A Melbourne hat business only restructured when external circumstances made change unavoidable. The results have been great. But, in hindsight, perhaps it should have acted earlier?
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Entrepreneur: Stephen Dobinson, Executive Director
Company: Avenel of Melbourne
Business type: Importer, manufacturer and wholesaler of hats, fashion and safety accessories
Employees: 10 (7 full-time, 3 part-time) and 8 agents
Turnover: (2005 - 2006) More than $3.5M
Head office: Hallam, Victoria
Contact details: +61 3 9702 4783
The Avenel Of Melbourne Story
Remember the ghastly fears about the year 2000? Experts were warning that the Y2K bug and the GST would damage or destroy hordes of weak, unprepared businesses. Some did suffer, but many others - like the hat wholesaler Avenel of Melbourne - eventually thrived on meeting the challenge.
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Key learning points:
- Change investment - A thorough business review will cost you money - but the long-term rewards can be far higher.
- Business consultants - Start any review by looking at who can help you: chambers of commerce, government business departments, export bodies, consultants. Thoroughly check out consultants before you hire them.
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Threats became unexpected opportunities. Executive director Stephen Dobinson says: "It was a difficult time: business had dropped by 15% and at the same time we had to invest back into the company. It was the biggest turning point in our business history."
Avenel was started in 1966 in a one-car garage in Oakleigh, Melbourne by two hat company sales executives: Norm Dobinson and Horrie Smith. When the hat wholesaler they worked for closed down, they began a partnership that has lasted for 40 years. It is now in its second generation with Stephen Dobinson and James Smith as joint executive directors. Stephen and James have been in the business for more than 25 years - longer than their fathers were.
The Challenge
How to restructure an old-style business to cope with new technological, cost and managerial pressures.
The Solution
In 1999, Dobinson and Smith knew they needed professional help to manage the challenges they were facing. They asked the Victorian Chamber of Industry and Commerce for advice. The chamber recommended three business-management consultancies and, after interviews, Dobinson and Smith chose Honeyman and Partners as their change agents. Dobinson says: "Small businesses rarely spend money to get outsiders in to look at structures and systems in place, but we didn't think we could do this from within."
Honeyman and Partners worked closely with Avenel over six months and monitored change for another six months. There were meetings to review the business's systems and its structure and to map out a vision for the future. Honeyman and Partners identified some key areas that Avenel needed to fix:
- The management structure needed to be clarified
- Technology had to be updated
- Systems needed to be streamlined
Dobinson says: "We'd had a successful 30 years but we knew the next 30 wouldn't be easy without reviewing and evolving."
The management roles of the two executive directors were more clearly defined to avoid any overlap and a national sales manager was employed. Dobinson says: "Jim and I had been doing everything in the business, but it was at the point where we couldn't do everything any longer. Honeymans made the tough decision; we had to step back and hand over some responsibility."
The Y2K bug provided a good opportunity to invest in up-to-date computer systems - and that created new opportunities. For example, Avenel's distribution could be tightly linked to its freight company, Star Track Express. Dobinson says: "We took on their software, which allowed us to track and trace our freight. It also meant we didn't have to hand-write on cartons with marking pens - we could just print off a label; the consignment notes were also paperless"
The new structure and systems enabled expansion. In 2002, Avenel heard of a Sydney hat wholesaler that was closing down - Boutique Imports. It sold high-end Panama Hats from Ecuador. Dobinson purchased the mens' line of the business. He says: "We'd always dealt in hats that sold at a wholesale price of $3-40 we never thought we would be able to sell hats in the $50-500 range. With the purchase we also bought their client list, which added a completely new dimension to the business."
The Result
The Victorian Chamber of Industry and Commerce paid 50% of the $15,000 fee for Honeyman and Partners to work with Avenel and devise a five-year business plan. With investment in new technology and Avenel's contribution to the business plan Dobinson estimates the company spent close to $30,000 on its change program.
Since 2000, Avenel's revenue has increased by more than 80%. Annual turnover is expected to grow by a further 8% each year for the next five years. The purchase of Boutique Imports has broadened Avenel's client base and added another $300,000 to annual turnover.