How I keep my business in the family while partnering with Google

Booktopia is Australia’s largest online bookseller, moving 1.2 million books a year.

Started in 2004 by Tony Nash and family members, the company is now turning over $2 million a month and was chosen by Google last year to be one of three local resellers of its Google eBooks program.

Now eight years in, Nash says he’s resisted the temptation to accept outside investment, preferring to keep the company owned by the original founders.

How fast has Booktopia been growing?

We’ve grown at the same rate. We’re up 60% on the previous year month on month, which is a great result. Sales are up, profitability is up and our place in the market is stronger.

We’re doing around $2 million a month now, so heading towards $24 million.

You’ve grown a lot over the past few years. What are some of the improvements you’ve been pursuing due to that growth?

One of the things we’ve been doing is getting more warehouse space. We now have 3.500 square metres, and that gives us the ability to just have stock whenever we need it. We think that’s the right strategy, not just having to order it in all the time.

We’re very particular about that, especially with books as they don’t come in any sort of protective packaging. We started ordering the books in, but for the last four years we’ve been building our stock levels.

It’s easy for us to just get an order, and then send it out, it takes two to three days, rather than having to order it in which just adds time to the whole process.

Is anything you’re particularly proud of?

One of the major things we’ve been able to do is not rely on any sort of external investment. Rather the investors we use are our buyers, and we just keep reinvesting into the business.

So who are the major shareholders, apart from yourself?

My brother, my brother-in-law and my sister, and they remain that way. We just celebrated our eighth birthday, and way back then we were spending just $10 a day on AdWords.

Do you ever get much attention from private equity or other investors?

No, but you know what happens, you get an article published, or you make a list like the BRW Fast 100, and you get all these capital equity firms contacting you and asking to talk.

And that’s fine, and good, but for me, it’s very important to question yourself with what you’re going to do with that money. You’re going to use it to build the company, and what else?

So how do you judge a prospective investor?

It’s all about how they can add value. We haven’t had people knocking on the door saying, “We love what you’re doing and want a piece of the action” that we particularly love.

They’re either half serious, or slightly serious, and just not a good fit. We just want to keep growing and when it gets to that step, then we’ll see where we are.

Could you ever imagine yourself bringing an investor into the business?

Of course. If it was the right scenario, and that worked for the business, then absolutely we would consider it. Just not at the moment.

We’re so far down the track with our business plan now and we remain profitable, and growing profitability, we’re doing really well.

We’re a long way down the track with our business to have someone understand the long-term perspective of what we have here. If we’re going to have someone come on board, it’s going to be more of a situation where they like what we are doing, they are in the same space, and they would probably pay a premium. I’m more interested in that type of scenario.

Last year you started selling eBooks, a couple of years after you said they weren’t quite getting enough traction at that point. Are you happy with the way sales are going now?

We’re very happy, but it’s also very dependent on the number of devices in the marketplace.

I love using my eReader, it fits in my hand nicely and I think eventually, most people will get one. Whenever you open one it opens directly to that page, the same position, and it just works.

Our eBook business is going very well, and more so, publishers are just stunned at the results. Once they start seeing that more they’ll get excited.

And are the publishers committed?

They’ve very committed. The big questions is, where will the sweet spot be in terms of physical books or digital books? That’ll be interesting, and eventually I think it’ll move to around 50%.

And so what else are you doing with your growth strategy?

We have a pretty significant facility, so devices and packing machines and other technology doesn’t just come out of thin air. You need to pay for that, to continue to invest, and overall I think we’ve done well but we’re tempered by the amount of cash we have.

But that’s enabled us to roll out efficient systems while remaining within our scope of growth. The last thing I ever wanted to do is fall in a heap.

It’s just about finding the sweet spot, creating more cash and reinvesting it at the right amount to ensure you’re growing. It’s a challenge, but we’ve been planning it carefully.

Have you done anything particularly differently as you grow?

The only thing, I think, is that there has been perhaps a more vigilant effort to maintain strategic relationships with our suppliers, be they packaging companies or other suppliers.

Anyone that can work with us to create efficiency.

Lots of companies have complained about postage rates. Have you had any problems?

I had a situation with Australia Post. I went up to a representative at an event and just had a discussion, and it just so happened another representative was there and he was able to help us with our contracts and our relationships. It was that we were on a standard contract, and we were three or four arms’ length away from being able to deal with people as a major player.

We’re moving 1.2 million books per year, and 90% are going to Australians. We need to be able to work with Australia Post on that. We do it much better now, and it works more efficiency.

That’s obviously going to become more important. Do you think there’s a good future there?

Yeah, they get it. They’ve made online retail a real priority, and it’s a necessity as so many people are ordering online now. Parcels are the new envelope, and it just requires a lot more attention.