Taking off the training wheels

The highly competitive education and training market became a rocky proving ground for 20-something Vitreous founder Marcus Sellen. He talks to MIKE PRESTON.

By Mike Preston

Training and education business Vitreous started from a tiny one bedroom apartment in 2004, with one employee, one phone line and $2000 in capital. Just three years later, it is a fast growing national concern with 30 employees, $5 million in revenue and big plans for the future. 

Aged just 24, founder and current chief executive Marcus Sellen made the decision to start his own business when he received notice that his employer, a training business, had gone bankrupt while he was away on holiday.

With little more than three weeks pay in his pocket and an idea for how training services could be delivered to clients in a more user-friendly way, Sellen used some contacts he had made in his former role to arrange an opportunity to pitch for a training contract with pay-TV giant Foxtel.

Sellen offered not only to provide high-quality training for its staff, but also to handle the paper-work and administration burden that goes with it. Despite the young age of its founder, Foxtel agreed to take a punt on Vitreous, providing the business with a backbone client that has enabled it to be profitable ever since.

Even with a high-profile client on board, Vitreous struggled with the issue that plagues many start-ups – tight cash flow. With little money in the bank and needing to take on employees quickly – nine employees were hired on in the first year – paying the bills was a battle in the early days.

“I think my most nervous moment was when I didn’t have money in the bank for payroll,” Sellen says. “You know the money is just two or three days away, but the bank won’t budge and people have done the work, so that puts you under a huge amount of pressure.”

Sellen’s answer was to run a no-frills operation, plough every spare dollar back into the business, and ensure clients were crystal clear on how much they had to pay, and when they had to pay it.

Tight cash flow management wasn’t the only discipline Vitreous was forced to adopt from an early stage. In 2005 the business faced catastrophe when a client that accounted for 60% of business and created work for more than two thirds of its staff suspended all of its training services while it conducted a major restructure.

Although Vitreous would reclaim most of the work 18 months later, in the meantime Sellen was forced to scramble to find sufficient replacement clients to maintain revenue, and more importantly, his staff in work.

“It was an incredibly hard transition to manage – staff were moving to work for new clients while we were cutting right back on costs on things like IT infrastructure, telephone systems and client lunches, as well as reducing the personal income I took out of the business,” Sellen says.

That hard period has since proved to be a blessing in disguise for Vitreous, with the return of the old client and a flow of new clients – including KFC, The Salvation Army, Brumby’s, McDonald’s and Nando’s – helping the business to achieve a 100% growth rate in the 2006/07 financial year.

Low barriers to entry means competition is fierce in the job training sector, with many businesses competing on price to win contracts with big clients. Vitreous tries to avoid getting into the discounting downward spiral by offering an integrated end-to-end training service that includes comprehensive project management and administration services, as well as promising clients a superior return on investment for their spend.

Sellen says he is also looking to broaden Vitreous’s revenue base by moving into the international education industry. Later this year he will open a campus in Melbourne’s CBD that will offer English language, aged care and community health training to students from overseas.

The move into education services, while offering a potentially lucrative new source of revenue for Vitreous, required a difficult personal decision for Sellen himself: funding the expansion forced him to sell down his stake in the business he had nurtured from scratch to 45%. One of his investors, who now holds 45%, is his former boss.

“It was a very hard decision to bring in investors, but we needed to take this opportunity to grow,” Sellen says. “My business partner could bring capital and skills for international business that we needed; both things I didn’t have that we needed to make this work.”

If successful, the move should also provide Vitreous with a platform to help Sellen achieve his ultimate goal: a sharemarket listing.

Sellen believes Vitreous needs to have an annual revenue of $15 million plus to be in a position to list, a goal he believes is achievable in the next three to five years.

A float in three years would mean Vitreous would have moved from inception to float in just six years, an ambitious objective by any standard. For Sellen, still under 30, the prospect of a float seems to hold mixed prospects.

“A float would be incredibly exciting, but I’m still very young and I’d probably be lost without it. I haven’t really thought about it a lot at this stage, but this business is my child so it’s hard to see myself not being involved in some way,” he says. “So I would see that as part of formulating a reasonable exit strategy in the future.”