This week’s family business story is also about a fragment of my life.
I grew up on Ventura buses, up and down Warrigal Road from South Oakleigh in Melbourne, where my family had settled in the early 50s. I took the blue bus to Mentone beach, to Sea Scouts in Mordialloc, guitar practice in Oakleigh, ten-pin bowling at Chaddie and to the train station to visit Nanna. Half my early life was spent sitting up the back of a Ventura bus, gazing out the window and picking scabs off my knees as it bounced along pot-holed outer Melbourne roads.
I didn’t know it then, but the founder of Ventura Buses, Harry Cornwall, had died at the same time I was born, in 1952. Harry had started the business in 1924 with the proud acquisition of a 14-seat Reo bus for 816 pounds. He had served in Europe in the First World War and for some reason found himself in Ventura, California, after the war ended – thus the name he gave to his bus business when he got back to Australia.
Harry started operating the busy, competitive route between Box Hill and the city, but six years later decided to strike out to where he’d have a monopoly. At that time the land between Box Hill and Mentone, through Melbourne’s south-east suburbs, was all farm paddocks, but Harry could see this area would eventually be developed and applied for a licence to operate buses along what was then an unmade country track – Warrigal Road.
In 1936 he married one his passengers, Myra Hammond, who caught the bus every day to the Benevolent Asylum in Cheltenham where she worked. They got chatting, fell in love, and had five children together.
Fast forward 76 years and the business is now run by Harry’s grandson, Andrew, a chartered accountant, is still 85 per cent owned by the family and operates 62 per cent of Melbourne’s bus routes with 1300 buses and 2000 drivers. There are three branches of the family still involved and yesterday they gathered in Dandenong for the company’s annual shareholders’ meeting.
Basically the AGM means Bev and Ray Galloway, and as many of their four kids as are around, come in for their annual chat to the board, since Andrew represents his side of the family and Greg Cornwall represents his father Ralston, Harry’s eldest son. Andrew, Ral, and Bev bought out their two siblings, Geoff and Peter, in 1998, just after Andrew’s father Ken passed away.
It was a happy occasion yesterday because it was the first AGM since the Cornwalls doubled the size of their business in January this year by buying out their friends the Grenda's for $400 million, following an auction rub by UBS, giving Ventura another 30 per cent of Melbourne’s routes, plus a flash new headquarters in Dandenong. To help fund the deal the family brought in a private equity investor, London-based ICG, which owns 15 per cent with a clear exit plan that will leave the family with 100 per cent again in a few years.
I visited Andrew Cornwall this week at his old HQ in North Fitzroy, a very daggy old cream brick building and depot where he still works. A less corporate operation is hard to imagine.
Andrew himself is a quiet, modest man who lives and breathes his family history. He’s been running the business since 1997, when he was thrust into the leadership prematurely at the age of 33 by the death of his father, Ken. Ken had been running the company since 1969, when he took over from the executors of Harry’s estate, Ross Watson and Bill Hurley.
Building Harry Cornwall’s Ventura Bus Lines into the dominant bus operator in Melbourne through acquisitions while maintaining family ownership has been a remarkable achievement, as much a testament to the family’s modest lifestyle and low demands for cash as Andrew’s ambition.
Apart from Geoffrey who was bought in 1998, none of the family has wanted much money out of the business – they have been happy to take pretty small dividends, and plough most of the cash flow back into replacing buses and buying out other bus operators.
When the current shareholders’ agreement was established 24 years ago it provided an exit mechanism for any member of the family who also wanted out, but none has taken it.
The terrible but beautiful thing about public transport is that the fares are set and collected entirely by the government. The operators get back a monthly retainer that’s determined not just by patronage, but also kilometres, hours worked and capital investment in new buses.
It means the ACCC doesn’t get involved. Metro Trains and Yarra Trams are both private companies that operate 100 per cent of the trains and trams in Melbourne, and that’s where Andrew wants to take Ventura Bus Lines – to 100 per cent. He is currently bidding in a tender that would get Ventura up to 70 per cent of Melbourne’s bus routes.
And after the acquisition of Grenda’s this year, Ventura is getting hard to beat in auctions and tenders because of its economies of scale, although nothing is taken for granted.
Andrew says the great advantage of family succession in a business is that you are brought up learning about critical success factors over the breakfast table. What he learnt from his father was that it’s all about the quality of the drivers – get that right and everything else follows.
But he also says it’s important for young family members not to feel pressured into going into the business. "You have to have the passion for it, otherwise it won’t work,” he says.
Ventura’s structure is uncomplicated: apart from ICG, each branch of the family has a third each with a right of first refusal over the others if they want out. There are only two Cornwalls on the board – Andrew and Greg – with the rest external. Andrew is chairman and CEO (you can do that in a family company).
The revenue is now $350 million a year but Andrew won’t tell me the profit. He says it’s not a huge margin business with the government controlling the prices. When he took over in 1998 the revenue was about $35 million.
Where to from here? Andrew has three children – Luke 16, Abigail 14, and Henry 10 – and, like he did, they hear about Ventura and its critical success factors over breakfast and dinner. Will they follow him into the business? He doesn’t know, but it’s entirely up to them.
Every week Alan will be writing about an Australian family business success story. If you know of a family business that deserves recognition, email firstname.lastname@example.org
Follow @AlanKohler on Twitter