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Waltzing with Matilda

By Rebecca Macfie

Thursday 28th July 2005

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Chris Howe is flat out, but he's not complaining. Two days before he posed for Unlimited's photo shoot at Sydney's Watsons Bay - where his trans-Tasman architecture practice Bossley Howe did its first high-profile Aussie job - the firm got word it had won the design contract for a 200-lodge eco-tourism development in the Northern Territory.

On top of that, there are 90 eco-tourism lodges to design in Noosa, on Queensland's Sunshine Coast, and the company is on the shortlist for a handful of New Zealand-based projects being carried out by Australian developers - the sort of work the firm wouldn't have been considered for if it hadn't established a presence on Australian soil, says Howe.

For Howe and his Auckland-based business partner Pete Bossley, it's time to break out the bubbly. Three-and-a-half years after taking their young firm across the Tasman, they can now confidently say they're through the costly set-up phase and that their investment is starting to pay for itself.

Yes, it's taken that long to get a secure toe-hold in this tough, aggressive and highly-competitive market. Three years of persistence, networking and quietly assertive brand building.

As Chris Howe and any number of other hardened trans-Tasman players will tell you, tackling the Australian market is not for the impatient or half-hearted. But for the well-prepared, well-funded and highly focused, the rewards of participating in an economy over six times larger than our own are worth it.

Australia was in Bossley Howe's sights right from the moment the firm was first conceived. Howe, who'd travelled and worked extensively around the world in project management and construction, had retrained as an architect in his early 40s, and was convinced there was a market for New Zealand's brand of architecture offshore. So he teamed up with Bossley - two-times New Zealand House of the Year winner and design director on the Te Papa project - with the express purpose of setting up an Australasian firm.

Howe dispatched himself to Sydney in October 2001, believing there was little chance of winning work in Australia without a physical presence there. For six months he worked out of the back bedroom of his Double Bay house before setting up a small office in the chic suburb's business area. After just four months he'd got the firm onto the shortlist for a job - but after 18 months all he had was a drawer full of Dear John letters. "We just couldn't break it. The answer was always, 'Well, when you get some work here'," he recalls.

Despite some hard core networking, it wasn't until July 2003 that Bossley Howe landed its first high profile job - the Watsons Bay urban design scheme for the Woollahra Municipal Council. Since then there have been four more jobs for Woollahra. Now with the Northern Territory contract in his back pocket - the firm's biggest-yet Aussie job - Howe attributes the firm's success across the ditch to that persistent networking and profile-building.

Given the litres of red ink high-profile Kiwi companies (The Warehouse, Air New Zealand, Telecom) have spilled in Australia, it's not surprising we have a somewhat angst-ridden relationship with our nearest neighbour and closest political and economic ally. It seems every time another public listed company announces it has made an Aussie acquisition, an audible groan goes up from a battle-weary New Zealand shareholding public.

But while we hand-wring over the ugly failures, we forget about the quiet successes (Nuplex, Pumpkin Patch, Sky City, Fisher and Paykel), and the raft of small and medium-sized New Zealand firms, like Bossley Howe, that have learned how to make it in Australia.

However, there's no denying it's a tough market - made tougher by the fact many companies expect it to be easy. And why wouldn't they? After all, the Aussies talk (sort of) like us, they derive from similar ancestral stock, we've had the world's best free trade agreement with them for the last 22 years, and over 400,000 of us live there. We even came within a whisker of becoming part of the Australian federation 100 years ago. So how hard can it be to deal with your trans-Tasman cuzzies?

Harder than it is to do business in the US or UK for some firms, according to LECG's David Moore, co-author of the New Zealand-Australia Economic Interdependence Study (May 2004), carried out for the Ministry of Economic Development. Kiwi companies are often "surprised by Australia's wallpaper of bureaucracy, and then naïvely disappointed when their competitors fail to roll out the welcome mat," Moore observes.

According to Sydney-based John Nicholson, New Zealand Trade & Enterprise's Asia Pacific manager, there's an ongoing and mistaken belief that Australia is "the same or virtually the same" as New Zealand. "A lot of companies base their business models on those expectations, and when they get here they find it is quite different."

So what are those differences and how can Kiwi companies prepare for them? Unlimited interviewed nine companies - small, medium and large - on their experiences in the Australian market, and distilled their observations down to six key pointers for companies considering making the leap.

Take a deep breath
Whether you're trying to open a bank account or register a company name, figuring out the Aussie capital gains tax regime or wondering if your product will be GST-exempt, you'll find Australia a much more complex and bureaucratic country than New Zealand. That's largely because the system of government is much more complex, with federal, state and territory governments all busily spewing out new law - some 33,000 pages of it in 2003 alone.

