Two years after acquiring Grays auctioneers through a management buy-out in 2005, the young team pinning its hopes on growing the company's online presence was becoming frustrated.
"We were working very hard, our revenue was growing very fast, but the bottom line wasn't growing in proportion," says Cameron Poolman, a former engineer who joined as a trainee auctioneer in 1995 and became managing director in 2003.
Two years later, recognising the potential of online auctions, he led a management buy-out. Ernst & Young advised on the deal that used bank finance backed by projected cash flow. Most of the debt was paid off by last year.
After operating as traditional auctioneers since 1989, Grays Group began selling online in 2000 by offering liquidated stock and industrial equipment.
At the first online auction of IT equipment it sold six notebook computers. Now, 95 per cent of stock is sold online. The company has a valuation division, but that is a small part of the business.
In 2007, the shareholders instigated an efficiency program after a review of the business showed the founding owners were generalists. In response, GraysOnline invested in experts to run warehousing, IT, customer services and finance.
A customer relationship management system was introduced as well as new finance systems and freight tracking.
Another saving came from identifying the source of the large number of items being returned because of damage, mis-description or quality concerns.
After bringing in a consultant to review the supply chain, the business cut these costs by half - a saving of $75,000 a month.
It also meant, says Poolman, that half of customers were having a negative experience.
One shortcoming of e-commerce in Australia, says Poolman, is the lack of big players to inspire others.
"We've made a conscious effort to spend a lot of time overseas." He says the United Kingdom is a dynamic market for keeping up with the latest in e-commerce, particularly marketing.
This year, he will attend the Internet Retailer Conference in the United States, which attracted about 4000 people last year, although only four from Australia.
At last year's conference he was surprised to learn jewellery was the fastest-growing category in the US: "I didn't think jewellery would work on the internet. But we put resources into it and it's the fastest growing category on Grays."
Unlike other auction sites such as eBay, GraysOnline's business model links businesses to consumers, not consumers to other consumers. Lines including IT, wine, consumer electronics and whitegoods account for 60 per cent of business compared with 40 per cent nine years ago.
By dollar value, IT is the biggest category and Grays works closely with Hewlett-Packard, Dell, Sony and Toshiba to sell surplus stock, for which it is paid a commission.
By volume, the biggest category is wine and about 50,000 cases are sold a month.
The industrial part of the business, representing 40 per cent of online turnover, includes auctions of mining and engineering equipment.
Earnings before interest and tax have grown by an average 20 per cent a year since 2003 to $10 million last financial year, with forecasts of $15 million this year, 10 times the 2000 figure.
Turnover last year was $230 million and is expected to reach between $250 million and $280 million this year.
The company has about half a million registered members, increasing by 15,000 a month.
If he could have his time over, Poolman says he would invest in processes and systems earlier, as well as the necessary expertise.
"We did well with our broad knowledge, but we could have invested a little bit earlier.
It doesn't have to be lots of money," he says.
