Re-inventing a cottage industry

Serial entrepreneur Ryan Trainor, 35, has spent the last year turning a cottage industry into a national, scalable business called Franklyn Scholar. 

It has attracted a high profile board and has revenue of $20 million. Amanda Gome talks to Trainor about how he built a sustainable business so fast, and what is next.  

Amanda Gome: You have had several successful businesses. You sold your early fitness business, a business you started in your 20s, for a few million to Geoff Lord’s UXC company.

Ryan Trainor: I actually started a large security company back when I was very young, back when I was 23, which I sold to Wilson Parking.

For how much?

It was enough to set myself up. I got myself a house and looked after mum and those type of things, which was terrific.

We looked after most of the major retailers in Australia, so it was a really exciting time. I was green around the ears back then and still learning a lot.

At the same time I had a training company that myself and a business partner actually grew and sold to a listed company in 2003.

So since then I did some investments and took some time off and travelled around the world with my wife, which was just great – China and India. India became really an endearing country for us.

I was just looking at what was the next thing I could be doing, and started Franklyn Scholar 12 months ago.

Now tell us what you’re looking for when you were assessing that new opportunity?

I felt that I’d earned my stripes with some of my other businesses, and I was really looking for something that I could exponentially grow, that had the opportunity for international expansion.

I want to take it to that next level – growing a $100 million business was the kind of goal.

From my previous experience, one of the key attributes was trying to find an under-serviced industry. It doesn’t have to be a sexy industry, but an industry of which I felt could do with a facelift but also improve innovation and service. Pretty similar to what I originally looked at with the security industry.

Tell us a little bit about Franklyn Scholar. What do you do?

We basically provide nationally accredited training from certificate II all way up to diploma and advanced diplomas.

So what we really do in a range of industries… our clients include David Jones and Boost Juice across Australia, OneSteel and parts of Toyota, so we’ve got the kind of industries that we focus on… but what we’re really trying to do is understand the outcomes that a business needs and then match that with nationally accredited training – which has many benefits for the staff, particularly in these times at the moment as well, and gives them a career path, increases productivity and also helps sustain the culture within the business.

Did it matter that you hadn’t worked in education and training?

I had had some experience with the training company originally, but I think it was just more taking that experience and probably taking it to a lot larger scale now as well. Also having faced a lot of the problems that businesses faced themselves, and the challenges, I wanted to take a whole new and fresh way to address the training industry rather than take an old school approach, which is incorporated in some businesses today.

So did you buy in or did you start your own business?

I started it from scratch. I was fortunate enough to have Westpac as a shareholder and also provide some of the credit for the business as well. I’m a major shareholder within the business with my CFO and COO, and another shareholder is 333 Capital, which is also part of Korda Mentha.

How did you get Westpac to come on board?

I put together an attractive information memorandum; looked at the industry, It took me three or four months to be studious and look at where the opportunities lie.

What did you look at?

The key thing was the industry itself, which is highly fragmented and some would possibly say a cottage industry. I’m in the RTO space, which is registered training organisation, and there are very few providers that provided a national footprint.

There were 5000 RTOs across Australia yet there were very few companies at that stage that could really support national businesses and create a bit of simplicity of government-funded training. So there was a real niche opportunity and a large opportunity, to create a scalable business to support national businesses there.

It’s an attractive industry because there is guaranteed government funding. Surely someone has tried to do this before.

I think they have but probably not on the scale that we are. And we’re really solution driven in the way that we’re doing it. It’s about being able to create a sustainable business whereas a lot of people I think have gone into the industry, and seeing all the different funding opportunities.

The other thing is that it’s like a federation model, so each state has different funding arrangements, which makes it really difficult. So what we really wanted to do is to provide this overlay, this one national business where clients come to us and we’ll worry about all the headaches.

So when you started what were your biggest challenges?

It’s like this blank canvas and you’ve got to look back to your first question; why has no one else done it properly before? And that’s understanding some of the great things that companies have done, and some of the challenges that they’ve faced as well.

We also did five acquisitions last year. And the biggest thing is culturally bringing these businesses together and consolidating the systems and the processes. We’ve just been really fortunate that we’ve got as part of it some brilliant people that are really brought into the vision. We’ve completely re-branded all the business now and consolidated it into one office in each state. So we’ve really done a lot of the hard work.

I think the key with any good business is attracting great people up-front. I recruited who’s now a shareholder as well my COO, who was ex-Exxon Mobil CEO of one of their businesses, and my CFO had run a listed business in South Africa. They’ve been there, they’ve done that, and provide me with a great deal of support, being the visionary trying to pull this all together.

How did you decide on your acquisitions? Did you have a big field?

Yes we did. We wanted to buy best-of-breed in specific areas and hence our first acquisition won “Australian Training Provider of the Year” and it was the largest private RTO in Victoria.

Once we had them, they had benchmark systems and processes. And we then went and bought a national company which had a national footprint. Then one of our largest competitors went into voluntary administration. So we went in there.

Who was that?

Workstar, and they had some terrific attributes as a company but potentially got distracted on a few areas as well, which is fine.

What did they get distracted on?

I just think that they had some very good technology, online technology, but potentially took their eye off the ball a little bit on the practical side on face-to-face delivery and a few other things. We acquired [part of] the business in November last year.

So you got $20 million revenue?

Yes, for this calendar we’ll hit $20 million.

The whole model is a consolidation model, although we’re aggressively organically growing the business now. But we’re the largest private registered training organisation now in Australia, and that was the first goal, and we have to be famous for something. Create the structure and infrastructure to start with, and then we’ll look for further acquisitions over the next two, three years as well.

