Podcast Transcript

[00:01:15] Sean: G’day everyone and welcome to the ScaleUps Podcast, where we help first time Founders learn the secrets of scaling so they can make bigger decisions with greater confidence, fulfill the potential of their business and maximise the value and impact they can create in the world. I'm your host, Sean Steele. And before we kick off today, I've got my fantastic guest here, Pete Cleary, from the Zinc Group, looking forward to getting you on board today, Pete, how are you?

[00:01:36] Pete: I'm very well. Thanks, mate. Thank you very much for asking me to come today.

[00:01:40] Sean: Mate, my pleasure, I'm looking forward to it. Before we kick off, just wanted to acknowledge some of our community, we've been getting lots of reviews through Apple Podcasts. We love Apple, seems to be it's 75% of our community are using Apple Podcasts. We've got some lovely reviews and ratings. It just helps it get into the hands of other people. A big shout out to Lucky who said recently “Super insightful and practical interview style. Great to have a guy interview that really knows what he's talking about. I love it.” I'm not sure that's entirely true, but at least I fake it till I make it. Lucky, thanks very much for your comments. If you're in a community and you're listening to this and you'd love to have yours read out, just jump on Apple Podcasts and drop on there for us. So, to kick off today, as I said, our guest today is Pete Cleary, Founder and CEO of Zinc Group.

[00:02:28] And for those of you who aren't familiar with the Zinc Group, maybe just a quick overview from me and then Pete, I'd love to really understand a bit more about this journey that you've been on. You started back in 2005 and I'm going to jump actually right up to sort of 2019. At a 2019, pre-COVID, you're a marketing business. You specialising in promotional marketing and merchandising and digital strategy and planning amongst many other things, it seems. Examples could have been, we might've seen your work through branded tennis balls at the Australian Open or Toy Story drink bottles at cinemas or lanyards for big events or branded portals for digital campaigns. Would they be some sort of examples that people might have experienced things?  

[00:03:08] Pete: Yeah, absolutely. They certainly would be. So, it was very much around the promotional marketing and brand activation space, very much. Our entertainment marketing division is our second area of our business, which is around licencing and third-party intellectual property. And then we have a loyalty and incentive part of our business as well. So, there's activations of what you've just described. I'm sure would have been us.

[00:03:35] Sean: Beautiful. Beautiful. And at that point, business is going well, you're in fastest growing 100 companies. At that stage, what would the business have looked like, just to give people a sense of the scale at that stage, Pete, what sort of revenue and employees wise, pre-COVID.  

[00:03:50] Pete: Pre COVID at like, as far back as 2016, sort of?

[00:03:54] Sean: Yeah, I guess that kind of… well, it might be 20 … when was COVID? In beginning of 2020, wasn't it? So, 2018 - 2019.  

[00:04:01] Pete: 2019. We were probably just under a hundred million Australian in revenue, and we'd grown from, we're about 30 million in revenue in 2016, and we had about maybe 220-230 team members in 2019.

[00:04:19] Sean: Wow. And at that stage, where you in the 14 countries that you're in now, or is some of that happened over the course of the last couple?  

[00:04:26] Pete: Now we're in all of the countries that we're in now, we're in about 14 countries now. And that journey probably started back in 2014 when we first went into New Zealand. And then over the course of the next five years, we expanded into different countries, particularly in Asia. And then right at the start of the COVID actually, and we'd been in discussions for a year, we had a strategic merge with a German company who was about the quarter of the size of what we were then. And that was right at the start of the pandemic, fortunately, or unfortunately. What doesn't break you makes you stronger, right?

[00:05:10] Sean: Something like that. I mean, there's nothing like getting mergers and acquisitions done through the center of the first global pandemic that any of us has been in.  

[00:05:17] Pete: And then not being able to travel and not being able to communicate and not being able to do all the things you normally do. It was an extraordinary time. So, it was right at that pre pandemic is when we joined forces with our German partner, who we've known for about 10 years, so that's why it did work because we had some history and we had a very strong cultural alignment with the leaders of that business and also very strong personal relationships. So, it's not something maybe we would have done if we didn't have that historical background.

[00:05:54] Sean: Yes. It makes complete sense. Yeah. I mean, it was hard enough to get deals done from an M&A perspective in COVID without the ability to solidify personal relationships with the typical lunches and dinners and stuff that this builds trust, but they’re actually doing integration.  

[00:06:10] Pete: Not, it is phenomenally difficult. It really is. And then at the same time, whole parts of our business just disappeared. So, we're trying to grapple with two or three things at the one time, it was a little bit of a perfect storm, that was probably a real challenge. Probably the biggest challenge we've had since we started, which is…

[00:06:31] Sean: Well, I'm keen to take people on a bit of that journey. So, before we do, just to give people a bit of context. So, in 2016 you are a 30 million business and this year, or if you're comfortable talking about this year, where is the business heading this year, to give a sense of that.  

