Dick Smith on his modest ambitions, building three successful businesses and his ‘one notable failure’

Dick Smith far exceeded somewhat modest expectations in business through a combination of luck and turning potential disasters into victories.

While best known for his two eponymous businesses, Dick Smith Electronics and Dick Smith Foods, and a third, Australian Geographic, he states categorically most of the money he made came from his adjoining industrial property investments.

The 77-year-old has just written his autobiography, My Adventurous Life, in which he illustrates what he believes are the four key ingredients to business success.

Dick Smith’s keys ingredients to business success

1. Ask for advice

2. Copy the success of others

3. Surround yourself with capable people

4. Work hard

Smith didn’t include courage, which was shown repeatedly by the man who said his only ambition was to employ a couple of people and earn $200 a week by the time he was 30.

Faced with a potential disaster early in his career, he wrote in the book that “we’d given ourselves two years to get the business off the ground; if it failed, we would’ve tried something else”.

The book devotes equal space to his many lifestyle adventures around the world but, in the process, he explains just how he created three successful businesses from scratch to become an Australian business icon.

Not everything worked and early on he failed to get follow-on trade from an electronic warning device that let the retailer know someone was in the store.

“An invention doesn’t create demand,” Smith confided in an interview with SmartCompany Plus.

“I made every mistake but only once.”

From $610 to $100,000,000, and back again

Smith’s typically modest advice comes from what he regards as a dreadful time at school; he had $610 to invest and turned Dick Smith Electronics into a billion-dollar business.

His big break came when he opened his second store, at Gore Hill on Pacific Highway in Sydney, when he took along a friend of a friend, Ray Jessop, who told him to take an option to buy the store in two years.

Smith ended up owning 30 buildings and, with each one, he was convinced he couldn’t afford to buy it. But after two years trading, he saved up enough to pay the deposit and off he went.

Jessop, an engineer by training ran a business called Dredging Industries and his worldly goods were enough to convince Smith his advice was worth taking.

In the 1970s Smith said “his possessions included a Pontiac GTO, an Alpha Romeo, a Cessna plane and a big speed boat, so I figured he knew what he was doing”.

Not on his advice list was another reason for his success, which was “to keep overheads down”.

“I was so hopeless at school so I kept it simple and when I started in business each night I would bring the sales dockets home and work out how much I had and how much it cost me.”

“I can’t read a balance sheet to this day,” Smith admits, explaining his accountant helps keep track of the property portfolio.

“My aim was a 50% profit margin, but ensured I could cover costs,” he said.

This lesson was put into effect three years into running the store, when he worked out a manager had stolen $18,000 worth of stock.

“I was surprised when the manager quit the business so after the store was shut I went through all the invoices and one morning at 3am I realised the goods were not there and he had taken them home,” Smith said.

“It’s the best thing that ever happened because it taught me to keep a close eye on the overheads,” he adds.

Smith opens his book with such discovery, saying “it was my own fault. I’d given in to the temptation to diversify the two-way radio business I’d started three years earlier to include selling electronic components. I should’ve remained with something I knew. But I was over-confident — and this was to teach me a lesson I’d never forget”.

The then-27-year-old, three years into his own business, said “we had a baby on the way, we were trying to save enough money to buy a house — and now, suddenly, we had debts we didn’t believe we could ever repay. It was the blackest day of our lives. We’d found ourselves in a tunnel that we couldn’t see any way out of”.

Finding new business ideas

Smith told SmartCompany Plus that he “is often surprised when he asks other small business people how they are going and they say they are not sure”.

“I knew every day how I was doing,” he added.

Smith was a master at stunts like towing an iceberg into Sydney Harbour. But when his appearance alongside Bob Brown at the campaign to save the Franklin River in the early 1980s was written off in the press as solely a publicity stunt, he created Australian Geographic to show the substance of his beliefs. The company was later sold to the then-publisher John Fairfax.

Seeing actor Paul Newman’s salad dressing in the supermarket gave Smith the idea to create his own food business with the proceeds also going to charity. The product was supported by Coles and Woolworths (Smith is less impressed with Aldi).

Multinationals are not his favourite and when US-based Tandy set up against his electronic stores vowing to trade at a loss for several years, Smith complained to local member John Howard who explained it was simply competition.

Eventually, Smith sold his electronic retail arm to Woolworths in two tranches for $25 million starting in 1980 and the retail behemoth sold the stores to Anchorage Capital in 2012 for $115 million.

After selling the first tranche Smith explained “in truth, I was getting bored and was looking for something new, but I still made sure the business was profitable. I spent my ‘work time’ putting in systems that could be replicated in a disciplined way in each store”.

The private equity experience wasn’t a happy one and the business ended up in liquidation in 2016, but Smith says “I was amazed it lasted so long.”

“Woolworths had expanded the store count way beyond what I thought was feasible and this meant it had to branch into consumer electronics, beyond the original focus on electronic components,” he added.

Smith was really never afraid to ask people he knew to clear hurdles, like former foreign minister and governor general Bill Hayden who contacted Russian foreign minister Eduard Shevardnadze to clear the way to let Smith travel through Russian airwaves to embark on a trip from the North to South Pole.

In all, Smith’s efforts were fun and successful with just one notable failure: getting the government to deregulate aviation.