HE founded his company, Corporate Travel Management (ASX: CTD), in 1994 with just two staff in a small Brisbane office and Jamie Pherous now heads a business that employs 2,200 people, services more than 70 countries and has a market capitalisation of around $2.5 billion.
Corporate Travel Management (CTM) is now the largest privately-owned travel management company in Australia and it recently reported its strongest ever full-year results for 2016-17, with a net profit increase of 42 per cent to $67 million thanks to strong growth across Europe and the US as well as Australia and New Zealand.
It was the company's 23rd consecutive year of growth and since it listed in 2010 with an issue price of $1.41, CTD shares are now tracking at a very healthy $21.08 as at 28 August, 2017.
Prior to establishing CTM, Pherous worked for Arthur Andersen (now Ernst & Young) as a chartered accountant specialising in business services and the financial consulting division in Australia, Papua New Guinea and the United Arab Emirates.
Business News Australia spoke with Jamie Pherous and asked him why he ditched his safe corporate job to start CTM and why he's so big on 'diversification'.
Q: When you set up CTM in 1994, what gap did you identify in the market?
Back in those days if you were a large corporate you only had the choice of four big global travel managers and they were defined by call centres and technology that didn't really add value and there was no transparency.
We saw a big gap and we were determined to prove that differently by providing three things exceptionally well. Technology that actually worked and added value to a customer but underpinned by really good personalised service.
"We also wanted a really good ROI methodology which means that if a client was spending, say, $5 million, let us show them how to get down to $4 million and be accountable for it."
Q: So, what's that recipe for 23 consecutive years of growth, what do you do differently?
In our business, there's four areas we get everyone to focus on and we want to make sure everyone in our business understands how to focus on those four areas. First, it's clients and how we win and retain them. Next is people. We want to attract, retain and develop our people and the glue that holds that together is number three and four: innovation and process.
"Quite frankly when you put that all together, profit falls out of the bottom."
Everyone's working for the customer and everyone's tied together to understand how they contribute to the customer and by doing so, you've got a very good sustainable business over the long term.
Q: Why the strategy shift to Europe and the US?
The market overseas is growing exponentially, that's why we're looking to go offshore. The market we're aiming for is $1.4 trillion and this is growing at $40 billion annually. That growth is six times faster than the growth in the Australian market.
The USA is now the biggest part of our market and we've only been there for four years. Our sales are $1.3 billion and we're still less than one per cent of the market. We're just a dot in the spectrum.
Q: I'm sure it's not been all plain sailing, have you hit any hurdles along the way?
Yep, in 1996 and we learned a very big lesson.
"We were going along with our lofty growth and we were at $10 million in sales and we had a $5 million client which was obviously a big part of our base and we lost that client. That was a day on which I literally cried."
You want to know why we lost it? It wasn't service, it wasn't price, it was technology. So, I actually cried, I really did cry, but we got together with the team and we said: 'okay what does this mean?' and we were able to recover and it meant we did not have to lose jobs.
From that day in 1996, we learnt our lessons. You do not want to put all your eggs in one basket. Now we're highly diversified in both geography and client size and no client represents more than four or five per cent of profit. You also have to grow because you can't control what clients do, if they go broke or whatever, and you have to invest in tech.
I look back on that now it was an important lesson and milestone for my mindset in how we set up this business today. If you see our 23-year growth, it just keeps going and the economy hasn't had a big bearing on our business. You really need to diversify. If you have one client represent half your business, then this is a nightmare. So now in our business no client represents more than a few per cent of our business and this is something we're really big on. So, if something goes wrong or you lose a client, or a client goes broke, or they get bought out, it doesn't affect your business or the people who work in it.
"And for us the most important thing is we're going to be innovative and we're going to drive innovation and we're going to do it in a way that is customer facing. Innovation is at the core of everything we do."
Q: Is there any way to foresee, or at least prepare for, a major shock to the business like that one in 1996?
We spend one day every quarter discussing what could break us and we also talk about what we can break ourselves. There are some pretty crazy ideas which you can just throw in the bin, but one or two can become good ones.
Q: You've spent more than two decades building CTM into an ASX top 200 company which is ticking along nicely. What gets you out of bed and keeps you motivated?
Like most entrepreneurs I'm not money driven, I'm more goal driven. We want to be the very best in the world and we want to prove to people that our model is the best it can be. We have a long way to go yet but really, I love what I do and I just love the people I work with.We're building a really good management team and it is so satisfying to see people build their careers here and a life out of the company and it is something I am so proud of and I do feel privileged to be a part of that.
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