[00:06:45] Pete: This year, our revenue slated to be about 220-230 million, Australian. And we'll probably finish the year with about 400 team members. But at the end of 2021, we're about 135-140 million in revenue. And we've probably got about 320-330 in team members now. So, we've been able to get through the pandemic, and get back to our core business, which I'm sure we can talk about. because we did happen to have with that using an overwhelming overused euphemism of pivot, but we did have to change what we were doing, fundamentally. But the last year particularly was about getting back to our core business and making sure that sustainable revenues and cash flows were back, which they are. And now we're very confident, and we've got very aggressive growth plans and we're a month or nearly two months in, and we're pretty confident in the first half. So, as I stand here today, touch wood, I'm pretty confident that our projections for this year should be pretty accurate, which is remarkable when you think back in 2016, like it's almost like, it's eight times the size of the business.

[00:08:01] Sean: Yeah, that is absolutely astronomical. And the learnings that you would have got personally, I expect through this process, Pete, have been a pretty significant, that is significant transformation over that period of time. And so I know we've just sort of started to drop a few… start to put some rabbit holes, that we could possibly go down. So, what I might do is just, I mean, that gives people a sense of the size of the scale of the business, and during which you've had to do some things very differently, but are now turning back to the core business. So maybe you can take me back to… can we go back to 2005 and just talk at a starting point? What led you to start the business in the first place?  

[00:08:39] Pete: Well, from a personal perspective, I'd gone through university and then had the fortune to meet someone who was a very good person. And it was also a very good businessman, guy by the name of Pete Grogan and he ran a very good business and I'm going back in like late 1990s.

[00:09:01] And so I grew up in a small business environment. And I think, you know, we had a team of about 30 people, we’re in a suburb in Melbourne called Mount Waverley and were maybe a seven or 8 million business. Long story short. it was the year 2000, and we had an international global player enter our marketing place. We were a Promotional Merchandise business, and it was like a 2000 pound gorilla entering, you know, we were a minute, we were tiny, and we were dealing with these large international clients, like BHP and Shell, and we didn't even have a website let alone, we had one office in Mount Waverley in Melbourne, and we didn't have a whole lot of infrastructure that you would be expecting to have, and then in comes this massive player and they looked at what they thought at the time were the best three companies in Australia in this space. And so, they actually purchased us in year 2000. So basically, what had happened there is we'd then gone from a very tightly run small business or smaller business where I'd grown up about managing expenses and having incremental growth of like 1-5%, whatever it might be to then going into a public listed company, because we were bought by a company called Corporate Express or staples at that time. And then I became the, I guess, General Manager for that division and we moved to Sydney and then we basically had a balance sheet, which I'd never had an access to capital. And they basically said, “we want you to grade this as quickly as you can, and we want success” because they were on a growth multiple, and all of a sudden, I'm in a public listed company reporting to the CEO, and I was 26-27. So, as you said in your intro, “you fake it till you make it”. And that's basically what happened, but we grew that business from the 7 or 8 million when we sold promoting, which is the company that we're in at the time to when I left in 2005, we've grown that business through acquisition and organic growth. It was about half 50% acquisition, 50% organic. And we've grown that to a 65 million business by the time it was 2005. So, we were probably in the top 10 advertising agencies in the country as a division of ostensibly office products company, and no one had ever heard us. So, from my perspective, I also realised that corporate life probably wasn't for me, and that I was looking for maybe something a little bit different because…well, to be honest, the culture, the people that worked at the time and the team that we'd built were fantastic, but we were a small division in a very large company. And we were a marketing driven and services division that was within the infrastructure of a product driven business. So, it became whilst we learnt a lot and we grew that business tenfold in those years, it taught me enormous lessons in terms of, if you don't have to worry about capital, how quickly you can grow, and profitability, if that's not a key for a year or two, which it wasn't, we could take some risks that we could never do when we're a smaller business. And so, what I sort of got was a grounding in terms of the best of both worlds, which is a very unique position and I’m very fortunate to have had that, but also importantly, culturally, I saw the very best in a small business and what that means where people actually care about each other to a corporate business, where you could sort of walk in missing an arm and; “Ah, there's something different about you. I don't know what it is, but…” you know, the rules of the game in the large corporate such that you just don't have the scope to be able to be who you really are and have time to treat people as people, you feel like battery hens sometimes, in the farm, and you've just got to do your job and you're a cog in the wheel. And that's when, from my perspective that wasn't where I saw myself as a future. And so, what I realised and I took about like nine months of gardening leave. And as I did that, I actually, for the first time, since I'd gone to uni and been working and you just get into the process of just working really hard without thinking about what you want to do or where you want to go or who you want to be. And what I realised during that process, I did about 20 different jobs for a day, trying to work out what I want to do as I rang a real estate agent said, “Look, I want to work in a real estate agent for two days”. And I did that just for free, just to see if it was what I wanted. I went and worked at a corporate banker for a couple of days. It's amasing. I've worked in a plasticine factory because I thought maybe it'd be a good idea to buy business and you know, I didn't know what I wanted to do, but during that process over about three months where I tried all these different things, I realised that it was less important what I did, which is what I had started out thinking. And it was more important how I was doing it and who I was doing it. And that's where the biggest revelation came to me about culture and about people. And what I realised that at the big corporate that I'd been at is the business was successful, but despite itself, and despite the way it treated people as cogs in that machine.