But there's also a philosophical difference, says Mark Smith, Sydney partner of Christchurch-based law firm Duncan Cotterill, which entered the Australian market two-and-a-half years ago. "In Australia they regulate everything and specify inputs. The law here says, 'this is how something is to be done'. In New Zealand the underlying philosophy is that the law doesn't care how it's done as long as the output passes a test."

Take something as simple as registering a business trading name: "You can't just hang a sign on your shop advertising Wally's Whitegoods. You've got to register your name, and you've got to do that in every state that you operate in. There are eight registries, and each wants some money off you and has complex forms to fill in."

Architect Chris Howe puts it this way: "If you can't tick the boxes here you can't go anywhere, and that permeates through everything from registering your car through to taking out a phone account. It's frustrating, but in other ways it opens up opportunities for people with innovation, who can say, 'Hey, I've got a better way.'"

It also means it's vital to get good advice, says NZTE's Nicholson, who believes too many Kiwi companies think they can get by with the help of the family lawyer. Skimping on advisors not only means management winds up being distracted by red tape rather than focusing on getting sales, but that poorly advised decisions can have unexpected consequences later on.

Smith often sees Kiwi companies landing themselves with expensive tax problems because they assume what's right in New Zealand is right in Australia. "For instance, the knee jerk reaction for many companies is to set up a company to limit their liability. But then in 10 years they have a valuable business that they want to sell, but they've probably cost themselves several hundred thousand dollars or more in additional capital gains tax that they could have avoided had they chosen a different structure."

Give it time
Chris Howe thought it would take two years to break even in Australia, but it took more like three. Mark Smith reckons it will take five years to make Duncan Cotterill's Aussie foray pay. For small Blenheim company Annies, (see 'Persistence pays' sidebar) it's been a case of chipping away for 10 years.

Sure, not every company finds it such a battle to get established here, and some we spoke to were doing well within a few months. But Smith says it's a common mistake for Kiwi companies to underestimate just how long it will take. "People who are establishing a business here expect to have to invest and persevere for much longer. Australian companies have an expectation of that - they seem to have more patience and persistence than New Zealand and they have an expectation that things will take time."

That means being sure that your company is strong enough to support the investment that will need to go into your Australian startup costs - both the ones you expect and others that may come as a surprise.

Privately owned Christchurch company Versatile Buildings entered the Australian market in 2000, purchasing a Queensland company manufacturing garages under the Totalspan brand. Although Versatile went through a due diligence process, there were some nasty surprises for the Kiwi owners once they got into the company.

Managing director Bruce Matheson says the workplace culture was hierarchical, resistant to change, and dominated by a small number of ringleaders. Initially Versatile retained the Australian vendor to manage the business, but Matheson says this just perpetuated the culture they were trying to change and after six months they sent over a Kiwi manager, Tim Austin, to run the show. "You really need to have someone at the top whose leadership and culture and management style matches the group's long term strategy," says Matheson

"The company is now performing really well, but initially to try and get people to be customer focused and to give a damn was very hard."

With Austin in charge, Versatile gradually started transplanting its New Zealand systems and workplace culture into the Australian subsidiary. "We now have a philosophy of ongoing continuous improvement, and you could go in there now and you would find very little difference between the two operations," says Matheson.

But there was a cost to all this - the business was unprofitable for the first year, "and we were very grateful to have a strong New Zealand company behind us," says Matheson. That initial pain was worth it, though - the Aussie operation now makes up 40% of Versatile's sales.

Don't bite off more than you can chew
Taking on the Aussie market doesn't necessarily mean bowling over there and setting up an office or warehouse or buying an existing company. Most companies interviewed by BIS Shrapnel for a 2003 report for NZ Trade & Enterprise started out operating through an agent, allowing them to test and build an understanding of the market without making a major financial commitment.

These days cheap air travel and the internet lets some companies, particularly in the IT sector, have both a strong physical presence in Australia and tight cost control. IT consulting and servicing company Datasouth has developed a market in Sydney that accounts for 25% of the company's turnover and is serviced entirely from New Zealand. An apartment in The Rocks serves as both a home and office base for owner and managing director Gavin Bennett on weekly commutes between Christchurch and Sydney, as well as for any staff sent over to service clients. All client calls are answered at the company's Christchurch call centre. When a client has a problem requiring an engineer or technician, Bennett dispatches one from Christchurch. As a back-up, Datasouth has established an alliance with an Australian IT company, which it can call on when it's not possible to get one of its own staff over the ditch (Datasouth provides the same backup for the Australian company's Auckland operation). And Bennett can call on a part time PA in Sydney when there are tasks needing urgent attention in his absence. "There are too many New Zealand companies that crash and burn here because they gear up and put in too much costly infrastructure," says Bennett.

