Anshu Arora 00:00:00
Hi everyone, welcome. It's great to have you here joining us for our first event in our Future Skills Fest. Before I get started, I would like to acknowledge the people of the Woiwurrung and Boowurrung language groups of the eastern Kulin nations on whose unceded lands we conduct the business of the university. I respectfully acknowledge their ancestors, and elders, past, present and emerging. And I would also like to acknowledge the traditional custodians and ancestors of the lands and waters across Australia where we conduct the business. For those of you who don't know me, my name is Anshu Arora. I'm from RMIT Online and I'm really excited to be hosting today's session. You know, we've just kicked off our Future Skills Fest. It's a week-long festival that we're bringing, featuring a mix of online and in-person events. These are really designed to explore the skills and the ideas and conversations that are shaping the future of work. So hopefully this is just the beginning and we'll see many of you. Across the week. And what a way to kick things off.
Anshu Arora 00:01:00
We've got Tim McDonald, who is the co-founder and non-executive director of Fonda Mexican.
Anshu Arora 00:01:06
Tim is here today with us to share some stories, some tools, some frameworks as he unpacks what actually helps ideas move forward.
Anshu Arora 00:01:16
Let's be honest, having an idea is one thing, but actually getting them into action is often where we see the real challenge. And I know I'm standing between you and Tim right now. But before I do go and hand over, I just want to do a couple of quick housekeeping notes. One, today's session will be recorded and we'll share the recording with you. After the event. We'd also love this session to be interactive. So please make sure you're dropping questions into the chat. Just make sure that you send them to everyone when you are doing that so everyone else and our team can see them. And I promise to leave some time at the end to have some Q &A with Tim. And that's it from me. I'll get out of your way because you've heard enough from me. I'm going to welcome Tim and hand over to you, Tim. Thank you so much again for joining us. We're really excited to hear from you.
Tim McDonald 00:02:03
All right. Thanks, Andrew. Thanks for having me. Um, I'm going to start, guys, over the sort of 20 or 30 minutes, I'll talk about the Fonda story and speak to some specific questions and dot points around the implementation of an idea. But as Andrew said, please jot down or put in the chat box any questions you've got. In my experience with these sorts of sessions, the Q &A. section is where the real gold is and the learning for you guys so I'll try and be as brief as possible with the the timeline of the fondest story and whatnot so we can We can get into the Q &A at the end of it. And I do think it's great. I will make a comment. It's great that the university does complement your theory. theoretical academic learning with these sort of real-life examples because, for me, this is where the real learning was done, not to discredit what you're going to be learning. learning it as part of your degrees, it'll really help. But where the real learning kicks in is when you're actually living it. So, hopefully, everyone can take something away from this today.
Tim McDonald 00:03:07
So, really quickly, the Fonda story. For those of you that don't know, Fonda is a fresh, casual Mexican restaurant concept. We've got eight restaurants, six in Victoria, one in Canberra, one in Sydney. And we sort of sit in between fast food and fine dining. And as part of the business, we've also started a food production kitchen facility out in Flemington. And that provides all of the salsas and the slow-cooked meats to Fonda. But that's also become a pretty significant business in itself by providing... Food service, food products, and other businesses. And it's actually a bigger business than Fonda today. So I can touch on that. But that's a quick snapshot of what the business is for those of you that aren't aware.
Tim McDonald 00:03:52
Thank you. Sorry, let me just go down to the first slide here. So really quickly, the Fonda journey for me really started as a teenager.
Tim McDonald 00:04:04
My family didn't have a lot of money when we grew up and I did feel what financial stress felt like. So I guess there was a desire to do something different financially and not do the sort of the rat race, so to speak.
Tim McDonald 00:04:19
I read, I was given a book when I was 14, Rich Dad, Poor Dad by Robert Kiyosaki, which just sounds like a really sort of naff cliché book. But... At that age and at that stage, for whatever reason, I just absorbed every word.
Tim McDonald 00:04:34
The fundamental learnings from that book have never left me. So that, looking back, that was a really important part of... of the Fonda journey. And also experiences that I had before starting Fonda were really important. I sold meat pies and drinks at the MCG as a teenager. So you get given pies and drinks and you sign in how many you've taken. Then you go out into the stand. And you have to work out where you go. You've got to call out hot pies, cold drinks. It was a really mini entrepreneurial experience. And you might sort of laugh at it because it's such a mini one selling pies and drinks at the footy. But again, when you're 15 or 16, that's where... the excitement and the experience started happening. I also sold Fresh Juice at music festivals and sporting events when I was sort of 18. 18, 19, 20. Again, that was my own business. It wasn't profitable, but what I learned in those mini entrepreneurial experiences and the books I read and those life experiences I had really set up the mindset.
Tim McDonald 00:05:41
And I think that's really important. Entrepreneurship. Again, it sounds a bit cliche, but it's just as much a mindset than anything. And that mindset is shaped by books you read and experiences you have.
