Business Opportunities Weblog

March 6, 2008 by Angela Shupe | 1 Comment

The Australian:

Media coverage of the plight of Eddy Groves, with his company’s share price plummeting as much as 70 per cent in one day, nearly always comes with an inference that he had it coming to him.

He is nearly always described as: “Ferrari-driving” or a “Ferrari-loving tycoon”, with the suggestion that buying expensive possessions was linked to his corporate fall from grace.

This is, in a word, unfair.

There are some fair criticisms that Groves should cop it, but for a guy who has been one of this country’s great small business success stories, he shouldn’t be pilloried for enjoying the consequences of his hard work.

Before looking at the sins he deserves a bagging for, let’s recap on his achievements. Before this share-market shellacking, there would have been thousands of up-and-coming business owners who would have been inspired to greater things by reading Groves’ story.

And when business owners go on to greater things, it usually means jobs and wages for others. It means more taxes for governments to spend and when they grow overseas, as Groves has, it also means valuable export income that this company sorely requires.

This South African-born Brisbane boy started out as a bank clerk in Brisbane. Uninspired by the job and at the ripe old age of 19, he went into his first business as a distributor for Pauls Milk.

From his earliest days, he showed business acumen and it wasn’t long before he owned the largest Pauls distribution network in Queensland.

In 1988, he kicked off into the childcare business with his first ABC Learning Centres operation.

This is a guy who would have read the likes of Michael Gerber’s E-Myth Revisited, which said most businesses fail because of poor systems. He would have looked at the likes of McDonald’s, which showed small business people the value of systems that reproduce successful businesses everywhere they go.

The company listed on the ASX in March 2001 and the share price went way above $8. And the reason for this was an unbelievable expansion program that ultimately became an overplayed strategy.

By the time the stock market had its way with ABC’s share price, taking it down as low as $1.15, the company was the largest publicly listed childcare company in the world. Its dominant footprint straddled Australia, Britain and the US.

This is a massively impressive story that even won over the wily investors of the Singapore Government’s Temasek Holdings, which bought 12 per cent of the company at a share price of $7.30 last June.

Be clear on this, Groves has made mistakes and the company share price had to fall, but not to these levels.

One respected commentator on Seven’s Today Tonight — in fact, it was me! — concluded Groves was stupid to over-borrow, leaving his company so badly exposed. However, he was not Lee Harvey Oswald — one man acting alone.

Although Eddy Groves has made some poor decisions, it’s pretty easy to say that he’s one of the largest success stories in Australia. It’s also very likely that he will bounce back from this, if his past record of success has anything to do with it.

Logo from ABC Learning Centres.

In Entrepreneurs, News | 1 Comment