[00:14:20] Imagine if you could create a business that was the best of both worlds, it had that sort of small business feel, we actually care about each other, but it had that scale where you could actually invest in create competitive advantage. And that's basically what led me to start Zinc because I couldn't, and this was back in 2005. So, you know, the Googles of the world were embryonic as well at that stage, and I actually worked in an advertising agency for two days, and that was probably the worst cultural experience that I've ever had. It was just dog-ed dog. So, I wasn't going to jump from the frying pan into the fire. So that's when I thought, well, if I can't find what I'm looking for, maybe what we need to do is create it. So, I took two months to write a business plan and that business plan, the first sort of half dozen pages was all on the culture and the walleye, and what we would build and the type of team and the people, and what came second and which is not often how the business plans sort of get written.

[00:15:19] But I guess for me, it was the motivator of what was driving me. And I was thinking if I could then find people that were motivated by the same intrinsic things, not just extrinsic motivators like money, but some intrinsic things in with regard to the passion or the way you treat people or the type of culture that you build, how extraordinary could it be for discretionary effort or working with people where you're trying to take out all the impediments that get in the way, and that's sort of where where's he started from, because I'd worked with some people who shared that. Some other guys had some very key sheds and same values. We all put money in together and that's been a big part of how we created at the start is for people to be self-directional, to have had discretion over how they're going to drive their lives and what they're doing, and I wanted people to be able to share in that value, which is a very Michael Porter concept that concept of shared value that a company can't just be about profit. It's going to be back creating value and then sharing that value. And it's how you share that value that is key, and that's really what drove the start of the Zinc and the team and the journey we're on, and we've made enormous mistakes over the way, and we really started to have some great success now in the last three years, but you know, it's been a 16- or 17-year overnight sensation.

[00:16:44] Sean: Yeah, that's right. You know, people can hear the numbers we were talking about before and like, “oh, wow, why haven't I thought of the idea that's going to take me from 30 million to 200 million”. Like it's not, you just ignored the previous 15 years that got you into that position. Yeah. Well, and so what would be a practical example of how shared value shows up in the business today when you think about how that sort of culture has turned into something that you're proud of?

[00:17:12] Pete: We try and have that conversation with the guys all the time, our team, in terms of, you know, not just asking, which is what most people do in most businesses, you know, what can this business do for me? You know, what money can I earn? And that's a fair enough question, and you need to be able to answer that, but there also needs to be another question, which is what can I do for this business or this team, because ultimately if everyone who's in the team at Zinc went and stood in the street, the businesses in the street, it's not in the buildings and the infrastructure and the processes. So, when I talk about a business, I'm actually talking about a team, which is a difficult thing to scale well, which is what I'm learning, but we are doing it.

[00:17:57] So I guess how it practically starts is you've got to ask two sides of that, “what can I do for the team or the business, but also what can that business do for me?” And leaders, as we are in our business, we need to be asking both of those questions as well. So, how that practically translate is, is we've identified four key stakeholder groups within our business that share in that shared value like our team, it's got to start with our team. It's then our client partners, our supply partners, and then our community partners. And if I look at our team, how this practice executes there is where saying to our team, what's going to make Zinc the best place in the world for you to work at, what makes Zinc a great place to work. And we have a range of initiatives in place, feedback sessions, cultural sessions, where we're trying to create exactly that. So, there was some years ago where the team wanted more time off. So, we created Zinc Leave, which is an extra week holiday if you're here for a certain time and the business is succeeding, you'll get up to another paid week a year leave and you know, that can set to grow. Recently, some of the guys have been talking about how can we get equity, how can we get in syncing. So, we're looking at how we can develop something like that. And then it's all the other practical things. Like we have a gym or we support people's mental or physical health, we've historically bought in nutritionist, we’ve historically brought in financial planners and a whole range of things to help people that are company funded to be able to help people outside of their direct role, if you know what I mean? Because you know, I want people to be as real as they are with… I'm the same person I am with my kids as I am with you as I am with my team here, and when people come to work, that's the type of people that I want to be able to work with. And that I think they share those same values, and we try and get rid of all the things that get in the way or obstacles that get in the way of people getting along with people. And if we can make some of the internal stuff easier, like, you know, the guy has worked very hard for their money and they worked very passionately and very diligently. So, if we can think about that and help them by bringing in a financial planner to get their money to work harder for them, and maybe take some outside stresses off because I feel more centered, more calm, more focused and that they've got a path or a journey that they're on, then, awesome. It's going to help. Our lives aren’t in boxes, you're one whole person. And I guess that's what we're trying to bring in and sort of remove that whole work-life balance scenario is a little bit of a misnomer because we're one person.

