Aaron Giddings Aarons Outdoor Living Managing Director and owner was asked to comment on his business strategy and to help budding entrepreneurs.
Scroll to the bottom for a list of hot hot tips! Read through the article to hear the successes and the downfalls of Aarons business, Aarons Outdoor Living (Previously Aarons Outdoor Creations).
In The Black July
Out of the doghouse By Anthony Black
Aaron Giddings started out building kennels in his parents’ backyard, but 15 years on the manufacturer and retailer is well equipped to deal with hard times ahead. Experience counts for a lot when running a business in challenging economic times. The battles fought to survive and prosper in the past provide invaluable lessons in dealing with the present and mapping out the future. It’s in times like these that manufacturer and retailer Aaron Giddings is relying on his bank of knowledge, accumulated over the past 15 years, to keep customers spending in a contracting economy, while preparing for a recovery.
Giddings, 36, is the founder of a company that builds bungalows, cabins, workshops, garden sheds, tropical thatches, children’s cubby houses and forts, outdoor furniture and pet houses. His range of products are built in a giant Australian factory and transported to his own display sites and numerous retail stores scattered across Australia. Today his company Aaron’s Outdoor Creations turns over almost A$10 million a year and employs 48 staff and dozens of contractors. The business, as they say, grew from humble beginnings, it started life when he began building dog kennels out of 44-gallon drums in the backyard of his parents’ home.
With measured confidence, Giddings says his company is ready to deal with the economic slowdown. He devised plans to offset the ill-effects flowing from the global financial crisis almost 12 months ago when it became clear to him that Australia would not be spared. His objective is to sustain and possibly increase profits amid stiffer competition for fewer discretionary dollars in times of growing unemployment.
Giddings is a numbers man, and several times during our interview repeats the line, ‘turnover is vanity, profit is sanity.’ In the past year, he has put budgets under the microscope in a bid to cut costs. One move saved the company A$150,000 when he decided not to renew a lease on a factory manufacturing his products. He concluded that an existing factory had enough spare space going to waste, and it could be easily used, making the most of each expensive square metre. Two factories was a luxury enjoyed in times of economic prosperity.
Several years ago, Giddings was operating five factories and employing 72 staff in what he says was a highly over-capitalised and inefficient business. ‘You can always trim the fat,’ he says. ‘Look a bit closer and I’m sure most businesses can always find some more.’ Well Giddings did, and he restructured his advertising budget not only to cut costs, but also to extract maximum value using the right media vehicles to carry his message. Advertising, in good times, was just another business expense void of attention and scrutiny. Not so now. Giddings says he has drastically cut his telephone directory advertising spend by A$85,000 a year. He still advertises, but television and a growing presence on the internet are better equipped to carry his ‘visual message’. These forms of media offer flexibility, in that the company message can be changed and updated very quickly.
Giddings says customers buying his products in kit form and assembling themselves can now follow video instructions burned on a disc. ‘Yes, we are ready for a prolonged recession,’ Giddings says. ‘We’re not going to ebb and flow with the recession; my strategy is to attack it, to be aggressive, to get satisfaction out of beating it like a disease. Blaming the recession for softer sales and weaker performance would be the easy thing to do if my numbers decline going forward. And that would be a genuine excuse. But I don’t want to do that. The real satisfaction would come from actually beating sales forecasts and growing profits and margins in a downturn. If you can do that in tough times, business should only get better during a recovery, provided we guard against complacency.’
Giddings is a salesman and to keep the numbers ticking over he has changed his sales and marketing strategy to deal with challenging times. His fresh approach essentially involves adding optional extras to base products at an attractive price. For instance, Giddings says a base model cubby house, without the optional extras of double doors, a skylight, two flower boxes and a letterbox, sells for an average price of A$1395. But after repricing optional extras, as a result of better deals with his suppliers, Giddings now offers the cubby, including optional extras, for A$1400. ‘This strategy is a response to the global recession,’ Giddings says. ‘People are very wary about spending money, particularly on discretionary items. Shoppers have to believe they are getting a good deal, or they will simply walk away. For an extra A$5.00 at the point of sale, I’m offering A$190.00 value in optional extras. Packaging the optional extras is a carrot to buy my product. People feel satisfied if they believe they have bought a quality product at a bargain price. Satisfied customers make a habit of returning, and repeat business is invaluable because you’re getting it free. Satisfied customers also recommend you to others, again for free.
Word-of-mouth advertising should never be underestimated.’ Giddings says experience has taught him how to evaluate or ‘read’ customer behaviour, another invaluable sales tool. ‘I study body language from the minute a customer walks in the door,’ Giddings says. ‘I see what product is interesting a customer and ask if I can assist. When a customer talks, he or she is volunteering information that I’m assessing. If customers want to browse, I stay off them, but I don’t ignore them. Some want you to make up their mind for them, while others just want a quick-fire solution to their nagging backyard problem. Customers in a hurry need urgent attention … and they get it. If a customer is aggressive, I make them feel superior without being subservient. Aggressive customers like their egos massaged because it’s a control thing, they like to feel they’re in charge. But aggressive customers also like a sales person to look them in the eye and to speak with authority. Invariably, they buy my product. ‘Placid or uncertain customers require a different sales approach. I speak to them with a softer, reassuring voice. They may want me to confirm they’re buying the right product. But I don’t over-sell, or it will turn customers off. Most customers don’t like pushy or overbearing sales people. Sometimes customers may visit my display sites several times before they buy. Or sometimes they don’t buy.’
