Philip Dean and Peter Ovenden knew there was an affluent market for internet cafes, but getting seed capital was a problem.
|
Entrepreneur: Philip Dean & Peter Ovenden
Company: Global Gossip
Business type: Internet cafes; communication centres
Turnover: $10M - $50M
Head office: Sydney, New South Wales
Contact details: +61 2 9263 0400
The Global Gossip Story
In 1997 Philip Dean, 25, and Peter Ovenden, 28, had a business idea but no money or business experience. Ovenden was a waiter at the Intercontinental Hotel in Sydney and Dean had just resigned from a job at a bank. Two years later, the pair were running Global Gossip, a chain of internet cafes that turned over $10 million in the 1998-99 financial year.
The idea for the business came from closely observing changes in market demands and industry policy. Dean was on holidays in the UK in early 1997, when he visited a tiny shop in Earls Court in London that was crammed with backpackers taking advantage of cheap calls. The British Telecommunications Industry had just been deregulated. Dean knew that when Australia deregulated its telecommunications industry a few months later, similar opportunities would arise.
Dean and Ovenden also observed that backpackers had other unmet communications needs apart from cheap calls. The profile of the average backpacker had changed from the poor hippies of the 1970s and 1980s to computer-literate middle and upper class people. These latter-day travellers often carry thousands of dollars and leading brand credit cards.
Dean and Ovenden saw that the affluent young travellers wanted a pleasant one-stop shop where they could sit in front of a computer and search for accommodation, communicate with relatives and friends, and buy or sell items such as cars. They also wanted to write resumes and apply for jobs as many were on working holiday visas.
|
Key learning points:
- New-economy business planning - The new economy moves so fast that even as a business plan is being developed, it is likely someone else will have taken the idea to the market. It is essential to move quickly and ensure that the new concept has strong points of difference. For example, while Ovenden and Dean were developing their business plan, internet cafes were springing up across Australia. However most were run from dingy basements under florescent tubes. The pair worked hard at setting up a comfortable, safe environment with friendly staff and a strong technical team to ensure faulty equipment was fixed fast.
- Lease negotiations - Dean and Ovenden found that landlords quickly understood how desperate they were for certain locations and would increase rents. The pair often did not reveal their real business identity until the end of negotiations for a coveted site.
|
|
The pair saw an opportunity for a chain of communication centres in tourist destinations around Australia. Money was their biggest obstacle. Ovenden’s salary as a waiter was not enough, and Dean had no luck securing $60,000 start-up money from any of the banks he approached. In the end, Ovenden's parents mortgaged the family home to provide the necessary seed capital. By mid-November 1997, the pair had signed a lease for a site in George Street in Sydney near a large backpackers lodge which was on a bus route to the airport.
Throughout December 1997, Dean and Ovenden worked around the clock to get the first store ready for Christmas Day. At 8am on Christmas morning, the shop opened and customers began to arrive. Ovenden says: "I'll never forget making our first $6." Ovenden then spent the next few weeks walking the streets handing out fliers. After the first month they hired their first employee.
The chain grew quickly, relying on word of mouth as the only form of advertising. In its first year Global Gossip turned over $3 million and made a net profit of $150,000. By early 2000, Global Gossip had 13 stores, 110 employees and 150,000 customers a month. Now the company is focusing on three areas. They want to open ten more communication centres in Australia, expand overseas, and develop a range of new services.