Tim McDonald 00:05:56
So getting into the sort of the stages of where the Fonder idea came from, I went to university. I did commerce law at Monash. I did an exchange semester in... Indiana in the United States. And during that time in Los Angeles, I saw some really cool, modern, fresh Mexican concepts. And then out in Indiana, I saw Chipotle. Chipotle is a very successful, large Mexican fast food chain in America.
Tim McDonald 00:06:23
At that time.
Tim McDonald 00:06:25
Australia had very poor offerings in the Mexican market. So I'm not a foodie and I'm not a restaurant guy and I still aren't, to be honest, and I never was. But for me, it was just going to another area, another jurisdiction, being America, seeing someone with an idea, being modern, fresh.
Tim McDonald 00:06:45
Mexican fusion food, that I had a really strong gut feeling it was going to work in Australia.
Tim McDonald 00:06:51
So the honest answer about the idea, it wasn't mine. It wasn't mine. It was something that I saw elsewhere. And it meant that I had a benchmark or an anchor point to develop the idea from. It might be a lot more exciting to purely... come up with your own idea. But it's a lot more risk and a lot more uncertainty in doing that, which doesn't mean it's not the right thing. But for me, I like the fact that I had a tangible example of what I was doing. And I was able to see that and study that while I was in America.
Tim McDonald 00:07:22
I resigned. I went to Minter Ellison as a commercial lawyer for a year.
Tim McDonald 00:07:27
But during that year, I was basically working on the Fonda business plan. I never really got into it. And the thing, the biggest moment, I think, in my entrepreneurial career was the day that I resigned from InterAlice. And that was like the biggest step because once I did that, everything started falling into place.
Tim McDonald 00:07:43
What gave me the courage to take that step and resign was actually a quote that my dad sent me at the time. I can't remember the quote verbatim, but essentially the quote changed my objective or my perspective. The quote changed the reason I was doing this. So a lot of people looked at me resigning from a lawyer and starting a business as a very risky decision. And financially, it was a very risky decision.
Tim McDonald 00:08:10
But I did it because I really wanted the thrill and the fun and the lifestyle that starting a business was going to give me. I wasn't doing this for money. So if I change that objective to I'm doing this because I really want the challenge of starting a Mexican restaurant, I want the challenge and the variety and the learning that I'm going to get from being an entrepreneur.
Tim McDonald 00:08:32
I was 100% guaranteed of success. I knew I was going to achieve that objective. regardless of whether or not Fonda worked financially.
Tim McDonald 00:08:41
I had a hundred percent. success outlook on what I was doing because I was doing it for the reasons I just described. It was having a crack. I knew I wanted to be an entrepreneur. And that completely changed the whole feeling. And resigning was actually easy because it shifted from being a financial.
Tim McDonald 00:08:58
Objective? to a lifestyle and a learning and a me being me objective. I know that sounds a bit woo-woo, but for me it was really important. And as the dot point says, they're pursuing passion over security.
Tim McDonald 00:09:14
It was hard getting started. I started with a business partner. I'll touch on this really quickly. Business partnerships probably fail 70% or 80% of the time.
Tim McDonald 00:09:26
but they still can be crucial. My business partner happened to be like the exact opposite to me.
Tim McDonald 00:09:34
He is more systems-driven, attention to detail. He's a scientist. I'm more creative, visionary, people-oriented, more the artist. And together... Part of the reason that Fonda succeeded was because our business partnership was very complementary. Now we fluked that for anyone considering going into business with someone else or more than one other person. I would strongly encourage you to make sure you have complementary skill set, complementary resources, and complementary psychological wiring. Every business— or most businesses— need the scientists and the artists. Some businesses need the technical expert and the business visionary, whatever it is. First of all, work out— what the business needs— and make sure that the partnership or the collection of partners fits that right, what the business needs. If it doesn't, my experience is it often ends in arguments and fights and breakups and tension.
Tim McDonald 00:10:31
Getting the first site was really hard. We ended up starting in a little 45 square metre site in Richmond. We got knocked back for probably six months because we were unexperienced and the concept was not proven. So getting approval from commercial landlords was really hard.
Tim McDonald 00:10:47
And then getting permits, liquor license permits, planning permits, disability permits, gas, electricity, food safety, food license. There's a lot of red tape in Australia. It really goes against the grain of the spirit of entrepreneurship. Unfortunately, I hope that changes, but there's a lot of red tape that we had to get through.
Tim McDonald 00:11:09
Um. And cash flow pressures. So I actually did, to partly fund the start of Fonda, I did the Cert IV in Small Business Management at RMIT. And for that, I qualified for the NICE program, New Enterprise Incentive Scheme, which is like a government welfare program for people that do the Cert IV and start a business.
Tim McDonald 00:11:33
At the same time.
Tim McDonald 00:11:36
I got a loan from my parents. My parents loaned me $90,000, which I paid them back. I was very fortunate to be able to do that. My business partner had deeper pockets than I did. So he came with a lot more equity capital than I did. And we're able to get asset financing for a lot of the equipment.
Tim McDonald 00:11:54
Anything that has a serial number, you can get asset finance again. So, if you are starting a business that has tangible assets, you can often get asset finance to start.
