Pakistan.”

When it comes to raising capital, Clarke strikes the same problem.

“There’s a major issue regarding credibility in New Zealand. We seem to always struggle with that if we go to Auckland to talk to investors. I quite regularly get asked when it comes to investment discussions, ‘can you really do this from Nelson?’ For overseas business it isn’t a problem at all. Contracting with a New Zealand business is a novelty and New Zealand has a good reputation.”
For Datasquirt, the IT company at number five with revenue growth over two years of 539.3%, breaking into international markets is a matter of hard work and finding the right people to represent the company, says director Christian Bernecker. The company has sold its text product to call centres in New Zealand and Australia and is hoping to break into the German market next.

“The challenge is finding good people to sell the product,” says Bernecker. “Do you use distributors or sell it yourself?”

Wellington-based 4RF sells its wireless network solutions across 75 countries with the usual challenges of language and culture. It has an office in Britain, a subsidiary in Brazil, and representatives in the United Arab Emirates, the Philippines, the US and Asia. Beyond them is a network of local agents. Business is a mix of direct sales and through distributors, says chief technical officer John Yaldwyn.

Although the company began in 1999, it didn’t really have a product until 2003, says Yaldwyn. So how did it manage to expand so rapidly? It takes money, basically, he says; money to travel, to attend roadshows, to get around the globe.

“We were nuts to operate in New Zealand, to be honest. Here we are in Wellington paying rates to the city council but if we went to Victoria in Australia or any other country that had a halfway decent policy towards startups and R&D investment, we would be in a much better position. But I guess it’s because we like New Zealand that we stuck it out.”

His company has received tremendous help from New Zealand Trade and Enterprise, says Yaldwyn, but he would like to see local and regional councils doing more to help. By fostering technology parks, for example.

“I don’t mean an incubator building. I’m talking about serious investment in buildings and space. Generally the benefits occur to a region so I would expect it to be regionally based. It would be interesting to know how many councils around the country would be interested in a three-year rates holiday to foster investment.”


Hanging ten

Two Kiwi entrepreneurs are riding the crest of a growing youth market for surf fashion


A couple of years ago, Geoff Hutchison and his brother-in-law Cameron Cutmore made a conscious decision to go for broke in developing a surf shop empire. It would mean longer hours, hard work, possibly more drama with new stores and more staff, and a need for more capital, but they figured the payoff would be worth it. If they pulled it off, they could retire early to go surfing whenever they wanted.

And if Australian companies like Billabong and Quiksilver could build billion-dollar empires on the back of a growing youth market for surf fashion, surely there had to be room for a couple of entrepreneurial Kiwis to do the same thing on a local scale?

Yes, as it turns out. Backdoor Surf Shop appears at number 11 on the Fast50 with revenue growth of 358.8%, the first time a surf shop empire has appeared in the Fast50. Turnover has risen to $5 million and they have 42 staff, although many of them are part timers.

The company has four shops — in downtown Hamilton, Te Rapa, Matamata and Takapuna — with another two on the way. And Hutchison and Cutmore have their eyes on others, expecting to grow through acquisition and opening new stores over the next 12 months.

“We’ll open new stores if the fundamentals look good,” says Hutchison. “We’re not hell bent on growth at any expense. We’re also keen to look at existing businesses for sale and there are a number where the operators have been around for a few years and want to get out.”

The pair formed a business partnership eight years ago when they opened a surf shop in downtown Hamilton and just kept expanding into larger premises. Last year they doubled the floor space and the shop now occupies 600m2 in the central city.

Matamata, not known for its surf culture, was the next step. Hutchison admits the shop “is a bit of a dud” but still makes enough profit to pay off the $160,000 investment in eight years. In 2004 they bought an existing business in Takapuna, despite warnings that the Auckland market would be too difficult to break into, and discovered North Shore and Hamilton teenagers shared similar tastes in clothes. In March this year they opened a shop in a new factory store complex at Te Rapa.

Initially, expansion was fuelled through private funds. As Hutchison says, most people who owned property through the recent boom had spare equity. “We now have a very good relationship with the bank.”

The other issue they face is pressure from clothing giants like Quiksilver. “Because they’re a public company, they’re hell bent on double-digit growth each year so they pressure us to take bigger orders,” says Hutchison.

So far, so good. Hutchison, 43, and Cutmore, 42, are successfully surfing the wave of expansion. But do they still find time to actually go surfing? Well, says Hutchison, what was a lifestyle business is now more business than lifestyle. “But if the surf’s good, we try and rearrange our schedules.”