Louise Schultze

Today we are talking with Louise Schultze, founder of online marketplace iBidAM.com, which helps connect SMEs with Australian suppliers of advertising and marketing services. The site, which was started in early 2008, was recently valued at $10 million and is now hunting for investors to help fund overseas expansion.

Louise talks about cutting costs through a radical business model, why companies need to be prepared to give something away and the biggest marketing mistakes SMEs make.

Can you tell us a bit about the sort of marketplace/crowdsourcing model which you have created.

Our business works on a premise that small business can go online and, using a template of questions, get a quote on anything in the advertising and marketing industry, so everything from business cards through to commercials. That quote automatically goes out to service providers that have signed up to use our system and there’s about 12,000 across Australia. We only use Australian service providers so we can cross check the quality control and it allow us to stimulate the economy here in that particular industry. Service providers will get the email, click on the link and just key in a figure, because the quote is already drawn up for them. If they are in the best three, that information will be provided to the client at the end of their bidding period.

But there’s a bit more hands-on involvement in that you do offer to guide people through that process a little bit more than other crowd sourcing sites.

Yes that’s right, we’ve got a free advice line. So that advice line has somebody with a degree in advertising and marketing acting as a consultant. We run that whole system at a loss, that education side of it. But what that does, is it brings an educational hub to our company where small business can go for that advice and then they can get all their products and services in the one place as well. The way I see it is like Bunnings employ people who have expertise in a particular area and they’re the people on the ground working with the customers.

Your background is in advertising and marketing and you’ve had a number of businesses. What prompted this idea?

Working in the industry for so long you get to know all the ins and outs and all the problems that are currently occurring. One of the greatest issues that we were finding was that because there was no well-known pricing structure you could charge whatever you wanted in the industry, and small businesses couldn’t afford or understand how the industry worked.

So they would go overseas to get cheap printing or cheap telemarketing services which was crushing the industry here. A lot of family print houses that have been around for generations were having difficulties and closed down because they couldn’t compete. At the same time, we had people ringing up just not knowing what it costs to get the generic things like a website and business cards.

And it has always been an area that people wing it. You wouldn’t wing your tax compliance, and you wouldn’t wing your legal requirements but people tend to wing their advertising and marketing requirements. It is a specialised skill and for the majority of businesses an area that may make or break them.

Absolutely. Do you think in the marketing services providers often see these SMEs coming?

Yes, I think it is kind of like the automotive industry, where you have got mechanics that are genuinely there to help you when you have a particular problem and then there are those that see opportunities and say ‘well, this person doesn’t know anything, I am just going to write whatever I can because they don’t know any different.’

And they think that there isn’t anywhere else to go to find out what the industry standard is, unless you start ringing around. If you start ringing around three, four or five printers just to get some business cards, that is not time efficient for a small business. It just simply isn’t.

For the majority of jobs the pricing structure drops anywhere between 40-70%, to give us a good industry average. Now, they are all Australian suppliers which means we are giving an Australian industry standard. It allows small businesses to go and say ‘you know what, my local printer has been taking advantage of me and I am going to go back to them’.

So these are the kinds of things that I identified over those 12 years in marketing, thinking there has got to be a better way to get an industry standard. Before iBidAM basically what I was doing was guaranteeing small businesses a better pricing structure than what they were currently getting by having 10 printers on my books. I would just send them a quick email saying this is the job, guys can you get back to me.

This concept was growing and I sold the business concept to an associate of mine who owned a communications company. It was starting to grow but in order to get more clients you have to put on more staff that handle all the ringing around, and all that client face-to-face stuff, so with the internet changing and evolving I decided that it would be much smarter for us and easier for use to grow by creating a system that was more automated.

So give us a feel for how big the business is in terms of staff and the jobs you are processing at any one time.

The company infrastructure that began in 2008 in terms of turning on the system. We turned that on in January and turned the revenue streams on in June. We went from a value of as a start up as basically zero or negative to about $2 million in the space of six months. We are now valued at over $10 million and I can’t talk too much about the revenue streams because of current situation where we are selling the company off overseas, but I can say that we are processing jobs daily and our advertising and advice line is now booked out a week in advance.

We are getting to the stage now where we are having to increase staff. We have about 10 full-time staff, but everybody in the company is a contractor, right through to the directors.

It is a little bit different in infrastructure and when I say a little bit I am probably under playing it. Just a personal insight, I have this thing about bets, nobody should really have a bet with me because I take them seriously. The bet was that I could turn my expenses into revenue streams, so one day I went into my staff and I sat them down and asked them who would like to own their own company or business and nine out of 10 put up their hand. The other one was already a director so they were already set, and so what I said is you’re all fired you can come in on Monday and I want you to come in with your business name and here’s a gift. And I gave everyone an envelope with a $1,000 cheque in it. And I said, this $1,000 isn’t a gift as such it is an investment, I want to invest in your company, your business. And if you come in on Monday and tell me what the name of it is we’ll set it up with a lawyer, you get an extra $1,000 to set it up with our accountant and lawyer.

And so now we actually invested in our staff. This is something we have only done in the last six months. They get to stipulate what they earn, they get to stipulate where they work, what hours they work, they get to manage their own super, tax compliances and they also have to manage their own hardware and software because they can now work from wherever they want. It has cut our expenses dramatically, more than half of our expenses came down because we could reduce our office sizes and equipment and now some of our staff have put on their own staff and got more clients already. We own anywhere between 5% of their business up to some cases 50% and we are hoping at the end of the financial year when they do their tax, we get a dividend back and that makes our expenses into a revenue. So that is how our structure works, we don’t have employees any longer, they are all contracted staff.

That is a very different model. Does that mean that your team is all spread everywhere?

Yes it does. For example, our head of IT has done so exceptionally well that he has a team of six people that is working out of the UK.

And do they work for other people as well as you?

Yes, now they do.

It is a very different way of engaging entrepreneurs.

And you know what, they work better, because they don’t have a boss they have a big client, and they are excited about that. So now they have already gone out and got other clients because they are empowered to do something. They are responsible for their deadlines, I don’t care if they are not in nine to five, but they have got to meet deadlines because they would have to do that for a client, no longer their boss. So it is a different environment but the stimulating work practice has made a massive difference in getting them to do certain things that I guess is hard to get employees to do.

As you mentioned you are trying to sell part of the business or get investors. How is that process going?

The company valuation is $10 million and that is based on what the company is currently turning over as well as our 16 shareholders have already purchased shares an investment into the company. We have three advisory board directors, one of which is Jack Room, the ex-head of Badjar Ogilvy and he is one of our investors as well. So the valuation has actually been evaluated by an external company and accountancy firm.