'How I'm shifting my business from survival mode to growth'

In December 2015, Michael Lavilles took over full ownership of travel wholesaler Beyond Travel. Overhauling the company’s cash flow and culture are among the most pressing challenges, he tells My Business.

Business foundations
Unlike many SME owners, Michael is not the founder of the business he currently owns.

“The company has been running for 22 years now; in 2004, I joined the company as a part-time FD [finance director],” he explains.

He worked as an employee of the business for roughly a year before the opportunity became available to invest in its future. And so in 2005, he and another business partner assumed ownership of Beyond Travel.

“And in December 2015, I bought my partner’s shares, so I then [took over] 100 per cent ownership of the company,” says Michael.

"Capital is very key, especially for our industry, because we operate on very narrow margins, so our retained earnings is basically what we use to grow, and that is very small."

Maintaining cash flow
For a business that operates seasonally (given virtually all trips booked through the company are taken during the northern hemisphere’s summer), and has low margins and lengthy payment terms, the conditions are ideal for Beyond Travel to face chronic cash flow problems.

“Capital is very key, especially for our industry, because we operate on very narrow margins, so our retained earnings is basically what we use to grow, and that is very small. So access to it is key, even just to survive on a cash flow,” explains Michael.

“Because we are seasonal, and we’re a northern hemisphere-tied company, it depends on the summer of the northern hemisphere. So during November to February, we’re very quiet, no one wants to travel there, so our cash dips around that time. Any future investments, I have to factor in our negative cash flow at that time.”

Rather than rely on loans to cover any capital deficit, Michael has opted to use his business American Express (AMEX) credit card to tide the business over during periods of low capital.

“What [AMEX] offered was that I could use my credit card to pay my suppliers to keep me going through those months, and because of the term, which is 51 days, last year alone that really helped me a great deal to keep the company going,” he says.

Yet Michael also insists on not relying too heavily on just one solution to his cash flow woes, and so is looking to innovate the payment arrangements with his key suppliers, enabling him to make payments when it suits his business.

“One thing I’m working on now is collaboration between us and our partners overseas ... but because we are not a big company that can leverage much of our sales like Woolworths and Coles, I had to come up with something that [allows me to] access the finance and [our partners] benefit from it,” he explains.

“So I came up with a model where it’s a reverse override. I went in there two months ago, I told them how we’re growing, where we are going, what our goals are and what’s in place, and I went to them and said, ‘My preference is we collaborate, we achieve our goals together and instead of you paying the override, I will pay the override, so your margins will be higher [and] your sales will be higher as well because we grow it together.’

“So they are all very keen; they’ve never heard of it before – a client telling them, ‘I’m going to come over and pay you the money’.”

Survival versus growth mentality
As Michael admits, the cash flow challenges faced by Beyond Travel has meant the business had been stuck in a survival mentality, constantly trying to keep its head above water.

However, Michael has aggressive plans to snap out of this mentality and shift the business’ ambitions towards strong growth.

“The general attitude was not growth-oriented, but survival – it was a very survival mode for a long time. I switched that around, I went for growth-oriented,” Michael explains.

“I invested heavily in my people – I trained them, I put them into a mentorship program, I’ve gone into incentive programs. And I understood fairly early on, because I wasn’t buying a brick-and-mortar asset for my equity; I was actually buying people’s goodwill and what is in their mind, so I knew that was the [real] asset and that was the asset I had to invest in.”

Part of this investment in his employees has been bringing them on board with his plans for the business and rewarding their efforts, rather than simply dictating they work even harder.

“My arrangement with them is 30 per cent of our net profit before tax is shared between everybody, so everybody works really hard, we [all] make money and we share it at the end. There’s been a lot in that program of developing them, so I’m very aggressive in terms of growth,” he says.

“I don’t mind breaking even, as long as I’m not borrowing money. Surviving on a low margin, and very small retained earnings, I think would have been in the past just survival, but I’ve reversed that around.”

"I think the biggest thing, especially for small business ... is the ability to come out of that small business mentality of working seven days a week."

Workplace culture
As well as directly investing in upskilling and training his employees, Michael admits he is actively working on changing the culture within the business as a means of fostering higher productivity, commitment and sense of achievement.

“I think the biggest thing, especially for small business ... is the ability to come out of that small business mentality of working seven days a week,” he says.

“I don’t know how much time you have to even think or strategise, so how are you going to grow this business? I think that’s the number one thing, whoever the leader is – in small business, you really need to come out of it and think about how you’re going to grow that business and what help you need [to do it].”

This idea of flexibility and having an enjoyable lifestyle, balancing work and personal time, is something Michael is focused on delivering to his employees too.

“The way it worked in the past was that to succeed, you had to work until 10 o’clock at night, seven days a week. It was set by the then-MD that that was the case. My view is completely the opposite,” he explains.

“My view is that we had to be wise, we had to be smart, we have to be intelligent first before we can work hard, so the first thing I said to them was that working long hours doesn’t impress me; what impresses me is if you think, if you work smart, and we have to know where we are going and we have to be ambitious.

“My priority is my family, and I could not be a hypocrite asking them to work long hours and I’m not, so I’m setting the pace of leaving at 5 o’clock in the evening and going back to my family.”

"We’re not just looking at ourselves and growing and making money; the more we grow, the more the community actually benefits, and I think that’s a good thing."

Giving back to the community
For Michael, there is nothing more important to building and maintaining brand credibility than giving back to the community.

“Part of the thing in business that we do is that 10 per cent of our net profit before tax goes back to helping communities directly – not necessarily just giving money to the Red Cross, we actually help people. It’s an area that I am passionate [about], social entrepreneurship,” he explains.

“At Beyond Travel, we’re not just looking at ourselves and growing and making money; the more we grow, the more the community actually benefits, and I think that’s a good thing.

“[For example] this year for Mother’s Day, we sent the best roses in town to each woman at the refuge centre, because I wanted to say, ‘You are a valuable person, you are wonderfully made’, so we sent them a card and a flower. We achieved that one, but that is the type of thing I would like to do with the success that we have, and to share that with people directly.”

Quick facts about Beyond Travel
Industry: Travel wholesale.
Established: 1994; Michael has been a shareholder since 2005, and sole owner since December 2015.
Customer base: Australia- and New Zealand-based travellers, although the company is looking to expand its online presence.
Number of employees: 16, plus contractor sales reps.

Links: 

https://www.facebook.com/BeyondTravelau/

promoted stories