Maintain the Pace - BRW Fast 100 2012

When it comes to small businesses, they didn’t come much smaller than the labour hire business started by Andrew Northcott eight years ago. A university student at the time, Northcott contracted himself out as a labourer to his first client. The transaction was recorded on his laptop computer and his first commission fee was a welcome addition to the $800 start-up capital in his corporate bank account.

From those humble beginnings, Northcott’s Brisbane-based LSA Recruitment Group is now one of Australia’s fastest-growing recruitment companies. Ranked at seventh on this year's BRW Fast 100, with 2011-12 revenue of $34.5 million, it is LSA’s third successive appearance on the list.

That’s an achievement in itself. Since BRW began ranking the first fastest growing small and medium companies in 1990, out of a total 1351 businesses that have been on the lists, more than half – 796 – have made it on to the list only once.

What the Fast 100 “stayers” illustrate is that achieving a short period of rapid success is relatively easy. The tricky part is striking that delicate balance between achieving fast growth while building a sustainable business. As the businesses in this story show, short-term success may point to a great future but it won’t guarantee it.

Northcott may not have made it as a regular on the Fast 100 had he not learned a valuable lesson early: that growth for growth’s sake is a business killer.

The original LSA business, the labour hire, or “blue collar” business, Labour Solutions Australia was joined in 2007 by the executive recruitment arm which gives the group its name: LSA Recruitment. LSA was built on a franchise model and buoyed by his early success, Northcott planned to sign up 150 franchisees by 2014. “The early years were a huge learning curve and we made a few mistakes,” he admits. LSA’s approach to franchising was one of them. “We just wanted to build a network and didn’t screen franchisees well. We had a lack of understanding of who or what makes an ideal franchise partner.”

The LSA franchise model gives experienced recruitment consultants the ability to go into business for themselves under the LSA banner while enjoying the benefits of centralised back office support. The problem was that some of the early franchisees were more aspiring than experienced recruiters – and not especially competent owner-operators – which threatened the LSA brand’s reputation. As the few bad apples dropped out of the network, Northcott resolved that things would change. “We took a more conservative approach to choosing our franchise partners and the priority has been to get the right people on board. That slowed the growth (of the franchise network) significantly but if we get that wrong we’re not doing the right thing by the other franchisees.”

Northcott says he has a greater sense of “exactly the kind of person who’s going to work in that role”. Franchise principals typically have six – ten years experience when they join LSA. LSA has 12 franchisees nationally and more modest growth plans for 35 in 2013. Northcott believes the franchise model can be adapted overseas and expansion to the United States and Britain is planned by 2015.