[00:20:40] Sean: Hmm. Yeah. And I think, I love the way that you talk about that because, I think it's very easy for companies to go, “well, I want to be on the best places to work list and so”, and everyone else has got ping pong tables and a gym membership and the food thing. And, yada, yada, yada, they go through the list, but actually, the reason for it is not there or the understanding of why all this stuff actually matters, and the fact that anyone who's having to separate their personality from who they are to who they are at work. That's an incredibly stressful existence and which leads to not only poor product. I mean, that's not a good culture. That's not going to be somebody who is showing up and actually adding to the culture. You know, I hear some people talk about cultural fit, and I think, “Yeah, like cultural fit is important” but you've got to be careful that you haven't made a culture in your own mind that's so finite and so defined and it's got so many hard lines around it that it can't evolve because you're bringing, as you said, your culture is your people, it's the collective energy, interactions, thinking, productivity of those people. That is the culture. So, if you’ve said, no, no, it's like this and if you don't fit that, then you're out. I'm like, yeah, but there is no cultural evolution.  

[00:21:55] Pete: I think it's a really good point. And I guess the one thing I'm very clear about, I can't control the culture. Like, there's no way. I can try and guide it and we can try and set a purpose and values that people share and align to in terms of the purpose. But that's all we can do because people are individuals and it's a bit of an old metaphor, but I sort of think of it like a quilt, you know, where each individual square is a person, but over time, the shape and the colors and the feel of that is going to change as the business evolves and grows. As people come and join the team, and as people leave the team and go on a different journey, this is constantly evolving, but what we can keep clear is the purpose that we're driving towards, and the why of the business, but also the values are almost like the filters of how we make decisions every day to try and get to that place. But I can't tell people what to do and… you've got to be able to hire great people, develop an environment that's built on trust and transparency, that's very clear. And then you've got to sort of get out of the road. And I think the point you make about cultural fit is an important one, because it does have to be an iron fist and a velvet glove. Like we don't have, we try and have fuel. So, if you're sick, I don't want to have sick leave certificate to prove to me that you're sick. We will take you on face value that you're sick, but the first time that you lie or that's abused, you can't work here, even if your performance is good, because that's going to be the bad apple that sets the whole rules in place of trying to do the right thing. So, people sort of get it or don't get it.

[00:23:41] And not everyone, Zinc does not suit everyone. And it's not about being bad or good, but you do have fit in on certain levels and you've got to continue to… that’s a lesson often, you've got to continue to re-engage that because I'm not the same person I was five years ago. So, just because you've got a team member that's really engaged and happy today, they might not be that in three or four years’ time. And the business has changed and the client requirements have changed. And so that's what you've got to have a framework, which is what we've got. We call it the Zinky journey, where people we check in on a regular basis. And we have these feedback sessions because the shape and the color and the flavor of the team is changing all the time.

[00:24:28] And I used to think, you know, “ah, just if I get there, you know, that revenue or that even a figure or if we open one more country…” It really is about the journey and I’m understanding that now like I actually understand it better. I think I've intellectually understood the concept, but I'm actually emotionally, I'm not looking for the end now, I'm on emotionally saying; Well, I'm on this journey now as a team member of Zinc and trying to be a better leader as I'm going along to the point that I'm going to keep adding value, but there's no end point because you know, it's like the human condition. You can just keep evolving and being better and challenging yourselves.

[00:25:16] Sean: Well, it's very easy to fall into that trap of also when things are hard of just seeing the next milestone you need to get to go, we just need to get to there and then everything will be good or that everything will be better then. I used to have a running joke with the first CEO I'd worked really closely with where we said, you know, and this joke ran for about three years, we were like, everything will be fine when we get to Easter, because we'd said that, it must've been February or something, we'd just discovered that the business was losing $350,000 a quarter and which was not what we were told when we took over the business, and we were like; okay, things will be better when we get to Easter and we've solved this problem. And when you get to Easter and of course there's new problems and you're thinking, okay, we'll just need to get to July. And by the time we get to July, everything will be settled.  

[00:25:55] Pete: No, no, you're right. You're absolutely right.

[00:25:58] Sean: This was just the ongoing… I think actually Tony Robbins summed it up beautifully. He said, you know, if I, in the context of the journey, because of course journey is a very widely used word. But when you think about as the Founder, when do you get to enjoy it. So, at what point, you know, this is what you've obviously wrestled with and come to a resolution, but it's like, well, at what point do I get to enjoy this journey? Is it when I hit that goal? Is it when I hit that revenue number? Is it winning that I ever done? Is it when I sell? Is it when I raise, like what is the mechanism? Because if you're waiting for all the stars to align and everything to be great, I think Tony Robbins said the best, you know, he said, well… I think his company is now doing something like 6 billion in revenue. He's like, “I've got 12 companies. I've got thousands of employees”. He said “if I had to wait for a day where everybody was doing everything to my standard, the way I would hope that it would be done and weren't screwing it up, weren’t losing money, weren't making terrible decisions. He goes, I would never, ever, ever have a good day.” He goes “because it's just not possible. So, I have to find a way to enjoy that journey.” As you say, I have to find a way of being enjoying the complexities, the imperfections, the stuff that doesn't work, and actually I have to enjoy all of that. Otherwise, this is going to be an absolutely awful ride until it finishes. And I'll almost be compelled to self-sabotage the journey to make it easier to control or less scary, or to kind of bring it back in rather than letting it expand. As you said, you kind of control the culture, you have to continue to imbue it and guide it. But you're also a participant.  