Network, network, network
Leave your politically correct notions of level playing fields and "a fair go" at home when you head across the Tasman. The game rules differ over there - something which John Nicholson of NZTE says Kiwi companies frequently misjudge.

Investment New Zealand's Australia director John Crawford depicts Australia as an extremely tightly networked society, built around a latticework of powerful relationships between business, politics and the media. Australian-born journalist John Pilger characterised it as the 'order of mates' and Crawford says it's not to be underestimated.

He says large companies in Australia expect to have direct access to politicians at state and federal level for help with business problems. "That level of contact is seen as normal. If you go to a political fundraising dinner you will see very senior business people there. And they're not paying $1000 a seat for nothing - they're there to court influence and get access to people at a later stage."

What's a Kiwi country cousin to do? Architect Chris Howe says you can't expect to crack the establishment, but you do need to take every opportunity to form your own networks. "Join your industry association, sponsor seminars, form alliances with other companies, get your name out there so you build respect among your peers."

From the outset Howe recognised the importance of networking, and worked hard at getting his firm's name out in the market. First, he mixed with other business people in Double Bay (where there happened to be a number of long-established Kiwi expats). He got involved through the Double Bay Chamber of Commerce in a controversial local urban design project and worked free of charge on an alternative design scheme. Within a year he was elected chair of the chamber. He joined the Ecologically Sustainable Design committee of the New South Wales branch of the Institute of Architects, and for the last 12 months has represented the institute on a review of the New South Wales bush fire legislation. And he's used his New Zealand connections to get introductions to big Aussie firms.

As Nicholson points out, there are 400,000 Kiwis living in Australia, many of them in influential positions - "and a lot of them will go out of their way to help you... so you need to play the game as the Aussies do."

One nation, many markets
Don't think of Australia as a uniform market. Remember each state was once a self-governing colony and the role of state government is fiercely protected. Combine this constitutional history with huge distances between the state capitals, and you have, in effect, a collection of discrete markets. They're broadly characterised like this:

  • Victoria - conservative and more "British"

  • New South Wales - commonly referred to as "crass, brash and trash". It's fast, loud and "in your face"

  • Queensland - laid back, informal, conservative, and more like New Zealand than the other states

  • South Australia - conservative, and with a stronger church influence

  • Western Australia - very independent from the eastern seaboard, with stronger Asian ties

  • Tasmania - it barely scores on the radar or most Australians, and ranks somewhere below New Zealand in their world view

  • Northern Territory - well, it's the outback, isn't it?

Because state governments control key areas like education, health and transport, company decision-making can be affected in unexpected ways. For example, Versatile wanted to deploy one of its Queensland managers to New South Wales, but it would have meant the man's 11-year-old daughter would go back a year at school. As a consequence, he didn't go.

And, as if the complex layers of tax and employment regulation weren't hard enough to get to grips with, there are important inter-state differences as well. For example, payroll tax is levied at different rates and applies at different thresholds in each state.

You're a Kiwi, so what
"New Zealand is not the centre of the world from the Australian perspective," observes John Bishop III, Sydney-based general manager of CD and DVD replication company Media Technology, which entered the Australian market four years ago. "When we first came over we were quite proud of our New Zealand link. We'd say, 'In New Zealand we did this or that, and we were very successful.' But then we toned it down because we discovered people just didn't really care. If anything it could even be seen as a negative... so we just adjusted and tailored our presentation."

Datasouth's Gavin Bennett reckons the Aussies don't have anything against New Zealand companies - they don't care where you're from as long as you've established your credentials and have a good product. In fact, he thinks Australians have a more positive attitude to New Zealand than vice versa. "Australians genuinely like us. We have a good work ethic, and that's recognised over here."

But don't be surprised if your Australian cousins don't take your Kiwi credentials for granted. It's worth bearing in mind this tale, as told to us by a New Zealand businessman operating in Australia, who preferred to remain nameless. "A senior Australian businessman said to me, 'In Australia we're brought up to believe New Zealanders are not as good as Australians, so the moment a New Zealander opens his mouth and says what he's doing is better, an Australian will automatically brand him a liar because we've been brought up to believe the opposite'."

Still, as Chris Howe has shown, it's nothing that dogged persistence, vigorous networking and Kiwi initiative can't overcome. Fancy a waltz?

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