Growing a fruitful business
David Harris, co-founder of Harris Farm Markets, was given a shock when he finished university and started working in his dad’s very successful chicken business. The jolt came when he discovered the business had been sold.
“I said to my father, ‘Dad, what have you done?” David remembers. “Instead of an excuse he gave me three bits of advice about starting a business. First make it something the big fellas don’t do well. Second, make it something that you can get into with limited capital so I can help you and third, make sure it is a cash business.”
Harris’ wife and business partner Cathy says after research David came and told he had two options — a fruit and vegetable business or a funeral business.
“I quickly told him that we had only one option,” she says.
Starting in 1971, by the mid-1980s they had 18 stores, which pioneered the fruit and vegetable supermarkets that were self-service, computerised and filled with every conceivable kind of ingredient for the most adventurous cook.
They had taken his dad’s advice and were real players and this was the time of Alan Bond and others of the high-flying 1980s, who later learnt the lesson that those who live by debt can also die by debt.
And while many of those entrepreneurs were ultimately banished to the bankruptcy bins of business history, never to rise again, Cathy and David Harris plumbed the depths of business failure but they came again.
But of course, they weren’t high flyers but hard workers who were victims of their own success with their Harris Farm Markets.
“We simply grew too fast,” Cathy recalls. “And we relied too much on debt.”
However, it was not just a borrow-and-grow story – there was also a lot of innovation.
“Gough Whitlam helped our growth,” Cathy says. “Equal pay for women meant we had to find a new way and self-service was it.”
Success meant that the Harris’s in those early days relied on bank funding and the ground rules for borrowing were a little easier than now. In fact, David believes it was too easy.
“I virtually had the keys to the bank’s safe,” he says. “We were doing well and the bank was prepared to fund more growth.” However, there came a time when an alternative source of funding was needed.
“We had used debt and we knew it was time for equity,” David explains. “That’s where Panfida came in.”
These were heady times following deregulation of the Australian economy after 1983 and Panfida Foods was effectively a company collector and one company they went after was Harris Farm Markets.
“We received $7 million for 50 per cent,” David says. “And we really grew.”
Within two years there were 37 stores but Panfida had bigger plans despite the fact that the company was travelling well.
“They bought something like 900 newsagencies in the UK and 150 Gas & Go businesses in the US,” he says. “This was real 80s stuff.”
Eventually it all went pear shape for Panfida Foods, ending in bankruptcy and the Harris’s were in serious conversation mode with the bank.
“They agreed I could buy the company but day by day the economy got worse and the negotiations became harder,” David admits. “The bank told me: ‘You sell the thing’ and I told them that I wanted to buy three of the shops.”
Bankers proved they had more heart than is often thought by agreeing but there was a condition — it had to be the last three of the 35 stores that were left.
Like many enterprising business types the Harris’s fell back on one of the oldest forms of business finance – friends and family.
“My mum and father-in-law bought one of the three stores I wanted,” David says. “The largest creditor took Edgecliff and a mate bought Pennant Hills.”
The deal was that David would run the stores and over time he would buy back into the operations, which he and Cathy did.
Strange times call for strange responses and Cathy went corporate for a time and this culminated in her being given the challenging task of being Australia’s first Director of Equal Opportunities for Women in the Workplace. She later became the deputy chancellor at the University of New South Wales.
The business has come again and there are now 17 stores but the experience has given the Harris’s a more realistic perspective on growing a great business.
“I am now very careful about fast growth,” David says. “If we have been growing quickly, we now sit back and rest if necessary before going again.”
Cathy says entrepreneurs are often A-type personalities.
“The very thing that makes things possible is what can stop them,” she says. “You have to have so much guts to open 37 stores – that is really putting yourself on the line every single day and you have to have a certain personality to do that.”
“If we had an outside director we might not have got into a position where we were looking for a Panfida,” she says.
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.
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Published on: Friday, November 18, 2011