[00:27:32] Pete: I think it’s exactly right, and the point you made really, Tony Robbins is correct as well. And that's something I've had to learn personally over the years, because everyone works differently, you know? I know a lot of people that are driven to start businesses or do things. And like you see in sports people as well, there's sometimes they're parts of their personality that are a little bit different to most peoples who were just coached along. Whereas other people are driven by certain things and you've got to manage those expectations that everyone's not going to work the same hours or in the same way, or to the same intensity or the same level as you, and it's having the maturity, which happens through time to respect that because it can become a disincentive to the people that you're dealing with. And I've had that over the years for sure where I've been disincentivising to people because it's, you know, I would ask nothing of anyone that I wouldn't ask it myself, but people have got different ways of doing it things.

[00:28:41] Sean: Sure. Pete, I'd love to get into… I know you and I could probably talk for three or four hours, and so, we're going to have to try to condense some of these. I want to get as much value of course, out of your mind and your journey as I possibly can in the time we've got available, there's three or four areas. I'd love to dig into.

[00:28:59] Pete: Yes.

[00:29:00] Sean: I have got some very interesting learnings in your international expansion strategy because expanding internationally is really easy on paper, in an Excel sheet and very hard to do in practice. And I expect to get some learnings there. You went through a merger acquisition process and you were doing that remotely, so really interested to get some insights out of that. And then of course, what we haven't talked about in any more detail is the strategic changes you had to make when COVID happened, and the existing business model got disrupted and you've now returned it far more back to the core business model, but there would have been some interesting learning.

[00:29:36] So, can we maybe start with the international expansion when you think, about the attempts to expand internationally, the sequencing with the way you did it. What learnings have you when you reflect on the path, things that you wish you'd known, perhaps if you were thinking about expanding internationally and you're someone who's thinking about it today, if somebody in our community, they haven't gone international before, and they're thinking about what did they need to know to make sure they'd do a better job, or the best job possible, I should say.

[00:30:02] Pete: … Everyone can learn from our mistakes because we have made a number of them. And I think that's probably the first learning is you've got a… as the saying goes, you got to fail fast and you got to be really open and brutally honest with what you're doing well and what you're not doing well, because if you pretend even for a short period of time, it just costs you money and cost your time. And eventually depending on your capital base and your cash flows and also the capacity of your leadership, because we were growing organically in the markets, we were in as the same time we were trying to expand. So, we were trying to develop a leadership group and the internal infrastructure at capacity for expansion. We've also got to manage their cashflow and the financial sides of it, as well as manage the organic growth, the success that we're already having in the market or markets we're in. So, I think, the mistakes of the first thing, being willing and open to them straight away and learn because you will make them, I mean, that's the one thing is, do you plan and know whatever you plan to do, that's exactly what might happen, but you've got a emergent strategy, I think is the great term everyone uses. I've used it all the time. That's an emergent strategy. I mean I had a plan and now it's, we're up to like version four because it keeps changing because we make mistakes, but we learn from them. I think the second thing for us was, if you can start small to do your learnings and mistakes small. That's good. So, the first market we expanded into is New Zealand. So, if you're in Australia, that's a very easy place to do because you can work at some of the obvious things there. The next market we expanded to was China, and we sort of stuffed that up three times. But we got it right the last time, but we're nearly at the point of giving up and China this year will be 50% of our revenues because that is one of the fastest growing parts of our business. And you go back to 2015, 2014, we were basically a 100% Australian owned company, just doing revenues in Australia. And we had an idea saying; Hey, you know, we're in a market of 25 million and we're doing this, this and this. If we did exactly the same things and spent the same amount of time and had the same strategy, if that strategy is right. If we took that to market that's 10 times or 50 times larger, how are we going to get a better return on that?

[00:32:23] And the answer is clearly yes. And that's why we thought we would have a go and that's exactly what we did. So, I think that would be the third thing is, once you've made your initial forays and you've tried to work some smaller things out and you've made some obvious mistakes, do be ambitious, do try and take on the world. I think, Australian businesses are extraordinarily successful. It's almost like our sportspeople sometime. And I think this comes down to our mentality and the way that we approach things like we're very down to earth and we do a lot of business in Europe and in the US and in Asia. And Australian businesses we see regularly are punching well above their weight, respectively in all these arenas. And it's normally because we will have a go where maybe there's a little anti-authoritarian streak in this where someone says we can't do it. Well, that's exactly what we will do.

