As a co-op outgrew its management structure, it wanted to retain its unique culture but function more efficiently. Here's how it did it.
| Entrepreneur |
Geoff Patnaude, Founding Chairman |
| Company |
Total Tools Industrial |
| Business type |
Tools and equipment sales, hire, repair |
| Founded |
1992 |
| Employees |
260 |
| Head office |
Brooklyn, Victoria |
| Contact details |
+61 2 6051 4040 (Albury, NSW) |
Key Learning Points |
|
Business structure
Is it time to reconsider your business structure? Franchising has boomed in recent years, but it is not the only way for a business collective to achieve rapid growth.
Unique culture
As a business grows, its management and administration become more complex. If consultants are called in, make sure they understand the central role that your business culture has played in your growth. If you lose your special business culture, you will lose the soul of the business.
|
The Total Tool Industrial Story
Enough business models have been spruiked in the past 20 years to keep the most ardent theorist happy. But Total Tools Industrial, which provides sales, hire and repair of tools and equipment, has succeeded with a philosophy that might be called anti-business. The chairman of Total Tools Industrial, Geoff Patnaude, is only half joking when he says: "We're like a bunch of communists."
The group had its beginnings in 1992 after a previous umbrella entity went into receivership. Store owners Geoff Patnaude of Albury in NSW and Ron McNamara of Moorabbin in Victoria, decided to work together to improve the prospects of their businesses. Annual turnover of the two stores was about $3 million.
Eventually they drew up a franchise-like licensing agreement, but there are big differences between the Total Tools model and a conventional franchise. "There's a modest joining fee, and the co-operative takes only its administration costs," Patnaude says. "We weren't interested in raking in money but in finding talented store operators. That intellectual property allows us to move forward."
"We were self-managed," Patnaude says. "And because we had been so selective with new members - the rejection rate for contenders was 80% - the management was virtually maintenance free." The group grew and prospered, building up a rapport with suppliers and a reputation among customers in the subcontracting, government and construction sectors - about 90% of its trade.
"The group expanded to eight outlets pretty much on a handshake," Patnaude says. "And benefits such as purchasing rebates and income from the importing of stock went back to the members."
The Challenge
By 2003, the co-operative had grown to 18 members. They began to feel that its loosely self-managed status limited growth and put too much of a load on individual owners. One member handled advertising, Patnaude negotiated with potential new members, another handled overseas supply, another did the accounts, and so on.
Members were busy expanding their own businesses and had insufficient time and resources to deal with co-op opportunities that came up.
The Solution
The consensus was to hire a management consultant - Louis Coutts of Coutts and Connor in East Melbourne - to produce a blueprint for the future. Coutts spent about three months on the project, his main findings being that the co-op needed a formal management team, an integrated computer system and more interdependence between member businesses rather than independence.
Patnaude says: "Coutts [was] able to communicate clearly and sell his concepts with a certain authority. The cost was substantial; we spent $800,000 on a world-best practice computer platform."
The co-op now has a dedicated management team consisting of a general manager, import manager, financial controller, merchandising manager and IT manager. The current chairman is a former national retail chain executive.
Every member of the co-op is a director. Before Coutts' recommendations were implemented, the composition of the board was as informal as the group's self-management. Now, the board is elected and half the positions are made vacant each year.
Patnaude says : "All members do some work for the general manager - another unusual feature of Total Tools Industrial. That way our intellectual property is not lost. But it takes a special kind of person to fill that general manager role and bring it all together."
He says the Total Tools system has some minor negative points, such as members having to take time out of their businesses, but overall it is a winner.
The Result
The Total Tools Industrial group increased turnover from about $18 million turnover when it had eight members to $70 million in the latest financial year.
Two more co-operative memberships are imminent, which will take the number to 24 nationwide.
Patnaude says members are pleased with the new structure, which offers the flexibility to explore commercial opportunities wherever and whenever they emerge. He believes that the group's structural and administrative changes will pay dividends for many years to come. "We're not satisfied to just sit still. Total Tools Industrial aims to be the leader in its market."