And how have you funded that?

Through credit, debt obviously being responsible for that. We’ve got terrific relationships with our bank, which is a good thing to have at the moment. I’ve actually just left a meeting with them and had a coffee and a chat with them about some other things.

I think once you get a good relationship with your bank, our discussions weren’t about credit at that stage, it was who they can introduce me to as part of their clients. And you know that’s a really healthy discussion. And also through equity, and obviously as any entrepreneur we back it ourselves.

So how much money have you put into it?

I probably won’t say the specifics, but it’s a considerable amount of my wealth.

A few million at least?

Yes, so with the other shareholders that are part of senior management we’ve really backed it in. Unless you do that as an entrepreneur, who else will support you and back you? 

And I think having someone like having Westpac there has been just a terrific attribute for us, and they bring a lot of skills to the table rather than just the money.

And that’s not just a lip service for them. You really want to have sound partnerships in this market at the moment, otherwise you can be on shaky ground as we read daily these days, don’t we?

So what’s your plan going forward? More acquisitions? What area haven’t you covered geographically or skill wise?

We’ve got offices in every state now. We’ll train more than 10,000 people across Australia this year in the workplace. Our goal within three years is to train 30,000 and be just known as the leading private education brand for workplace training. And we’re heading towards that; we’ve got over 200 professionals now across Australia.

Our strategy from here is not to create any more expertise in new markets but try and get a greater depth of offering to our current clients and in the areas that we currently work in. It’s now about creating a greater quantum of services rather than trying to go out there and being everything to everybody.

So what’s your projection for revenue for growth?

Our ultimate goal is to be a $100 million business. Are we going to reach that? Who knows. If you had of told me 10 or 12 months ago would we be looking at a $20 million turnover business, I might have said I’m not too sure either. It was in the plan, but we’ll see how we go.

Profitable?

Oh yes, we’re highly profitable, which is the most important thing at the moment. And one thing I think I have learnt from other ventures is you really need to be. It’s OK to grow, but if you’re not diligent in the way that you manage your costs, manage your people and those type of things, you can find yourself on quicksand very quickly.

So the revenue model, you’ve got your money from government as well as your clients paying. How much of it is set government revenue?

Forty per cent maybe of our business.

You’re the envy of most businesses listening to this.

It’s very easy to bag the Government, but from our point of view they’re really investing in business. I think they’ll invest more in business over the coming 12 to 24 months as well.

And when you say investing in business, what do you mean?

Well up-skilling existing staff. I mean one of the most terrific initiatives at the moment is post-July there will be funding available for business to help middle management and educate them in diplomas and advanced diplomas.

They are being very pro-active in that area and although it’s only a portion of our funding, it’s not all of our funding by any stretch. We just see that it’s a great space for us to be in and a great space for people who are committed to the training and trying to up-skill these businesses as well. So we’re really happy to be in this place at the moment.

One of the trends that we’ve heard about is workers themselves want to up-skill because they are scared of redundancy and want to get a pay rise. Are you seeing that?

There’s a real drive to up-skill their staff. I mean if there are redundancies on one hand, someone needs to cover it on the other as well. And people are going to stay in their jobs longer. So there is a real need for career planning within businesses as well, which is probably why there is such a skill gap in middle management across Australia.

There is a real genuine want to invest back into people, because they’re going to be there for a lot longer now, and they’re going to be needing them to be multi-skilled in a lot of areas.

When we asked our smart companies who they are looking at getting rid of to cope with these bad times, it was that middle manager level. It wasn’t in sales and marketing. That means you have to up-skill the people below them.

Absolutely. I think the Government is looking at that now. How do we retrain these people so that they become relevant again but in different industries? You know some industries are hurting and some industries are going well. It is a real challenge.

So you are 35 now. How long do you think you’ll stick at this business and what is next?

There is so much scope to grow the business. And I don’t think I have been in a business that has provided me with such an opportunity to do that. If we get Australia right over the next three or four years then we can replicate that model overseas as well.

So at the moment I see this as a long term, I have got a capable team and terrific board. We are really fortunate that we attracted the ex-federal treasurer Ralph Willis to our board. who was also the catalyst for introducing this when he was a minister. He actually introduced the traineeship and apprenticeship program.

So we have got a really strong board, as well as Rob Nicholls from Westpac, and we are just seeing this as a terrific opportunity to create a legacy business. I look at everything in a three or four year timeslot, so we might sit down in four years time and say that wasn’t quite right, but it is my focus at the moment.

Would you be looking at an exit?

I just look at it as three or four year spots. I am not thinking about exit at the moment, it is just not in our plans. There is just too much to do.

And floats are a terrific things, but there really needs to be an interesting story as to why you would do that. If we get to a stage where we need more funding in two or three years time and the market changes and we are really well positioned, that might be something that we look at.

Are you using any new technology?

We have got a terrific e-learning platform, which I think has been introduced into business, but I think we have a long way to go which is terrific. We have a rewards platform that is about to launch which is basically like a Flybuys for our trainees, so they can actually buy things from Amazon and stuff at different milestones of their traineeship.

And we have got an internal social networking tool for our employees to be able to help them. The hard thing is when you have different organisations coming together as one at the start, is how to get to know each other, so we are really focusing internally with our people.

So there are some interesting innovations there, and again it has just got to be a staggered approach the way that we introduce these things. Otherwise everyone’s head will pop off their shoulders.