[00:33:29] We go back at ourselves and we're very brutal and we're very honest in a candid way, not in a nasty way in terms of what we can and can't do. Whereas, sometimes in different cultures, that can be smoothed out, but I really liked the rawness and the honesty, I guess of what we’ve grown up in our culture. Yeah. And I think it translates well, really well. And we're very well liked, like, because we are those things and we're generally pretty honest and ethical as well. So that would probably be the next thing with regard to that, and the last thing would be getting your capital base right.

[00:34:07] Like, you are going to run out of money or they're going to be problems that you have not foreseen and you have to have that buffer to be able to do it, and that's the twice we nearly came on and done both times because we had more success. Like we were planning for the worst and the opposite happened where we actually grew quicker and our working capital requirements went through the roof and it really crushed us. So, this is where you've got to have your capital base would probably be, and your cashflow set up as much as you can before you do it.  

[00:34:36] Sean: Yeah. I haven't seen the source of the stat yet, so I don't have the reference point, but I was told that 50% of the business value, once you've passed the year one, you know, getting out of small business, 50% of businesses that fail when they're scaling fail in the 12 months following their record year of growth, which makes a lot of sense for exactly the reason that you've just described. You know, it's very easy to assume the worst and it could go really well. So, if you don't have your ducks in a row, you can run out of cash super fast.  

[00:35:12] Pete: Can I just make a point on that, Sean? Sorry. I think there's two points on there, one of it is the cashflow but I think the thing is to know what strengths are, because I think there's a lot of people that start small businesses that are very good salespeople were very good in a small business environment, and once you have that growth, you've got to start focusing on the next level of infrastructural growth or systems or process or physical like offices even, and what I found, and we've made a lot of acquisitions as we've been growing as well. That it's that stage where a business gets to 4 or 5 million, and they've got to take that next stage of growth. Often people get distracted working in the business, or they start working on the business as opposed to focusing on the things that have made them successful initially. And they get lost in all the infrastructural things that becomes a real problem. And I guess that's one thing that we took away when we started Zinc. And I probably should've mentioned this before. Like we started Zinc with a 200 seat phone system, we opened two offices in Melbourne and Sydney the day we opened, and we developed a capital base, but I'd made a lot of acquisitions when I was at corporate express. And the one thing I'd seen most small businesses, when they hit between 5 and 7 million, they tend to fall over because they start focusing on all the things that aren't revenue or client-based, and sometimes guys are good at that. And maybe what you need to do is think about bringing someone in to let you keep focusing on what you are doing a good at. And so we try to avoid that in day one, and I think it's been one of the reasons for our success. It's high in risk and we certainly invested out of the curve. It was almost like wearing dad's jacket when it was just way too big and you grew into it. And when we started that business, we had one client. Yeah. So, it was an extraordinary, risky thing to do, but it's certainly something that if you're focusing on growth, you've got to build your infrastructure ahead of what you actually need, because if you're trying to chase it all the time, you'll just drown. It's like trying to give a drowning man a drink. It's just impossible.  

[00:37:25] Sean: Yeah. And unfortunately, you know, you end up doing a lot of brand damage on the way up because you end up making promises you just can't deliver on because the processes don't scale, the people, the service doesn't scale, nothing's, and it's a really, and that's typically, that's what I ended up working with Founders on is exactly, as you said, he's putting in the foundational building blocks in before you need them, before they're going to be a problem. Because if I can say, somebody's getting close to 30 people and I'm thinking. “But you didn't have this, you didn't have this, you didn't have this, you don't have this.” And at 30 people, you are going to massively struggle as a Founder because you've been managing everyone. By that stage, you've been dictating everybody's priorities, you've got no management structure, probably very light and you're going to fall in a hole, mentally and emotionally. You're not personally going to survive that journey of 50 without some major infrastructure investments. I totally get what you're saying.

[00:38:11] Pete: And leadership and it's all about people, you know. Right people and you've built that right culture to start, you'll tend to be able to adapt and grow with some of those things. So, you know, you will have to invest in infrastructure and process and all those things before, but at the end of the day, you're going to have to have the people first to be able to help facilitate and manage it. So, I totally agree with you.

[00:38:40] Sean: Pete, one of the things that we haven't talked about, but I think in the time that we've got available, I'd really love to unpack is, in COVID you had to make a transition, some new products and services that maybe you hadn't been focused on before and you're talking about the fact it's kind of returning to core business. Can you just take people very quickly through what actually changed? What did you have to do? And as a result of now kind of being, well, let's say on the other side of it, when you look back, what are the learnings about that period for you? So, can you explain that for us?

