Many small businesses fail in their first year due to poor cashflow, but health group Kinnect, which provides rehabilitation and exercise therapy services, nearly went bust because its two founders were simply too friendly.
“We did horribly,” says co-founder Kevin Conlon of the pair’s first foray into business in Townsville. “We did so badly that after about nine months, my partner needed to head back to Brisbane and I bought the business for a dollar – which was a good deal for him at the time.”
So what went wrong?
“We naively approached everyone in the medical field and told them what we were doing. We thought people wouldn’t see us as competitors, but a group of health care professionals thought we were.”
Not surprisingly, these health care companies ramped up their efforts to defend their markets and squeeze out Kinnect.
Conlon says the problems of the first year were exacerbated by the fact neither of them had any business experience.
“When we first started we sold our cars to fund the business, because neither of us had experience with money. I lived in his parents’ backyard in a caravan for six months.”
So after the failure in Townsville, the two then fled to Cairns where Conlon says the pair did “everything completely opposite to what we did in Townsville”.
Almost 13 years after the company started, things are back on track. As well as occupational health rehabilitation services, the company has branched out into running programs with workplaces that are trying to reduce or prevent injuries.
It recorded revenue of $1.4 million in 2007-08 and was ranked number 50 on SmartCompany’s Smart50 list. Conlon expects about $1.61 million for the current financial year, which would represent growth of 15%.
Conlon started the business after finishing university and completing a degree in exercise physiology.
After finding there were no firms or hospitals that would hire him to do the work he was qualified for, he did what any entrepreneur would do – he created his own work.
“The reality was that there was one other company doing it, and they were the supervisors of a program we did at a hospital during our degree, and they only started seven months before we did.”
The business currently employs 13 staff in three Queensland locations, with another office on the way. But Conlon says as well as the business virtually failing in its first year, there have been other challenges.
“The biggest challenge was going from me to staff members. I think I expected everyone to think and behave like me, and quickly realised that the vast majority of the world doesn’t.”
The key was bringing in other managers with vastly different skill sets to his own.
“I think all too often business owners feel comfortable with friends. It’s really important if you’re going to golden-handcuff someone as a partner or equity owner, that their skill set is different to your own so that it adds value.”
Conlon says that having the business fall over also taught him an important lesson about accountancy.
Before he left for a trip overseas, (which would ultimately see him spend nearly three years abroad studying), he shocked his accountant friend by revealing he actually had no idea how much the business was making.
“I cared about the work, not the things you should have cared about. I’ve since learnt that business is about numbers. It doesn’t matter what business you’re in – unless you can make a profit and make the numbers stack up realistically, then don’t do it,” he says.
“There are easier ways to earn a living then being a small business that struggles. A lot of people in small business are chained and don’t spend enough time looking at numbers. If you can’t make the numbers add up then don’t do it.”
As Conlan’s revenue predictions indicate, the recession is not having a big impact on Kinnect. According to IBISWorld, the physiotherapy sector is expected to growth at an average annual rate of 3.8% over the five years to 2013-14, thanks to continued demand from a rapidly ageing population and more government money for physiotherapy services.
Conlan says he has been pleasantly surprised about the willingness of companies to spend on injury prevention programs.
“To be honest we would consider that program a discretionary spend – being pro-active in preventing injuries in your business – and we thought we’d see a decline in that. But we haven’t seen a change.
“Employers are taking seriously the ramifications injuries have on their bottom line. It’s a no brainer if you say to someone they can spend $100,000 (after an injury occurs) or $20,000 on prevention, they’ll spend the $20,000.”
But Conlon says that while the business is doing well, he has no plans for expansion due to the complexity of other states’ rehabilitation laws.
“We are not looking to expand at this point in time. Half of what we do is working with people who are broken – they have to be rehabilitated and there are currently different laws for every state on what we can and can’t do. Now we’re focused on consolidating Queensland.”
But despite these expansion hurdles, Conlon says he is happy with where the business is now, and claims he has learnt to focus more on the things that matter when running a business and says his naïveté has helped him succeed.
“Without that I wouldn’t have been co-erced into business; if I were a little bit older I would have looked at the risk benefit and thought that’s a bit scary. I never had any doubts whatsoever,” he says.
“We’re very busy, but being busy is a good problem – you can sleep when you’re dead.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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