Growth tips from Adam Schwab, Australia’s fastest starter

Adam Schwab is one of Australia’s most successful and down-to-earth entrepreneurs.

As CEO and co-founder of Lux Group, he manages over 200 team members around the world, turns over more than $300 million annually and has just been named No.1 on the 2017 Financial Review's Fast Starters list, as well as in 2013 topping BRW’s Fast Starters list.

Recently Lux Group and former rival, Catch Group, announced a record-breaking e-commerce transaction, with the two groups doing a deal to exchange their e-commerce travel and product brands as well as merging their local businesses, Scoopon and Cudo.

With such phenomenal growth and milestones, we caught up with our top expert, Adam, to discuss how he acquired his first customers; tips for maintaining business growth; and the mistakes he learnt from along the way.

 

 

The big idea that kick started his business

When Adam Schwab and school friend, Jeremy Same, started what would later become DEALS.com.au back in 2010, they had the same problem most marketplaces have: the chicken or the egg conundrum. Which side of the marketplace to focus on, the supply or demand side.

“We were going into restaurants and cafes and saying, ‘We’re going to generate customers for you’ and they would say, ‘How are you going to do that?’ We’d say, ‘Well we are going to build a website and people are going to visit, because we’re offering deals.’ We had a clear credibility issue given we didn’t actually have a site and certainly didn’t have any customers yet,” Adam says.

With no customers to attract the best restaurants, they needed a growth hack to solve the issue.

“My co-founder, Jeremy, came up with one of his best ideas ever,” says Adam.

“Jeremy found a Facebook group called Secret Melbourne that had 50,000 members and talked about things to do in Melbourne. He suggested ‘Why don’t we buy this group?’

“We contacted the Admin owner and asked if he wanted to sell his page. He agreed, because there was no other way for him to make money from it, and so we acquired the Admin rights [Facebook didn’t allow groups to be sold] for about $20,000. Overnight we had 50,000 potential customers.

“This gave us leverage to go to businesses and tell them, we have 50,000 potential customers to market to. We would post onto the group’s page a deal a day and get people to like and share the post.

“Everything grew virally from that point on. It was an incredibly organic way to grow the traffic and essentially solved our chicken and egg problem.”

 

Advice for fast growth

When it comes to fast and continuous growth for e-commerce businesses, Adam advises entrepreneurs to understand the cost of acquiring new customers, the cost per acquisition and increasing the customer’s lifetime value through frequent and repeat purchases.

“A lot of businesses get caught out, spending a lot of money on marketing. They’ll spend $100 to acquire a customer who ends up spending $50 over their lifetime.

“If you spend $100 on acquiring a customer, you need to make sure your customer spends around double that on first purchase (depending on what your margin is), and then buys repeatedly. Otherwise it’s inevitable that the business will run out of money,” says Adam.

When it comes to achieving fast growth, not only is it important to have a good understanding of your customer’s value, but Adam advises that great customer service can go a long way.

“First, your product needs to be exceptional; but, it’s also about focusing on the customer experience and doing everything you can to retain the customer that you’ve essentially bought.

“A five minute phone call to keep a $100 customer is always going to be worth it.

“Valuing your time is important, but valuing your customer is really the key to success,” says Adam.

 

Two of Adam’s biggest learnings

In December 2017, Lux Group announced Australia’s biggest e-commerce transaction with Catch Group. The deal involved three separate transactions, with the Groups essentially swapping their travel and product brands to focus on pure-play e-commerce businesses, as well as the creation of a local experience joint venture.

“The transaction was really about simplifying our business model to focus on travel and still maintain an interest in our local business, which is what we’re best at.

“In the past we’ve been too quick to purchase businesses because we thought they were cheap, rather than purchasing them because it really adds value.

“You are better off buying a great business for a fair price, than a crap business for a cheap price. Some of the not-so-great businesses we acquired helped us to scale, but some of them were mistakes that cost us upward of about $20 million,” says Adam.

Besides purchasing the right businesses, another decision Adam questions is whether they should have raised capital earlier in order to accelerate growth and hire the right people.

“Getting better people earlier is one thing I would have done differently, but the reason we didn’t do that was because it was costly.

“We’ve always been bootstrapped and often wonder whether we should have raised capital earlier to ensure we could get the best talent in at the earliest stages of the business,” says Adam.

Based on this experience, Adam advises startups to consider giving away equity to provide a sense of ownership to employees and to attract a better calibre of people.

“If I had my time again, I would be more aggressive at getting really good people onboard early,” says Adam.

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