Get smart â the Ned Montarello story
The Ned Montarello story is one for the small business textbooks where an entrepreneur saw a neglected market, thanks to the hardnosed attitudes of the banks, and then linked it to one of greatest threats to business success – the proverbial cash flow crisis.
Then, when he was cleverly able to connect his market-solving ‘product’ to a tax deduction, he was staring a business winner square in the face. Of course, there were other hurdles to jump, such as getting the support of major retailers and financial institutions for the millions of dollars needed to make his RentSmart business fly, but he did it.
West Australian Montarello kicked off his ThinkSmart business in 1996 with its RentSmart business spearheading the venture.
Recognising that typical small businesses spent around $5000 a year on equipment and that the statistician said there were 1.2 million small businesses at the time, Montarello saw a $6 billion market ripe for the plucking.
“The RentSmart product was therefore born out of the opportunity to meet the needs of the small business person for convenient, fast fuss free finance in retail stores and, importantly, provide them a simple path for staying up to date with technology,” he points out. “Our business model was intended to be portable and scaleable and the niche in which we operate is worldwide so the opportunity for growth is exciting.”
“Like many small businesses I faced those standard start-up pressures – I’d mortgaged my home for capital to finance the business and had no fixed income.” he recalls. “It took four months to set up the product and systems and we took two months after opening before we wrote any business, so that’s a period of time I’ll never forget.”
He also needed funds so that his customers could rent rather than buy their essential equipment.
“I had the monumental task of finding a wholesale funder to take the credit risk on an unproven model and convince them to outsource the approval process for customers to us to provide instant approval at the point of sale,” he explains. “These were the same banks who’d ask a small business to provide them an asset and liabilities statement for a loan to get a $2500 PC, which was the very issue our business was set up to overcome.”
The challenge of securing a national retailer to position the product took a year, but a bright future looked assured when Dick Smith Electronics took on the product.
The RentSmart product is now in more than 1000 retail outlets around Australia, in outlets such as Dick Smith Electronics and Powerhouse, JB Hi-Fi and Officeworks.
His offering effectively saved money, cut out deposits and balloon payments, quickened upgrades to new technology, provided tax deductions and was cash flow friendly.
He took smart thinking to a new level in 2003 – the export level – cracking a deal with the Halifax Bank of Scotland and trading with one of the largest electrical retailers in Europe and the UK.
Four years later the company fulfilled just about all entrepreneurs’ dreams of going public, being floated for $204 million. He is now executive chairman and CEO of the company and that’s something that many founding entrepreneurs don’t have the skill set to pull off.
Montarello says that’s reflective of the fact that RentSmart is a product that does well during challenging times.
And this is why Montarello is not too phased by the 50 per cent tax concession for those who buy their equipment, despite it could affect some businesses decision to rent.
“To the people who use RentSmart, the tax benefits of the concession are less important than the need for cash flow which RentSmart provides,” he insists.
He says the company is committed to the long-term contracts, with its wholesale funders and retailers worldwide positioned for growth with the recovery.
“Our biggest challenge is to execute our business plans in a focused way and to that end, operationally, we have positioned the business to be net debt free and geared to grow cash reserves during 2009,” he says. “We’ve aligned our group resources to enable us to focus on our more profitable, accessible territories and partnerships in Europe and Australasia where we see opportunities to gain market share through this downturn.”
Reflecting on how he built his business, Montarello advises you need a great product, good cash flow and conservative gearing. You also need to take advice, plan regularly, be prepared to change and take considered risks with qualified information before fully backing yourself.
He also referred to the importance of internal grit.
“I think every person who has built a successful business has an inbuilt determination and self belief in their creation,” Montarello suggests. “You have to refuse to accept failure as an option and as everything is on the line, you can’t give up – you have to make things work.”
This has been a long and successful trip for a son of Italian immigrants and former AMP employee, but it has been one that has been good for both the ThinkSmart business and the many smaller operators who now have a much easier access to crucial business equipment.
If you’re looking to work on your business rather than being stuck in it, book in for a complimentary business assessment today with Switzer Business Coaching.
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.