Growth Businesses

Diversify/Adapt or die - Can your business survive?

07 March 2020
Diversify/Adapt or die - Can your business survive?
This article is written by Steve Gagel, Director of Business Services and Taxation.

Last month, I was invited to speak at the Clubs Queensland Diversity Symposium as a member of the Brisbane Racing Club ('BRC') Board. BRC received the “Best Club Diversification” award at the 2019 Clubs Queensland event. The BRC business started at Eagle Farm racecourse on a tract of swampy land on Brisbane’s northern outskirts in 1865. My first thoughts were to go back and retrace history to try to identify when the change began and to see how the BRC (or Queensland Turf Club and Brisbane Turf Club prior to the merge in 2009) acted to ensure that its future was secure.

The photo above was when racing in Queensland was at its peak. It was taken in 1936 of the Public Grandstand. The only technology in view are binoculars in the hands of some patrons. Everyone was focused on the event in front of them – all present in the moment. They are all immaculately dressed. They all paid to access to watch the race and to have a bet. The only legal place you could have a bet was at the track. The club was strong with regular race days attracting 20,000+ spectators on most Saturdays. The Racing Business could be run on one day of the week and there were ample funds to support a thriving business. Massive assets could lay dormant for the following days and still the Club made a healthy profit.

Fast forward to 2013 when I joined the board of the BRC, the financial stability of the business was a long way from the glory days of the past. Racing as a business was creating a loss that had to be supported by Government (via Racing Queensland) to continue operations. A $1.2B master plan was finalised and was launched after the merger of the two Brisbane Race Clubs in 2009 that forced the combined BRC board to address the future of racing in Queensland after the disruption (rightly or wrongly) caused by Bob Bentley.

What had happened in the interim period between a booming racing business in the 1940's to the one struggling to survive in the 2000's? The answer to that is a number of structural business changes and technological advances that slowly took away business from the BRC, namely:

  • 1960's first off course TAB in operation (albeit pools closed 40 minutes prior to jump and no payout until Monday with no radio allowed inside the TAB)
  • 1985 Sky Racing commenced transmission into homes when Australia's first domestic satellite was launched.
  • Increase in sports entertainment for sponsor dollars;
    • 1987 Brisbane Bears/Lions
    • 1988 Brisbane Broncos
    • 1996 Brisbane Reds and Super Rugby becoming professional
    • 2004 Brisbane Roar
    • 2008 Brisbane Firebirds launching into mainstream media
    • 2011 Brisbane Heat
  • Increase in competition on legal gaming;
    • 1985 Jupiter's Gold Coast Casino opens
    • 1992 Poker Machines allowed into pubs and clubs in Queensland
    • 1995 Brisbane Treasury Casino
    • 2001 Online Gaming legalised
  • 2001 3G mobile technology allowed for online gaming on mobile technology
  • 2010 to date - the successful rise of Peter V'Landys and NSW Racing leading to reduction of 'Clock Time' for Queensland racing product.
It can be argued that the burn was slow, starting in 1960 and escalating exponentially through 2001. The greatest pressure occurred during 2001 when online gaming and mobile technology combined to put the racing model at greatest risk. The decade starting in the year 2000 was a turbulent time for racing in Queensland and as a result of many passionate racing people, change was forced on the participants. It was a wake up call for all involved and led to the development of a master plan by the BRC to future proof the sport that has been operating in Brisbane for 155 years. The roll out of the masterplan has saved the BRC in the past three financial years and will ensure the survival of the club for the next 155 years. The BRC currently represents 25% of all bets in Queensland across all codes and 33% of thoroughbred racing (with Eagle Farm still getting up to speed after the second track rebuild.)

The importance of the right people at the BRC at the right time cannot be underestimated. I have had the honour of working with three very different CEO’s during my tenure and each of them at the time was the right person to be in the driver’s seat and all progressed the club to where it is now. The board is also vital in relation to the setting of strategy and the composition of the board is critical in ensuring the right skills are present to increase the risk appetite in an appropriate fashion. All clubs should review their constitutions and conduct a 'required skills matrix' prior to considering any large scale change to business operations. Members skills should be sought to fill gaps in the skills matrix and election to the board should not be a popularity contest but rather a chance to target a skills upgrade on the board.

As Queensland Clubs follow the NSW Club diversification path (powered by poker machines since 1956 in NSW), there is much to learn on visiting the mega NSW Clubs like West HQ (Rooty Hill RSL) that I visited in November 2019. Richard Errington, CEO of West HQ (also a speaker at the Clubs Queensland Diversification Symposium), spoke of the importance of diversity in your business assets and running your club in a more business like manner. A remarkable turnaround of a club where my prior visit was back in the late 1980’s driving up from my home town of Queanbeyan.

Equally, the importance of the right business partners cannot be underestimated. The BRC, a cash strapped but asset rich club (similar to a lot of other Queensland clubs), had to rely on a number of contributors to our cause to move the first piece of the finance puzzle to allow for the masterplan to start. Close relationships with Government (both local and state), a strong banking relationship with a bank that understands your business coupled with strong multinational construction companies that can ride the long term residential markets are key to ensuring ongoing viability.

In closing, I thought I would leave you with some great business fails due to changes in technology:

  • Cobb & Co (1853 to 1927) – 74 yrs
  • Kodak (1889 to 2012) – 123 yrs
  • Blockbuster Video (1985 to 2010) – 25 yrs
  • Polaroid (1937 to 2001) – 64 yrs
  • Toys R Us (1948 to 2017) – 69 yrs
  • Borders Books (1971 to 2011) – 40 yrs
Are you recognising the changes occurring around you in time to save your business?

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