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Adelaide or Austin? Why US is better at business

Three times with three different companies, Ron Read was a business success. Unfortunately his success wasn’t on his home turf. Richard Blandy tells why, in business and startups, anything Australia can do, the US can do better.

Dec 15, 2015, updated Dec 15, 2015
Shoppers crowd the streets of New York at night. Martin Keene/PA Wire

Shoppers crowd the streets of New York at night. Martin Keene/PA Wire

Ron Read was born in Adelaide in 1947. He started his working life in 1964 in the Australian Navy, where he spent 12 years, including in Vietnam.

He then spent eight years with a subsidiary of Tubemakers of Australia.

In 1987, Ron migrated to America. He joined a small Virginia-based company as vice president for sales and marketing.

In five years, sales revenue grew from $1 million to $10 million.

In 1994 the company was acquired by Danka Industries Ltd, a large public company, and Ron became GM for the mid-Atlantic region.

In February 1996, Ron founded his own small company, also headquartered in northern Virginia, 10 miles from downtown Washington DC. In 1997, his company won a coveted Small Business of the Year award.

His company subsequently experienced substantial growth. In 2008, Ron sold it, remaining for a further two years to help guide the transition to new ownership. He returned to Adelaide in 2012.

Since his return, Ron has often been asked about the difference between running a business in America and in Australia.

Notwithstanding the intense competition in America compared with Australia, the answer, in Ron’s opinion, is that it is easier to do business in the USA.

The reason is that there are far fewer government regulations and there is no equivalent of Fair Work Australia prescribing minimum pay rates and conditions.

Ron says that the American economy is based on a seven-day week, and not just nine to five, either.

Trading extends into the early evening in all major cities for some industry groups, five days per week.

Ron’s own medium technology business operated from 7:45 am to 6:45 pm. Shops are open seven days a week. For six days, Monday through Saturday, shops are open late into the night.

Ron asks the question: If you were a budding South Australian start-up company or entrepreneur, where would you prefer to be – Adelaide or Austin?

For almost 24 years, in three different companies, Ron negotiated directly with every employee what and how they would be paid, including vacation, public holidays and sick leave.

To attract and retain high caliber people, he had at least to match what his competitors paid, including cars, fuel cards, contributions to private health insurance, vacations, public holidays, sick leave, and all other conditions.

In addition, every employee participated in a profit-sharing plan, and every employee’s pay was based on performance.

For sales staff, approximately 80 per cent of their income was performance-based, while for administrative staff, about 20 per cent of their income was performance and/or objective driven.

Employees were very well remunerated. This was not because the law said so, but because their individual productivity was high. Their performance drove the company’s overall performance and profitability, which in turn drove each individual’s performance-based remuneration.

As a CEO, Ron was not aware of any occupational health and safety legislation in Washington DC, Virginia, Maryland, Pennsylvania, Delaware, West Virginia, North Carolina or South Carolina – the states where his companies did business.

The governments in those states relied on employers paying due regard to their employees’ health and safety.

Also, Ron never experienced union representatives involving themselves in his businesses or representing any of his employees.

Little effort was required to navigate through government regulations, fees or taxes, because they barely existed.

There was no GST, for example. Sales tax, which varied from state to state, was simply added to the cost of goods and services being provided to end users at the point of sale.

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There were very few fringe benefit taxes in the states in which his companies operated.

In Ron’s experience, the United States has always endeavoured to make it as easy as possible to start and operate a business. Everyone there is very mindful of the fact that bureaucratic rules and regulations can be an impediment to production and living standards.

The impediments governments have created for businesses in South Australia by way of rules and regulations, fees and taxes, are a handbrake on the exercise of the free enterprise spirit which Ron believes still exists strongly under the surface.

After all, South Australia was founded with a free enterprise ethos. The early South Australians were entrepreneurs, innovators and improvisers.

Ron’s great grandfather was one of them.

The most refreshing thing Ron found in the United States was the Americans’ up-beat, entrepreneurial spirit across all communities, from the shoe shine boy on the street to the shop assistant in a golf pro shop.

These people are paid on performance. They are not paid what their boss is instructed to pay them by Fair Work Australia.

It was this free enterprise spirit (which has been the heart and soul of the United States for 400 years) which Ron found so exciting and addictive, as have many other Australians, including Ron’s friend, Phillip Merrick, who founded Web Methods in northern Virginia in 1996.

When Phillip took his company public, it was (and remains) the largest ever IPO on the NASDAQ.

Ron strongly believes that we must try to create an environment in South Australia that will halt the exodus of entrepreneurial men and women.

He believes we can learn a lot from the US in that regard.

The impediments governments have created in Australia over the years by way of rules and regulations, fees and taxes, are nothing more than handbrakes.

Appointing an Innovation Minister or creating a fund for government co-investment in start-ups are not the answer. To Ron, such proposals are little more than vote buying reactions to a systemic problem.

On the other hand, without so many rules and regulations, fees and taxes, the potential of many enterprising Australians to become major job creators here will be unleashed.

Ron asks the question: If you were a budding South Australian start-up company or entrepreneur, where would you prefer to be – Adelaide or Austin?

The reality is that far too many are leaving our shores, despite their attachment to our wonderful country, because the business environment here is far too difficult to run a highly competitive company, when compared with the USA.

Richard Blandy is an Adjunct Professor of Economics in the Business School at the University of South Australia.

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