[00:39:05] Pete: Sure. Well, I guess the key thing … is make sure that we protected the team. So, this was really at the start of March when everything just started going sideways. And I think everyone, through December and January and early February thought this was a China problem, or it was an Asia problem. It'd be like SARS or it'd be like whatever and it’ll sort of out over there. And then all of a sudden it just started going sideways and it went sideways really quickly. And then everything's just shutting down. So, I guess the key thing we did was make sure our team felt protected and our members standing up in front of the team and we told everyone, but, you know, and I remember doing it in front of the Australian team, that we've got the capacity to work through this and we're going to do everything we can and not let any single team member go. Because that's the first thing is you've got to make sure everyone feels solid. And if you can't do that, I would have been saying whatever it is I needed to say. Good news, bad news or ugly. You've got to be telling the team constantly what's happening. And that's what we were doing through that those first few months is making sure everyone knew what was happening and had a very clear picture on reality. We weren't hiding anything because we didn't know what was going to happen, but here were our intentions and these are the plans we had and we were sharing profit and cashflow figures with everyone so that they knew exactly what was going on. And I guess the key thing for us, one of the biggest areas of our business has been our entertainment marketing division. And this is very much centered around the cinema channel, in terms of movie theaters. And that was one of the hardest hit and theme parks. And these were one of the hardest hit areas that just basically stopped overnight, and we had some significant, we had a 10 million debtor in China, that also just stopped overnight.

[00:40:57] So we had a couple of million dollars’ worth of goods on the water on boats that were being delivered to 45 different countries around the world. And the cinemas have basically opened on Friday and they've shut on Monday. So, we've got all these consignments that are going, but they've got no one to take them because we were calling and obviously borders are shut, travel is gone, no one was responding. Because we're calling, we're emailing but everyone is shut down, literally. So, we had to warehouse all those goods, and then we had a team, a whole team sitting there that after a week or two basically had nothing to do because this was not ending. And this is where we asked ourselves the question of where are our client's spending and what are they doing. And it was just a, and this is where I think good entrepreneurs and good leaders adapt and move quickly. And this is where… and it's not something unique. Like lots of people did different things, but in our instance, it was then understanding that, well, the one thing clients were still spending money on was PPE. And because we've got such a strong supply chain in China and because we've got four offices in China, we're able to pivot the supply chain we had to PPE and were able to provide personal protective equipment, which has PPE to governments and a range of statutory authorities in the next three months when no one else could, and things where it was like, I don't know if you guys have seen that movie War Dogs. It's hilarious about the arms dealer, it just goes out of control. This is what it was but with PPE where there was just no rules. And there was just freight increased almost tenfold over a week. You know, we were chattering whole planes leaving China, going to New Zealand, going to America where we just never done some of these things before. But because we had a team that felt protected and looked after and solid, which was based on a culture of trust and we hadn't done some of these things before, we were open to changing and adapting very quickly, and that's basically exactly what we did. So, it was an extraordinary time. And I think we did something like 85 or sorry, 110 to 120 million of sales of PPE in like 12 weeks or 14 weeks. We didn't have a day off. There was a core group of people who didn't have a day off for three months. But what it did do was get us through that period. And we've hardly sold any PPE since 2020. So it is an extraordinary story. And then supply chain caught up and then, you know, we're not competitive now with regard to what other people can do, but at that time, in some countries, and we were dealing with Walmart in the US like we were supplying some being domestic, we were supplying Amazon as well in the US um, as well as New Zealand, Australia, and also in Europe. It was an extraordinary time. Absolutely extraordinary.

[00:44:15] Sean: Wow. And what an incredible… I always think, you know, out of… you know people say, don't waste a crisis and so on. But the thing about that for me is it. Yes, sometimes the big financial opportunities that come in crisis if you’re quick to move and so on. But for me, it's more about your culture. What are people going to take away from this as a story forevermore, as a result of actually how the business responded, how people were treated, how people came together, what they ended up doing, and that I can imagine it's been an incredible cultural symbol story, that for your business, for everyone, people like you should have seen what we were doing. You know, I like that the why the business protected us, they gave us the opportunity to get creative and to figure out like knowing a chartered plane before, how do we do the, I don’t know, like just talking to just figure it out, you know, just getting stuff done, but through that process, the business survived and what's happening now is that it's coming back to it’s roots… and what an incredible journey for your team.  

[00:45:11] Pete: Absolutely. But it's also, I mean, we had to borrow a lot of money during that time as well, and you know, we're still paying that money through because we literally had debtors that weren't paying us for 12 months. But in that time as well, and this is a part of this shared value concept, we went back to old team members and just about every team member in every country took a pay cut of some description because we gave them the option. We basically said, you know, in this room, there are X amount of people, 10% of these people can't be here or what we all take a 10% pay cut. And we can all get through this together. And yeah, that's one of the proudest moments I've had been at Zinc is when your team sits there and they're all willing to sacrifice for each other. And the leadership group had sacrificed twice as much. They'd sacrifice 20% of their salary and for months earlier as they should, because that's exactly good leaders eat last and that's exactly the way it should be. But that's an extraordinary thing to be a part of and the mutual obligation I think you feel is extraordinary. So, you know, and then as soon as we could, and it varied in different countries, we were trying to get people back to full salaries, which we could, and obviously there was various government initiatives that really supported that, and then that took us 12 months to get our cash flows back into try and work out with our debtors to try and stabilise the business because it, but you know, we had this extraordinary growth and we had these extraordinary opportunities, but we had to fund them. I would always keeps coming back to funding.

