Most company founders are good at the early stages of entrepreneurship. They’ve got an idea to kick-start their operation. They’ve got energy, ambition, confidence. They’ve got the support of friends and family. They can manage whatever comes along. But in the phases that follow, they may discover they haven’t the wherewithal to truly increase value. Just because you have a knack for starting companies, doesn’t necessarily mean those skills will translate into growing one.
There are celebrated cases of founders who have successfully started and grown a business – Elon Musk, James Dyson and Bill Gates spring to mind. There are, however, many more examples of entrepreneurs who perform well initially, but then begin to run out of fresh ideas as their company ages. As a business owner, there are ways you can avoid this. Here’s the story of one entrepreneur who found a path to success.
How one founder unlocked the true value of his business.
Damian James grew up in Melbourne and learned a lot about the ageing population in Australia. Realising that healthcare could be a lucrative field, he discovered a sector ripe for disruption, podiatry, a branch of medicine devoted to the diagnosis, medical and surgical treatment of foot and ankle disorders.
At the time, most podiatrists in Melbourne worked from a retail location where the doctor owned and operated a private practice. The podiatrist would rent space, hire some staff, and charge patients per visit. At night, some enterprising doctors would also visit residential homes to offer care. Reasoning that many old people nodded off shortly after dinner, James saw an opportunity for a podiatrist to visit residential homes during the day when it was more convenient for patients.
The million-dollar Idea.
James, who’d earned a Bachelor’s degree in Podiatry, started Aged Foot Care. He approached residential homes with a compelling offer of removing the traditional overhead of an office. Aged Foot Care went through a variety of growing pains over the years, including an expensive rebranding to the name Dimple. By 2015, Dimple was generating roughly $200,000 of profit on $2.5M in revenue.
Despite his success, James was frustrated. The company’s growth had stalled. His management team seemed perpetually incapable of hitting its targets. Quarter after quarter, he would set goals with his team, but they’d fall short. James decided it was time to bring in outside help, so he hired a Chief Operating Officer.
To recruit the new COO, James knew he’d need to give up some equity, so he commissioned a valuation for Dimple which came in at $2.5 million. He offered a salary, plus 5% of the company. But then he came up with a great incentive. James offered another 3% of the business (up to a maximum of 20%) for every $1 million the COO would grow Dimple’s revenue past $5 million.
The new role was a huge success. James quickly promoted him to Chief Executive Officer and stepped back from the day-to-day operations. He decided to let the company thrive under the new CEO’s leadership. Down to just one day a week, James limited his involvement to providing a vision and protecting the company’s core values, while the CEO ran the day-to-day business – pursuing James’ core strategy of contracting with aged care facilities.
The company hit $11 million in revenue by 2017.
The big bonus.
Zenitas had a similar strategy of bringing healthcare to patients in homes or care centres, rather than having them languish in hospital beds. The company was keen to add podiatry to its stable of services. The decision-makers realised that acquiring Dimple would allow it to become an overnight market leader.
In July 2017, Zenitas acquired Dimple for $13.4 million. Under different leadership, the company had grown in value over 500% in less than three years.
This is just one example of an owner with a great initial idea, but not the necessary skill set to monetise it. Starting and growing a company require different skills which are rarely found in the same individual.
This begs the question if you really want to generate value, could it be time to find someone else to run your business?