Innovation

Robert Herjavec Still Has Something to Prove

The famed PROFIT 500 CEO has made some dangerous mistakes in his own ventures. He doesn't intend to repeat them

Written by John Lorinc

Considering the guy has a 2004 Ducati Formula One motorbike parked in the corner of his office and the crumpled hood of a sportscar he totalled bolted to one wall, it’s hardly surprising to hear Robert Herjavec say that the secret sauce in any successful start-up is “traction.” You can have a great idea, smart people, the whole corporate package. But if the wheels of a fledgling enterprise are spinning in place, he says, you’ve got a problem.

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Believe it or not, the 50-year-old star of ABC’s Shark Tank (and formerly Dragons’ Den) knows a thing or two about running a business in neutral. A serial entrepreneur with a brain for tech, Herjavec made tens of millions in 2000 by selling Brak Systems, a computer security firm he founded in 1992, to AT&T. He later worked as a senior executive at a company that Nokia bought for $225 million. Savouring a prosperous early retirement, he bought a $10-million mansion, filled the garage with Ferraris and learned to race. In spite of his thrill-seeking hobby, he quickly grew bored. So, in 2003, Herjavec launched a data-security firm, confident it would gross $5 million within a year. As it transpired, The Herjavec Group (THG)’s first 12 months in business brought in a piddling $400,000; it took another four years to reach the $5-million mark. “That,” he admits, “is how wrong we were.”

Business owners should never delegate sales. Nothing happens until you sell.

Herjavec is remarkably clinical in his explanation of THG’s early miscues: he went in assuming the market hadn’t changed since he’d exited it in 2000. He wanted to sell firewalls, but corporate IT managers had become more preoccupied with email security and data-protection services. Ultimately, a client told Herjavec he was off target. “I just wasn’t smart enough to see it,” says Herjavec with unconvincing humility. “The hardest thing in life is to build a company from the ground up.”

Traction.

THG has plenty of traction today: with $100-250 million in revenue, the company claims to control 8% to 10% of Canada’s $2-billion corporate IT-security market. The firm’s 643% growth over the past five years puts it at No. 108 on the 2013 PROFIT 500, and makes THG the 17th fastest-growing IT Products & Services company.

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The firm’s customer base includes mid-sized and large private companies, as well as public organizations such as the Liquor Control Board of Ontario. And Herjavec says there’s plenty of runway left in Canada, largely due to mounting fears about cybercrime and attacks by malicious hackers. He figures he can double his revenue again within a few years by winning more Canadian clients, as well as by expanding into the U.S. and Europe.

The company doesn’t develop its own software or hardware; it is a value-added reseller of security systems produced by global firms such as McAfee and Blue Coat Systems. Service is the key, says Herjavec. “Sales is selling the first night in a hotel room. Service is getting the customer to come back.”

Companies often talk up the importance of customer service, but many fail to deliver. According to Don Burke, an LCBO security systems analyst who did business with Herjavec long before the latter became a celebrity, THG fosters a lean culture that allows clients to get solutions without the bureaucracy often found in larger outfits. The LCBO outsources a 24/7 security-monitoring system to THG. If there’s a glitch, says Burke, he can contact THG’s engineers directly. “They’ll throw everything they have at a problem to fix it.”

For all the high-touch customer relations, it’s clear that THG is a sales-driven organization, and that this culture  comes from the top. Herjavec is an approachable and down-to-earth businessman, and he still involves himself directly in the sales process. He believes growth entrepreneurs should delegate freely to skilled operations and finance executives. But when it comes to sales, there can be no stand-ins. “Nothing happens until you sell. Sales trumps all.” Indeed, he feels business owners who delegate the sales function are taking huge risks: “You always have to know enough about sales to know when someone is lying to you.”

Following his own advice, Herjavec actively participates in major sales calls. Since he’s become a celebrity, his arrival at a customer’s premises can be dramatic. But he insists that this recognition is a double-edged sword; he feels additional pressure to demonstrate that he’s conversant in all the nerdy details of the products and not just a figurehead.

There’s certainly the risk of skepticism. Dean Gibb, vice-president of IT for pipe-coating firm ShawCor, who inherited the THG contract when he joined his employer, says he initially didn’t want to deal with Herjavec personally; he wanted to avoid being distracted by the celebrity factor when making decisions about a service provider. But after attending a few customer events that Herjavec hosted, Gibb’s reluctance fell away.

Burke and Gibb both say that THG’s pricing doesn’t try to leverage Herjavec’s fame. The LCBO, as a public sector agency, regularly puts its data-security contracts out to tender, and THG has no difficulty providing competitive bids, says Burke. Gibb adds that THG tends to position itself as a mid-range supplier. “You can always find someone who can do it cheaper and someone who can do it more expensively,” he says.

Of course, Herjavec is no ingénu about his personal celebrity, and he readily leverages his ability to get face time with customers. He’s long held the view that entrepreneurs need to meet their customers’ current needs while also leading clients toward the next generation of products and services. So, while Herjavec voraciously consumes news about emerging security trends, his team is constantly asking customers about their security needs today.

Still, he is cautious about broadening his company’s focus. When THG began exploring cloud-based data storage, the marketing staff proposed an initial investment of $250,000 to launch a new service. Herjavec balked at the cost, suggesting the firm start much more modestly, since it didn’t have any customers lined up yet. “I said it is best to test and invest than simply to invest.”

He’s taking a similar approach with a planned U.S. expansion. At Brak, Herjavec tried to break into the U.S. with a full suite of services and a big splash, only to find clients less than impressed. Having expanded in Canada by acquiring six smaller rivals, THG recently invested $10 million to buy a U.S. firm rather than build from scratch. “We won’t start from zero,” says Herjavec.

Even as he eyes the U.S. and the fast emerging market for cloud services, Herjavec finds himself fielding questions about his long-term plans. After all, he sold his previous company at the height of the market, and THG is now in its tenth year. Yet, when one of his two co-founders—vice-president of sales George Frempong and engineer Sean Higgins, who’s worked with Herjavec since the days he ran his first company out of his garage—asked Herjavec recently about his exit strategy, he insisted he has no plans to sell or go public.

Indeed, with three teens at home, Herjavec seems to be pondering legacy. He’s compelling all three to work at THG this summer, perhaps with an eye to bringing them into the company. “They’re incredibly mad at me for forcing them to work here,” he grins. For the time being, however, he doesn’t intend to downshift, or even ease up on the accelerator. “The minute you think you’ve made it,” he muses, recalling that earlier aborted retirement, “you’re done.”

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Originally appeared on PROFITguide.com
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