[00:46:55] Sean: Yeah. A hundred percent. Yeah. I mean, I did exactly the same thing in the company I was running at the time, and to your point, the level of joy you get as a leader seeing people willing to put their personal selves aside for the greater good. And actually, one of the things I think that's one of the lovely things about our culture also nationally is that we're generally a relatively collectivist culture. And when you see very individualistic cultures where that's just not in the DNA, you know, it's me before everybody else, where were kind of like, hey, we'll sacrifice for the group if it gets us all a better outcome, that's a beautiful Australian thing. But to show that, you know, that's all, and it's all easy to say, and it's very nice, but when it impacts you personally, and your family, and you've got to take that story home and tell your partner or whoever is at home, it's like, hey, we're going to have to make some changes.

[00:47:45] Pete: I think it’s less collectivist and more egalitarian, is what I'd say like, and I think that's that real essence of … in the Australian culture that I think is extraordinary where people will give you the shirt off their back, but it's going to be built on trust, as long as when you need a hand that you're going to be there, you know, and I think that's a terrific thing about how we do things.

[00:48:10] Sean: Yeah, that's beautiful. Pete, we are out of time, but I have one question that I need to ask you that I ask all, all Founders that I've interviewed on this podcast. I want you to imagine that you’ve gone out and I don't know how, how long it's going to be before you're finished, you know, building businesses, how long this journey is, but let's imagine you're in your yearning years and you're, you know, you're getting a bit older, you're very wise. And you still got all your marbles with you and the CEO of the world's largest global community of first time Founders, tens of millions of people around the world who are all sort of dialed in, looking for opportunities to learn from wisdom from people who've really succeeded in building the kind of businesses that they'd love to build. And she asks you for your three ‘above all else's’. You've got to crystallise the three most important things that Founders need to get right if they actually want to be able to scale their business and therefore their impact and their cultures, what are the three things that you think that Founders…

[00:49:10] Pete: I think you've got to get people that are going to share the same values and that will sign up for the purpose, and that will do hard yards when they occur, because there will be some, I think you then got to get your culture, right. And they're very different. Like people are almost your hardware and culture is almost your software. Like you can have the greatest computer in the world with buggy software and nor can you have great software with ordinary hardware. So, to me, you've then got to work on your culture. And for me, that premise was around shared value or a more conscious form of capitalism that that's occurring now, where it doesn't have to be a zero sum game. And probably the last thing would be, your capital base, your cashflow. They would be the three things probably in that order that I would be really suggesting people focus on.

[00:50:08] Absolutely. And a great team.

[00:50:12] Sean: Yeah. it sounds like the way that you built your business from everything you said today Pete. So, look Pete, I'd really like to acknowledge you before we go for the way that you've built this business, because lots of people can talk culture and lots of people talk about team, but what's really obvious to me in the way that you've talked about it is how much this is actually part of who you are, what fundamentally drives you as a human and as a leader in business and the dialogue around actually just being able to show up as the same individual in every single scenario and creating environment where everybody else is not only expected to, but is sort of required to. And that is the culture. And if we can't do that, that we don't, like, what are we doing here? That is a beautiful thing for people to be part of. And so, I feel very excited for your team that they've been able to participate in a business that has that kind of leadership. So, congratulations to you and to your leaders in your team. I know it's not easy.

before we go, Pete, how can people get in touch with you or follow along with what the business is doing? If they want to sort of stay connected.  

[00:51:10] Pete: ... www.zinc.com is probably the, the key ways. And if we can help, I mean, we're here. It's too hard, not to share and help each other out of it. So, we don't have all the answers, but if we can, we are happy to.

[00:51:31] Sean: A hundred percent. Beautiful. Thanks so much, Pete. Well, folks I really hope you enjoyed the show today with Pete Cleary from Zinc. Big thanks to you, Pete. Before you go today, if you've got an opportunity of course, we'd love a review. Feel free to jump on the ScaleUpsPodcast.com website. You can pop your email there and you'll hear about a new episodes before they launch, or if you are a bit more of a social animal, you can find us on @ScaleUpsPodcast on any of your favorite socials. But if for everybody listening to that, you have heard a journey that's gone over a pretty significant period of time. So, before you get dazzled by the numbers that Pete and his team have achieved in the last really between 2016 to go from 30 to north of 200 in seven years, something like that, six years? Remember that there was a pretty significant journey before 2016, that occurred to actually build all that infrastructure and those foundations to get there. And the only thing that guarantees that you cannot scale is actually giving up. So, you have to stay unshakable in your faith that you’ll get there, but remained flexible in your approach and just do not give up, stick at it and stay with it. You've been listening to the skylights podcast. I'm Sean Steele.

[00:52:34] Pete: Thanks very much.