Tim McDonald 00:12:03
So, we had, as I mentioned before, we had no prior hospitality experience. We weren't chefs. We weren't front of house waiters. We weren't restaurant managers. But what I realized in hindsight, what that meant was we built this business from the perspective of a customer.
Tim McDonald 00:12:20
Because we didn't have any other experience. That forced us to think about like a customer. A lot of people in hospitality fail. Because they get too wrapped up in what their vision is and what they want. Because they've developed that over time and years of hospitality experience, I want to encourage you to think about developing your business idea from the perspective of your customer and be harsh on the idea, just like customers are very harsh on businesses. If a customer has a bad experience or you're not meeting what they're looking for, they go like that. So be harsh on your own idea. Like a customer would and will.
Tim McDonald 00:12:54
Um, We thought that because, again, we didn't have hospitality experience, so we were doing things differently. We weren't being conventional in our service model, our pricing, our communication. We brought a fresh perspective, and we weren't trapped by the way it's done. Now, this isn't to say that if you are doing a business or you've got a business idea, in an area that you have a lot of experience in. That's not to say that's a bad thing, but from my experience, having that fresh perspective was probably more of an advantage than it was a disadvantage in starting Fonda.
Tim McDonald 00:13:29
So we started in Richmond and I've got to say.
Tim McDonald 00:13:34
There was a lot of luck involved. Like we worked really hard to get the menu right and the pricing right. But we were in the right place at the right time with the right cuisine.
Tim McDonald 00:13:44
Broadsheet was just starting, and they were all over us. So we got a whole lot of free PR. So, just accept the fact that when entrepreneurship... There's a lot of luck involved, and that might be bad luck and that might be good luck. You can control what you can control, but sometimes there's some things out of your control that dictate where you end up.
Tim McDonald 00:14:04
So we went from one store, the first five or six years, we grew very quickly and we really... When you're growing. It's easy to grow. But I realise now, in hindsight, for that first four or five years, we should have been more careful and conservative with where the new stores went. We should have been more careful and conservative with debt.
Tim McDonald 00:14:24
Often when things are going well, people tend to be overconfident and overbullish.
Tim McDonald 00:14:30
And often when things are going poorly, humans tend to be underconfident and underbullish. Usually the right way to go is somewhere in the middle. But we were too confident in that first five years. I wouldn't say we were arrogant or cocky. But we just thought that we could go into regional sites, out of suburb sites. We thought we'd be fine managing sites interstate. We thought we'd be fine borrowing money and paying back the debt.
Tim McDonald 00:14:55
And what we realized— it was, it was pretty hard to stay relevant and to stay successful long-term was a lot harder than we thought it was going to be.
Tim McDonald 00:15:03
So we did bring in external capital. I just approached a guy called Jeff Harris, who's a high net worth individual, one of the founders of Flight Centre.
Tim McDonald 00:15:11
I approached him directly. I tracked him down. I tracked down his email and I just emailed him and I told him who I was and I told him what I was looking for.
Tim McDonald 00:15:21
He emailed me back straight away and he called me that afternoon and we had a coffee the next day and I just did a deal. I capital raised $3 million from him at a $12 million valuation. And I did it myself. I know there's brokers out there and you kind of need an accountant to help it. My experience with these cap raise brokers hasn't been very successful, very positive.
Tim McDonald 00:15:43
Every time we've been successful in deals, we've done it ourself and it's more organic and authentic, but you do lose control.
Tim McDonald 00:15:50
When we've got an external shareholder, then you need to justify everything on your P &L. Any private expenses get looked at a little bit more closely.
Tim McDonald 00:15:59
Um, And they need to be aligned. They need to understand what your vision is. And they need to know that it's still your baby and your puppy. And they need to get on board with your vision.
Tim McDonald 00:16:09
As we grew, it's also harder to keep the culture. One thing I'll say is growth is great. But if you've got a small, successful, profitable business, there's nothing wrong with that.
Tim McDonald 00:16:23
Don't feel that you constantly have to grow and don't feel that bigger is better. Because I can tell you my personal experience and my observation of others. Most of the time, bigger is not better. Most of the time, bigger means at some point that the business actually fails because you're taking risks to grow. There's nothing wrong with a small, profitable, exciting business that's giving you and your life what you want from your business. A lot of entrepreneurs feel in the trap of... perpetual growth. There's nothing wrong with constant improvement. There's nothing wrong with constant change.
Tim McDonald 00:16:57
But don't think that you constantly need to grow your business in size.
Tim McDonald 00:17:03
Culture and value. So we had a profit share program. We didn't, we didn't, um, franchise the business. We had a profit share program which gave our managers like aligned incentives. They had full transparency to P &L. We had each month, we had a Fondarian of the month. We had really clear values and we had an awards night at the end of the year, which is like a Brownlow medal dinner, which everyone was invited to. It was a really special, proper three-course meal and there was a lot of awards given out. And you know what? Most, sorry, every awards night we've had, there's been multiple people that cry. They're literally in tears from the recognition and acknowledgement that we've given them on the awards night. Most people just want recognition. At the end of the day, they care about that more than their pay rate. And most people don't get it. And the reason that people cried at awards night is because... They just hadn't been recognised their whole lives. Most of them, their whole lives, had not had that recognition or acknowledgement, and it meant so much to them. So it was powerful for them, but it was also really powerful for everyone in the room.
