Small Business: Diversifying - Josh Forde, Rabid

Josh Forde, co-founder of Rabid.

This week, Small Business editor Caitlin Sykes talks to business owners about diversifying into new markets.

Josh Forde and Breccan McLeod-Lundy are the co-founders of software consultancy Rabid. The Wellington-based company recently diversified its business by acquiring Auckland-based, two-person software development shop Resistor.

How has the purchase of a new business in Auckland allowed you to diversify?

Rabid's existing strengths have been in developing software and core technology for some major projects - new services like PledgeMe, and Homes.co.nz - as well as with corporates who are overhauling their online services, but the acquisition of Resistor has allowed us to broaden our capability. Their background includes exporting to high-tech manufacturers in the US and building infrastructure like billing systems. Hardware development is increasingly a part of the mix for products today and they bring a lot of experience there, meaning we can increasingly provide full solutions for clients.

Why did you choose to diversify your business by this approach as opposed, for example, to developing those services from your pre-existing base in Wellington?

We've known the team at Resistor for years through the open source community, and as we've grown - especially into some more commercial projects - Auckland has become a priority, because a lot of businesses have their headquarters there. By doing things this way it means we have dedicated local people in the market, rather than just a sales office. This gives us more face-to-face capability, and means we're not starting from scratch in reestablishing ourselves.

Also, senior engineers in web tech just aren't available through traditional recruitment processes so this was another way of getting those people on board. Often with a new office the first few hires are risky, but we've been able to bypass that and move quickly in a new market.

What are some of the things you've learnt as a business owner through this process?

I think business is always about collaborating with people, and understanding people's different motivations is key to doing that successfully. I've found it's been no different in this case where the deal was as much about our company being a place where they wanted to work as it was about the commercials.

Breccan and I are getting to classic growth management challenges now, but we've learned to work with people we genuinely trust. We were lucky in this case to be able to take a big leap with people we already had relationships with, but we still needed to get them excited about our plans for the coming years. We've focused energy on building a collaborative internal culture, so wherever possible we introduce new hires and new clients to our existing team and get a sense of people's empathy and personal motivations in coming to work.

Do you have plans to diversify further?

Yes. We're currently looking at high-value exporting opportunities as well as ways to make sure that part of our business can grow sustainably, and we're still interested in acquiring other small high-quality teams that will add to our ability to do this. We want to build relationships with people that love the underlying work that we do and we also see that as a great way for us to grow.

Increasingly we're advising on digital opportunities well before building the software. This is a step up from what's traditionally been our core service but it's closer to where we think we can really add value. I think this is a good move, because it means that fundamentally better products will come out of our projects.