Craig Winkler started his first business from the spare bedroom of a rented house in Melbourne. The entrepreneur, now CEO of one of Australia’s best known brands, MYOB, couldn’t have known that life would deliver its first ‘financial’ crisis within his first week. It was October 1987. The stockmarket crashed and Winkler suffered his first setback as a budding business builder, launching a new company in a cash-starved Australia. But blessings come in many guises. Today, Winkler’s second company MYOB is one of the most widely recognized brands in corporate Australia, having made an indelible mark on the way small to medium sized businesses are managed.
Interview by James Tuckerman
JT: Tell me Craig, how did the MYOB story all begin?
CW: Well, it began like most businesses: with an idea and an opportunity. I have two co-founders. We came from different directions, but had arrived at the same idea – business is hard, and it shouldn’t be. There’s got to be an easier way. Each of us had different experiences running our own businesses. We recognized that technology could be applied to many of the basic business problems that we each had encountered. I guess at that time, during the late 80s, the price of computer hardware was coming down and more businesses were starting to use computers. But more often than not, businesses – particularly smaller businesses – were using their computers as little more than advanced typewriters. So, we saw an opportunity to do more than that, to get to the guts of what’s needed in a business, and provide a product that is affordable and make it something that normal people running a business can use.
JT: So, what year are we talking about here?
CW: The official kick off for MYOB was 1991. We rolled up some products into MYOB accounting and launched them into the Australian market. But I started my own business in 1987, just before the 1987 crash. I was on my own at that time. I learnt a lot of those important early lessons around then. So, I think by the time Brad [Shofer] and I hooked up in 1991, we both had experiences running our own businesses. We both had a very deep sense of what was hard about it and, therefore, what we were trying to fix. We thought about creating some really easy software tools that could make it so much simpler for a small business owner to get a grip on his or her finances (who owes who money, tools to track income) what customers need, really basic stuff.
JT: Your own experiences in the crash would have created a very clear sense of empathy with your customer, I’d imagine, particularly managing your own books from the spare bedroom.
CW: Absolutely. That sort of experience really forces you to look at what it is you are trying to achieve, which helps a business push through the really difficult times.
JT: I understand you inherited the MYOB brand. It’s such a memorable brand. How important has the brand been to the success of the business? Has there ever been a moment when you thought, "Let’s try something else?"
CW: Yes. At the very beginning we had a lot of discussion about the brand, because it can be taken two ways. That’s the beauty and also the challenge of it. When we introduce the product to some parts of the world, saying ‘mind your own business’ is much more aggressive and rude than it is in other places. But then, it’s also a very memorable brand and hard to forget. Most business owners understand its true meaning.
JT: Have you ever encountered any IP problems with such a generic name or expression?
CW: That’s very interesting, because the intellectual property law around the world is quite different in different places. I guess that’s one of the challenges of operating in multiple markets. We are currently operating in eight counties, including places like mainland China. It’s a very interesting experience. We need to make sure that we are protecting not only our technology but also our brand, MYOB. It’s a very long and tough path. Because, you’re right, it’s an expression that is commonly used. But when it’s applied to running a business, in that other sense of minding your own business, we have been able to protect that. But at the end of the day, a lot of it is really about becoming known and associating the expression with the brand. The best brand protection is to make sure that it has a strong meaning and resonance for our clients because of the services we provide – that is more important than any amount of legal protection.
JT: In the early days, how did you manage growing pains?
CW: I think at the time we really didn’t think about it that much. Growing pain was just an everyday reality that we had to deal with. Growing fast is fantastic, but also incredibly demanding and very expensive. In the early days, there were a couple of years in a row that nearly killed us. It was unbelievable, just pouring our profit straight back into the business, and it just took all our energy to keep growing the business. But we kept seeing opportunities and we wanted to grab them. I guess, fundamentally, what we were doing, what we understood that we were doing, was helping business owners. We knew how hard running a business can be and we were making life better for many people. And that’s what continuously drove us.
JT: Speaking of growing pains, perhaps the highest profile growth activity of MYOB was its acquisition of Solution 6. How much did that change the business?