Tim McDonald 00:18:07
To see the business acknowledge someone for doing something and what that meant to them. So it was very, very powerful. I don't care how much those nights cost, and they cost a lot of money. There was always a payoff for the cultural impact of those nights.
Tim McDonald 00:18:24
Mi casa es tu casa, my house is your house. That's our tagline at Fonda and that essentially became our internal mantra and our internal philosophy. So treat Fonderians like they're your family members and treat customers like they're guests in your home.
Tim McDonald 00:18:39
Key relationships that shape the growth. So, getting the right business partner at the start. I saw a question pop up before. I found my right business partner. He was just a friend of mine. And I got lucky. I wouldn't recommend going into business with friends just because they're friends. Be ruthless, finding the right business partner. Or partnership. Don't just go into business with friends because they're friends. It's okay if they are friends, but they tick other boxes. That's okay. Most people just go into business with people that they're best friends with at the time. And that's most of the time not the right decision. Make sure that those business partners have got complementary skills set and shared values. You can be... different technically and psychologically.
Tim McDonald 00:19:23
But you need to have shared values and you need to have an aligned vision of what the future of the business looks like. So different skills, different psychological wiring. Aligned values and a shared vision of the future is key to that. And then clear communication and alignment on vision as you go through. You almost need to have like a quarterly planning, counselling meeting with your business partners.
Tim McDonald 00:19:50
Staying relevant long-term, I don't think we did this very well. Continuous innovation in menu and experience. So I said before, you don't always feel you have to grow your business. But a growth mentality is good, constantly improving your culture. Improving your marketing, improving your product.
Tim McDonald 00:20:06
But also, if you get something right, like you look at. McDonald's or Grilled or Yochi, some of those food businesses, they've got something right and they are absolutely... like anything sticking to that consistency. So don't try and change everything for the sake of constant change. The things you've got right, lock them in and don't let them change. But things that aren't quite right, or things that need evolving and changing. Constantly challenging yourself to change those things is crucial.
Tim McDonald 00:20:33
Sorry.
Tim McDonald 00:20:36
Managing sector challenges, labour supply trends. So keep an eye on changes in the sector, changes in customer demands and customer trends, supply chain changes. Sometimes beef is cheap and then beef gets really expensive. There'll be times when you have to change your business model because of those macro changes.
Tim McDonald 00:20:58
So I'm just going to quickly run through over the next six or seven minutes. I'm going to run through a few sort of questions. Um, I think these are really relevant questions. I'm going to keep these tangible. Why most ideas fall before they start?
Tim McDonald 00:21:13
Um.
Tim McDonald 00:21:14
I think The best thing to do if you're exploring an idea is... Be an optimistic skeptic. So be confident in your idea. And be a believer. But the best thing you could do is be your Be the biggest skeptic. Try to prove to yourself, and I mean genuinely do this. Don't superficially do it. Try to prove to yourself that your idea is actually not going to work. And if you don't succeed in that, then do your idea. Your mission should be. Be as skeptical as you can be whilst being a believer. And if you can't prove to yourself that your idea is not going to work, then do it. I see so many people get so swept up in this overwhelming belief that their idea is so good and it's going to work. That they don't test out really if it is the right, you know, idea or if it is going to work. Question your assumptions. A lot of people say, 'Oh, 20 people come and buy this and I only need this and they're going to pay.' Like test those things. Like, why are 20 people going to come in for lunch and buy a burrito?
Tim McDonald 00:22:16
Why are they going to go to that location? Why are they going to pay $16 for that? How and why are they going to see those ads?
Tim McDonald 00:22:24
Why do you think people like Mexican?
Tim McDonald 00:22:26
Um, testing your logic rigorously. Someone just said, 'What if you have self-doubt that stops you from starting?'
Tim McDonald 00:22:35
That's a really good question because self-doubt can be... Healthy? I see. Too many people have too much self-confidence and self-doubt. Um.
Tim McDonald 00:22:45
I think.
Tim McDonald 00:22:47
Testing it with someone else. Sometimes self-doubt, I'll get a bit deep for a moment, but like I said, entrepreneurship is more of a mindset than a set of rules. If you've got self-doubt, sometimes there's a bit of personal development that needs to happen there. Sometimes it's a... Some counselling or some reading or something else that you probably need to work on as an individual. To help get yourself in the right mindset that you need to be in to be an entrepreneur. It's nothing to do with the idea. It's all to do with what's going on up here. And so many of us, sorry, all of us, have insecurities, all of us have ego issues, all of us have fears, all of us have faced stuff in life that plays up here. Working on that and getting that right.
Tim McDonald 00:23:31
That's actually probably the most important thing that you can do as aspiring entrepreneurs. Before cash flow models and business ideas and SWOT analysis that... Self-development from a mental, psychological, spiritual perspective is more important than all of that, but by a mile.