With the sales pitch comes the passion for his business and products. Giddings says it’s important that any sales person or employee be more than adequately equipped with product knowledge. ‘Employees must know and understand their product, or they risk looking silly in front of the customer, and are unlikely to make a sale,’ Giddings says. He says sales people and employees who genuinely believe in their products and services are much more likely to be successful. Their enthusiasm is contagious.
Aaron’s outdoor creations sells about 2500 cubbies a year, 2500 pet houses, 500 sheds, 200 tropical thatches, 50 bungalows and countless pieces of outdoor furniture. Giddings is self-taught; his story of initiative and persistence, sometimes in the face of adversity, can be considered an example of how dedication, commitment and making the most of opportunities can bring success. He says his attitude has never wavered since starting his business at 21. He recalls how it all began after returning from a 12-month stay in Japan. Giddings learned Japanese for four years at Melbourne High School. He wanted to be fluent so a 12-month scholarship took him to Nagoya where he learned more than the language. He marvelled at the Japanese work ethic, which he promptly adopted. ‘The Japanese work ethic is simply unbelievable in whatever field of endeavour people choose,’ Giddings says. ‘Parents go to work early in the morning and arrive home late. Children practise their sports before and after school. They are proud people who want to succeed and they work long hours to achieve it. Living in Japan was such a valuable experience. I was young and wanted to see the world, Japan provided me with vision.’
After Japan, Giddings, aged 20, deferred a commerce degree at the University of Melbourne to earn money. He never finished his degree. One of his first jobs was selling smoke detectors door-to-door when legislation made them compulsory. The job paid the rent but it was boring. He set his eyes on a neighbour’s dog kennel made from a 44-gallon drum, and Giddings’ business venture was born. He would cut a hole in the top of the drum, turn it on its side and bolt it to timber legs. He would carpet the inside, and the smart finished product included a corrugated iron gable roof. He managed to salvage used drums (free of tar and oil), from council depots and car dealerships, mostly free. After a slow start he sold his first dog kennel for A$90 from materials costing A$9.00. Next, an advertisement in a publication specialising in buying and selling goods generated four consistent sales a week. Then Giddings approached 50 nurseries and pet shops about stocking his kennels for a sales commission. It was a win-win for Giddings and the retailers as demand for kennels grew stronger as winter approached. He needed workers, a factory and a loan. He managed to get an unsecured ANZ Bank loan for A$20,000 after almost every other financial institution had said no when examining his turn-over, product and prospects. With the loan, he leased a small factory and started hiring the long-term unemployed under an Australian federal government program, the job start allowance. The allowance covered 80 per cent of his wages bill, a timely, helping hand when establishing a new business.
Giddings says the first financial commitment his business met each month was the ANZ loan. ‘I was determined never to miss a repayment because the last thing a new business needs is a bank on your back,’ Giddings says. He says the business has never taken out another loan and is ‘totally debt free’. Giddings was keen to build and diversify his business and he wanted another product to complement his dog kennel line, and to keep his workers busy. He bought a newspaper advertisement to test if there was a market for children’s cubbies. The response was immediate, with orders to build six cubbies a month before Christmas. But he wasn’t prepared, and sold each cubby for $350.00, which didn’t cover the cost of materials. He spent the next month, often working until 3am to meet orders, fully aware he wouldn’t make a profit. The positive aspect was that he created a new business. The lesson he learned is to cost a job properly before quoting a retail price. And Giddings acknowledges he has made his fair share of mistakes along the way. He says at one stage, the business grew too quickly and in different directions, which compromised product quality and service.
‘There was no checklist so we sent out product with parts missing,’ Giddings says. ‘It didn’t take long before I had irate customers on the phone. I was caught up in my own success and dropped the ball. I hired employees prepared to work for low wages, but the mistake was I recruited too many unskilled people. That’s entirely my fault because I was too busy to do the necessary checks before hiring staff. I’ve learned that recruiting reliable, efficient, skilled and hard-working staff is one of the most valuable assets to a business. I’m learning to delegate much more, although that’s difficult for a control freak.’ Giddings, who works 70 to 80 hours a week, plans on expanding the business in Australia and to other countries when the global economy improves.
To date, his hard work has been personally rewarding, he owns three residential properties in prestigious Melbourne and Sydney suburbs without a mortgage. ‘Money is a by-product of running a successful business,’ Giddings says.
What can business’s learn from a young entrepreneur? – Aarons Giddings
- Plan in advance to avoid nasty shocks.
- Anticipate revenues, costs and profits for the next two years by putting budgets under the microscope.
- Trim the fat.
- Find efficiencies and cut unnecessary costs.
- Turnover is vanity, profit is sanity.
- Restructure company operations to get the most out of staff, plant, office and equipment.
- Advertising. Use suitable media vehicles that can maximise exposure of products and services.
- And do a better deal today.
- Demand value.
- Do better deals with commercial and industrial landlords and product suppliers in times of fierce competition.
- Package products and services for clients to make them feel they are getting top value for money.
- Be prepared to spend more time talking or dealing with clients in these uncertain times. You’re on their side. Some want reassurance. Satisfied clients will do free word-of-mouth advertising.
- Show measured business passion; it’s contagious. Be confident, but keep the ego in check.
- Product and service knowledge. Ensure all new employees are fully trained in company products and services. Ignorance can be costly.
- Be alert. Constantly look for new opportunities. They can come out of left field.
Reference: July 2009, volume 79:06, p.40