CW: That changed the business significantly. It effectively doubled our size overnight, in terms of the number of people on the payroll It changed our profile. It increased our presence in a number of geographic markets. We planned it very carefully. There were certainly ripples, because you are dealing with people. That’s one of the important things to me in business. Businesses are about people. So, whether it’s your own team internally, or whether it’s your clients, or whether it’s your shareholders, everything really comes down to people. If you are willing to treat people the right way, and you are willing to put yourself in their shoes, and look at what’s best for them, then you make fewer mistakes.
JT: Any tips for Anthill readers who might be considering expansion through acquisition?
CW: Don’t underestimate the effort you are going to put in. If you can see how you would add value, if you think you can see how you would integrate properly, sure, go ahead. If not, don’t go ahead. Ask yourself, ‘What would make things different if the company was under my ownership?’ But don’t underestimate how much effort you are going to put in before you will be able to extract value from the acquisition.
JT: MYOB listed in 1999. How did you go about rasing capital between 1991 and 1999? Did you need it?
CW: We didn’t raise capital during all those early years. We felt that we could make a difference. That may sound a little bit over the top but that was our view. We didn’t know how far we’d go. We weren’t trying to make a quick exit and cash-out. None of us felt that way. We just wanted to make a difference, so we were quite willing to reinvest the profits year after year and pay ourselves small salaries, enough to live on, because we were having great fun. So, basically we didn’t go looking for funds in the early years.
JT: So, what compelled you to list?
CW: It was a big decision. And there were a number of factors that went into that decision. I think one of the critical reasons was that expansion and growth are expensive, and we were starting to get beyond what we could achieve by just reinvesting our profits. So we looked at a whole range of different approaches, structures and different funding models. Back at that time (1997-98) our view was that venture capital would be easy to acquire, but the industry wasn’t particularly strong or rich or deep. Then we looked at other alternatives – private investments and so on. The three of us were very happy to be the owners of the business but we also knew that there might come a point when one or another of us might want to do something else or reduce our involvement or something, and we weren’t sure how we would handle that. In a private structure, it is very difficult to deal with those things. And importantly, we had a profit sharing scheme in place, where we shared profits but we didn’t have a share scheme, where our team could share in the capital growth of the business. So, having a public benchmark seemed a really good way to manage that.
JT: When you listed, did any of your employees with shares simply shout "Woo-hoo!" and disappear on indefinite holidays?
CW: No, I don’t think anyone did anything like that. We don’t tend to attract people that are purely in it for the money, because there is something exciting about what we are doing. We really want to make a difference. We know the pain and we really want to help. So there is a drive that goes beyond day-to-day finance.
JT: Were there any moments when you were particularly concerned about the future of the company, when you felt like you were hitting your head against a brick wall and felt like just giving up?
CW: In the very early days, stuff like cash flow was scary – forfeiting our salaries to pay everyone else. There are also moments when you feel pretty terrified – how do we manage this change, how do we meet this new trend – those things are scary. But you know there is something weird that I have learned about myself. Even though I’m a pretty pragmatic guy and pretty conservative, if I’m confident that what I’m doing is the right thing, then I’ll definitely take on the risks. Appropriate management is, of course, important also, but if the sense is strong that we are on the right track, then we’ll press on, no matter what the hurdles are.
JT: According to BRW, at one time you were worth $300 million, which is a lot of money. Has there been a moment when you stopped and thought, "I can relax now. I’ve made it."
CW: I guess I never think about things in those terms. That number you quoted there, I think it is just a paper fi gure. Money is not the main driver for me I guess. I get paid a salary, and that’s plenty to live on. I’m very grateful for that. But what I’m doing is more important, day-to-day. There is always something to do tomorrow. There are always new challenges. It’s endless really. And the challenges just keep coming.
JT: We have a competition in its second year called the Cool Company Awards, and what we have found is that many of the successful entrants do share a similar motivation, that they are making a difference. They don’t mind suffering in the short term because they know that if they continue what they are doing they might just change the world a little bit. Do you feel that you’ve changed the business world?
CW: I think we have made a small dent in the painful side of running a business. But there is so much more that we can do. I’m grateful to be able to look back at what we have achieved. But really, there is so much more that we want to do.