Tim McDonald 00:23:49
Pressure testing your ideas before execution. So testing it with customers and don't ask leading questions. Don't ask questions that. If you go home and ask your mom, 'Hey, I've got this idea, what do you think?' Or if you go to your friends and say, 'Hi, I've got this idea.' Do you think it'll work? I can tell you now 100%, they're going to say yes. Johnny, that's a great idea. That's amazing. You should do it. That will definitely work. That's what they're all going to tell you. And that might help. Your self-confidence and help inspire you, but that is not helpful. That sort of feedback is usually more unhelpful than it is helpful. Test customers in a way that removes the bias, that doesn't ask leading questions. Often I've got a chicken business, a chicken restaurant in Richmond. And often I ask customers on their way out, how was everything, guys? Did you have a great time? Was it good? They say, yeah, yeah, absolutely. And I'll say, no, honestly, if you've got any feedback, they say. No, no, no, no, no. That was fine. That was great. I say, guys, give me one thing that we could have done better.
Tim McDonald 00:24:50
And they always have something to tell me. So sometimes it takes the right structure in questions to actually get that feedback out that you were looking for. Because most people... unconsciously ask questions in a leading way. Hey guys, is everything alright here? I'm the owner of the shop. Of course, they're going to tell me yes. You need to ask questions in a way that forces the real and the constructive feedback. Give me one thing I could have improved. And then often they just pile on all these ideas and all these things that we'd stuffed up. It's not their fault. It took the right questions to get that feedback that I really needed to hear.
Tim McDonald 00:25:25
Well, the right questions, the right people.
Tim McDonald 00:25:28
Like I've said there, get feedback from actual potential customers. Ask people who've done it before. Speak to people that have done. Speak to people that have walked the path that you're about to speak to.
Tim McDonald 00:25:38
That's a great point. Someone just said there's sometimes anonymity in feedback. That's a really good point. That's probably the best way of moving bias so they don't know who they're talking to. Seek out domain experts and practitioners.
Tim McDonald 00:25:50
But remember, you guys are entrepreneurs. You're not technical experts. So if you're wanting to roll out a chain or start a chain of medical clinics. Great. Talk to doctors and get their experience from doctors and practice managers. But remember, they're not entrepreneurs. They're doctors. So they're going to have a different mindset. They're going to see it differently to you. Get their intel, but don't let their feedback or what they say necessarily deter you from the idea.
Tim McDonald 00:26:16
And listen more than you pitch. Spend less time telling everyone how good your idea is and spend more time really asking them and stress testing the strength of your idea.
Tim McDonald 00:26:27
Realistic resources. This is another reason, like be realistic with what you need. How much time and money do I need to get this going? Identify those constraints. And if you don't have those resources, that's okay, but you've just got to find them. You're going to need the right business partners or you're going to need the right bank loan. Or you're going to need the right capital injection. Just because you don't have the full package of what it needs— like mindset, experience, capital, network, resources—doesn't mean you necessarily need to have all of that. But if you don't, you need to identify what's missing and choose your partners or your debt partners or whatever accordingly.
Tim McDonald 00:27:04
And always plan for things to take twice as long and cost twice as much as you think they're going to take.
Tim McDonald 00:27:11
I'm going to try and do this in the next three minutes. Why momentum and confidence matter more than the perfect ideas. I'm— I'm going to add to these. I'm really big on these. Perfect ideas is like 20% of it, 10% of it. My first slide here, execution eats strategy for breakfast. That's a saying. If you give me a good executor, with a... Four out of 10 idea. And you give me a poor executor who's got a nine out of 10 idea.
Tim McDonald 00:27:39
Without a doubt, I'll be backing that person that's a four out of 10 idea, but is a 10 out of 10 executor. And if you have your own gaps in execution, and I can tell you now I personally do, just make sure you've got people around you that fill those gaps, either business partners or key employees. That offset that. So. My first thing is don't worry about the idea. My next entrepreneurial venture is actually buying a small business. So I literally don't have the idea. It's someone else's idea and it's their business. And this whole concept of entrepreneurship through acquisition is becoming a big thing because it's much lower risk. You get a profitable business on day one and the banks lend you money to buy the business from day one. So you don't actually need an idea. Of course, good ideas are great. Was Uber a great idea? Obviously. Was Facebook a great idea? Obviously. Was Grilled a great idea? They don't have to be fully your idea. You could have got the idea from someone else or something else he was saying that's evolved.
Tim McDonald 00:28:41
But I'd focus on number one, getting the right team of partners together, and number two, execution. Then number three is the quality of your idea.
Tim McDonald 00:28:51
Power of progress. So just start. Each small win builds that momentum. Like a business plan is a great start, or get a customer feedback survey and start that. That's a great start.
Tim McDonald 00:29:02
Do some um minimum viable product. If you want to start a Mexican restaurant, make a couple of tacos at home. Just progress. Over perfection. Progress builds progress. It changes what's going on up here. When you start making little wins and you start getting progress, you feel totally different. And those little wins can be tiny little wins. You start feeling totally different about it and progress just builds. So, and you get a psychological shift. It becomes an idea in your head. To a real life thing, even if it's you making two tacos in your kitchen. On a Saturday afternoon. Your business idea is real. You can taste it. You can see it. You can smell it. That is significant.
Tim McDonald 00:29:42
And done is better than perfect. Progress over perfection.
Tim McDonald 00:29:46
Perfection delays learning. I'm really bad at this. I overthink things. Early traction beats late perfection— is just a little quote that I'll put down there.
Tim McDonald 00:29:55
Get the right team, work out what's missing, hire over attitude and cultural fit. You can teach skills. You can't teach values. And your early team and those first people you get, whether they're partners or employees. They really magnify everything. They will basically determine make or break.
Tim McDonald 00:30:15
Practical steps to start. I'm going over time here, so I'll be really quick to start building without overcomplicating. Low capital entry point. So I've just started a chicken restaurant in Swan Street. That was an error. I should have started a little food van. Test the concept. Out of a $100,000 food van or a $40,000 food van. Build the brand, build the product, test the concept out of a food van. I went and spent $1. 5 million on a fit out of a chicken restaurant and it was an error. Get rapid customer feedback early, like taste this taco, taste that sauce. What do you think of that? Testing assumptions cheaply. Food van versus restaurant. I can test my assumption for a $40,000 food van. or a $1. 5 million restaurant? Which one would you rather? and validate before you fully commit. So don't be too scared, like have a crack and test it, but make sure you validate before you really go whole hog. Without overcomplicating it. At some point, you've got to take that leap of faith.
Tim McDonald 00:31:17
Focus on truly testing viability. Like, will customers actually pay? The amount of business ideas I've heard of, like, oh, My customers will book in for an hour session and they'll pay $160. I'll get seven people every day, five days a week.
Tim McDonald 00:31:33
I'm like, really?
Tim McDonald 00:31:35
Will that actually happen? Will they actually pay 160? Will you actually get seven people a day? Every day of the week. Like really, maybe you will. I'm not being a naysayer, but really test that out.
Tim McDonald 00:31:47
Can you deliver profitably? Even if I can build, even if I do get 200 people buying a chicken burger. Um, Can I actually market that as a problem? That's a real P &L on a cashflow forecast. Know your actual costs. Even if I can achieve good sales revenue and I can have people lining up for chicken. Is that profitable? Because that's another question. You might satisfy the sales line. But you're not running it at. at a profit. What's the point?
Tim McDonald 00:32:15
Is the market big enough? How many people really want chicken? Lunch, dinner? Take away, dine in. FRIENDS Roasts. How big is the market?
Tim McDonald 00:32:24
And what's your unfair advantage? What are you doing differently? And it might be something as simple as I'm doing it at a different location. I saw a concept in Sydney. I'm going to copy it. I'm not going to change a thing. I'm just going to do it in Melbourne. That's all the advantage needs to be. It doesn't need to be. Some harebrained idea that no one's ever done before ever. Might be the same thing in a different area.
Tim McDonald 00:32:46
Mistakes are the pathway to success. Make mistakes. Every mistake is a celebration. Celebrate a mistake because you're getting closer to knowing. Most business owners, that start getting really good at entrepreneurship, say, 'I'm just running out of mistakes.'
Tim McDonald 00:33:01
The good guys are just the guys that have made the most mistakes. And the way of making mistakes is just having a crack, just trying. But as I said before, trying in the cheapest way possible. Share your lessons with your team. Write your lessons down. Have a notebook of like. my mistakes for today and try to write three or four in it every day. Just have a list of mistakes because that becomes your goal, your black book. And mistakes build credibility with investors. I've heard this in America. If you're a property developer, trying to raise capital and you haven't been bankrupt before. No one backs you. Because you're seen as someone that you haven't had enough of a crack.
Tim McDonald 00:33:38
Speed of learning beats perfection. Fail fast. I know that's actually, I think that is a book. It's a bit of a cliche thing, but it's so true in all of that.
Tim McDonald 00:33:47
That's it, 34 minutes. I think we're handing it over to questions, but that's it. I hope everyone got something out of that. And feel free to jump into, Anshu, are we jumping into Q &A? What are we doing now?
Tim McDonald 00:34:04
Oh, you're on mute.
Anshu Arora 00:34:06
Six years into this and I'm still on mute. Thank you so much, Tim. That was really insightful. I'm sure lots of good insights for people to take away. We've got some really great questions coming through from the audience.
Anshu Arora 00:34:18
I'm going to start with... with this first question from the audience. What does it take to plan the first few steps? You know, should people be focusing on brand awareness? Should they be focusing on how they structure the organization? What would you say are those first few steps that are critical to get from idea to... Take a seat.
Tim McDonald 00:34:38
It's just focusing on the product or service.
Tim McDonald 00:34:42
And do people really want it? And how many people really want it?
Tim McDonald 00:34:47
And what do they really want? So getting really clear on the product or service that you're developing. And trying to test that out through. You know, um, As I said, questioning potential customers, but in a way where you're getting honest feedback.
Anshu Arora 00:35:01
Mm-hmm.
Tim McDonald 00:35:02
If you're opening a Mexican restaurant, get eight people around your house on a Saturday and make three tacos.
Tim McDonald 00:35:09
Or if it's, or speak, I would also analyze and speak to comparable businesses that are offering a similar product or service to what you're offering and just see how they're going. Have they got shoes out of the door? Are they dead? If they're dead, are they dead because people just don't want that product, or are they dead because... It's something they're doing wrong. They're not marketing well. The chicken doesn't taste good. They're too expensive. So I'd keep it really simple and go, 'What is my product and service?
Tim McDonald 00:35:38
And do people really want it? And then sort of exploring where and how do they want it, like what's important to them. Most people at a chicken restaurant, you know, what they want? They just want really good tasting chips. It's that simple. And you can overcomplicate it like I need to be healthy and the brand's got to resonate with this and blah blah. Sometimes people just want good chicken salt on hot chips. And we can overcomplicate things. So keep it simple and really test your product or your service. But don't test it to try to prove it right. Just to try to prove it wrong. And if you can't do that, then you go to the next step.
Anshu Arora 00:36:13
And so, when, I guess, one of the questions coming here is, when will you know it's safe to act on your business idea? Like, when does that testing stop?
Tim McDonald 00:36:19
When you know that you've got to, there's enough. That the. Feedback from your testing tells you there's enough. desire for your product or service that you need to run your business profitably. Like for a chicken restaurant in Swan Street, we really need to turn over $30,000 to $40,000 a week of revenue. That's what it really needs to be at. So once you've got an indication that you're... Revenue will be big enough and the size of the market is big enough to tick those revenue boxes. Then you start moving on to, okay, how can I deliver this in a way that's profitable? So great, I can serve, I think my data's telling me I can do $40,000 a week in chicken sales. Now I've got to go, can I do that? At a price point. Given the costs that allows me to make a profit.
Anshu Arora 00:37:05
Hmm.
Anshu Arora 00:37:06
And Tim, you've talked about your kind of background. I mean, do you think having that legal background and making it easier to negotiate those deals and understand some of the terminology as you were going into that process?
Tim McDonald 00:37:17
Not really. I did a commerce degree with a finance major and I did a legal degree.
Tim McDonald 00:37:24
Didn't really help at all.
Tim McDonald 00:37:27
The biggest thing I got out of my law degree was doing exchange semester in America and seeing that idea. I probably got more out of reading Rich Dad Poor Dad when I was 14 than I did out of the law degree.
Anshu Arora 00:37:39
The actual degree.
Tim McDonald 00:37:40
Yeah.
Anshu Arora 00:37:40
And what about, I mean, you talked about in your intro doing that grad cert. Did that help you in any way? Like what were the key takeaways from that?
Tim McDonald 00:37:48
That was more practical because that is... With credit to that, I'm not just saying this because it was an RMIT certificate, but credit to that, they were more about actually building a business plan instead of learning theory. So we actually had to submit: a cash flow model and a P &L forecast, and a business plan. So that was probably more helpful.
Tim McDonald 00:38:12
And I also got, basically, I got the doll for a year, which was also good. That's the main reason I did it. But um Uh... It was helpful and practical, but those nuts and bolts. Whilst they're helpful, they're not the make or break of your business idea, working or not working.
Anshu Arora 00:38:28
Mmm.
Anshu Arora 00:38:30
And in terms of, I guess, when you were starting out, Fonda, and during those tougher moments, what kept you motivated and how did you keep moving forward? Because obviously there was a lot of different things that you were navigating simultaneously.
Anshu Arora 00:38:41
What was that motivation?
Tim McDonald 00:38:43
There's a few things there.
Tim McDonald 00:38:45
Sometimes it's good not to have a plan B. The motivation— of needing something to work— really is powerful for the human spirit. There was a six months ago, there was a 14-year-old kid. I think he was 12 or 13 or 14. Him and his mom and his sister got swept offshore in Perth. This happened four months ago. They were four kilometers offshore. And he swam four Ks. from the boat to land to go and raise the alarm to go and again save his mum and his sister.
Tim McDonald 00:39:21
If you told that kid to just get in the water and swim 4Ks just for fun or for a goal, there's no way he could have been able to do it. But he had to do it. Once he started swimming at his shore, he had no choice but to keep going. And I'm not comparing like. the livelihood of your mum and your sister to starting a business. But when you have to make something work and you have no other option. The human spirit is really, really powerful. So sometimes it's good. to put yourself in a position where it's got to work. Don't have too many plan B's. I've got a job. I'm just doing this on the side. I'm kind of doing this in my spare time. As soon as you actually commit to something and really commit— And you have to make it work.
Tim McDonald 00:40:03
Luck just starts to fall your way. Things just start to happen and things just work. And I didn't realize that until I quit.
Tim McDonald 00:40:10
Minter Ellison. Yeah. And just loving it. If you truly want to run your own business and you love the thrill of entrepreneurship, that intrinsic motivation you get from all the challenges and setbacks, if you truly have that entrepreneurial mindset, that will also just be a motivator.
Anshu Arora 00:40:25
And you talked about a little bit, you just mentioned it before, about luck. So how much do you think that luck drives in individual success?
Tim McDonald 00:40:33
Um, there's two things like. A lot of—and most successful business people, you see them in their books and they will just say, 'I just got really lucky.' Luck often plays a role. That's a fact. And everyone here on this call will face luck in their entrepreneurial careers and they will face bad luck.
Tim McDonald 00:40:52
But you also create your own luck. If you work hard and you commit and you make sacrifices for that commitment. All of a sudden, luck falls your way. It's a weird... It's a weird sort of almost spiritual thing. Real commitment, real hard work. You absolutely can create your own life.
Anshu Arora 00:41:10
Yeah. And in terms of, you know, you talked about how you approach getting some external financial support. I mean, how easy is it to find that financial support when you have your own business plan? And do you have any tips for the people joining us today?
Tim McDonald 00:41:25
Yeah. So, um, it's just sales. You're selling yourself to investors. You're selling yourself to banks. So you've got to be a good salesperson. If you're not a good salesperson, get someone to help you do it and you give them a cut of what you raise.
Tim McDonald 00:41:41
So at the core, it's about selling. But you need to sort of be able to show someone, in really tangible way, why your business is going to work. The easiest thing to raise capital for is an existing business. And I'm looking at buying a business at the moment, and the bank is funding 100% of the business acquisition cost. And they were just looking because that business had been performing strongly for five or six years. The bank assessed the loan based on that business, not on me or what I've done.
Tim McDonald 00:42:10
So buying something that's already going, which probably isn't what you guys are here to do. That is the easiest way of doing it. Raising capital, like getting debt financed for things that are tangible assets, is pretty easy. Like buying a machine, a photocopier, a car, or a computer is easy to get financed for.
Tim McDonald 00:42:28
And then, when you're raising capital for a business idea. For a pure startup, it's very hard. You won't get any debt funding. No one will debt finance a startup idea unless it's really boring, established, like a, I don't know, a fish and chip shop or something that's quite bricks and mortar.
Tim McDonald 00:42:48
Really, you need to be tapping into angel investors, VCs, high net worth individuals, and crowdsourcing. There are a lot of ways you can do it. Um, things like. Landlords providing rent-free periods when you're fitting out a restaurant, that was something that we sort of realised we could do to ease that initial financial capital. But the main one is business partners, like investors, business partners that are going to come on board. And the good thing about them, sometimes they can bring more than just money. They can bring money. But when they've got really good experience and networks, that often comes for free. You get a really good capital partner that brings cash.
Tim McDonald 00:43:21
Sometimes the advice they give or the networks they introduce you to are actually worth more than the cash they provide.
Anshu Arora 00:43:27
Yeah, fantastic. I'm going to ask one last question before we wrap up the session. Um, it's from Callum: how do you choose between two or more winning ideas?
Tim McDonald 00:43:39
I think you create, well, the first thing I'd say is go with your gut, but I would just create a checklist, like an Excel. Or a Google Sheet sort of thing that assesses the risk, the expected return, how much you're going to enjoy it, assessing every single thing on that.
Tim McDonald 00:44:04
Uh... every aspect of that opportunity.
Anshu Arora 00:44:07
Hmm.
Tim McDonald 00:44:08
And giving it a rating of 1 to 10, all the risk involved, the capital required, give it a rating of 1 to 10 and let an objective number decide which one to go with if you can't let your gut decide.
Anshu Arora 00:44:21
Fantastic. Hey, Tim, thank you so much for taking the time out and spending it with us today. We've really, I mean, I've really enjoyed the conversation. I'm sure everyone else on the call has too. A couple of things that I'm taking away from today are putting yourself in the customer's shoes. So developing from a perspective of a customer is really critical and balancing that belief and that critical thing. Thinking bigger is not always better. So if you have a small profitable business that's you know, don't feel the pressure to grow, grow, grow. And make the most mistakes, but in the cheapest way possible. I think there's some really good takeaways that I'll be holding on to post this session. So thank you so much. And thank you everyone else. Joining us today and being part of the conversations for for great questions coming through the chat. Um, just a few things before we do wrap up: if you know we've sparked some ideas or we've inspired you to, and you want to continue building your skills, please check out our upcoming events and our courses on the website. We've got five free Future Skills short courses to give away to a... attendees.
Anshu Arora 00:45:23
So make sure you're sharing your key takeaways from the festival or from this session on your social media. Tag us and we can see that on your post and we'd love to hear what's kind of resonated with you as well. And like I mentioned earlier, the learning doesn't stop here. This is our first event for the Future Skills Fair. So we've got more coming across AI, customer experience, career growth. We'd absolutely love to see you at another event across the week. We do have our face-to-face event tomorrow morning. So if you're around, please come and say hello. The RMIT online team will be there too. So you're good. Thanks, everyone. Enjoy the rest of your day. And we really hope to see you soon.
