It’s a little acknowledged truism that a Eureka moment – that time of stunning clarity when a profound insight fully crystallises – usually occurs after years of exploration, analysis and often backbreaking labour.

Such was the case for Alan Kohler, Chief Executive Officer of Australian Independent Business Media (AIBM) and founder of the Eureka Report, Australia’s most successful investment newsletter, and Business Spectator, a 24-hour business news and commentary website. Both publications have delivered plenty of Eureka moments to Australia’s investing community.

A finance journalist since 1971, the year he first began tearing off the telex for the finance desk at The Australian, the move from commentator to publishing entrepreneur has been a long journey. The path has included learning the craft, understanding the complexities of global financial markets and tirelessly building a profile.

“When you start a small business, you have to do absolutely everything and approach it with a different mindset entirely,” Kohler comments. “You’re responsible for it, your own money is at risk and over time you’re responsible for other people’s livelihood. That’s very different to simply writing about other companies’ finances.”

A super market

The genesis of the Eureka Report, launched in 2005, lay in the outcome of a long journey of another kind: Australia’s march towards the compulsory superannuation system that revolutionised the relationship between ordinary Australians and their money.

“I’d been working as a finance columnist at the The Age and the Sydney Morning Herald (SM H) for many years, as well as appearing on the ABC’s Inside Business as a commentator,” explains Kohler. “When Australia moved from a defined benefit superannuation market to an accumulation fund regime with the introduction of the superannuation guarantee in 1992, it occurred to me that everyday Aussies were likely to become far more interested in what was happening in investment markets.

“By 2002, when the guarantee moved to 9 percent, I realised there was a place for a subscription newsletter for ordinary investors who were eager to understand what trends might impact their superannuation money.”

The realisation coincided with another equally important insight: that there was a big gap between what the big brokers were producing for professional investors and what was being provided through the media for individual investors. Says Kohler: “There were newsletters that focused on stock tipping for intelligent investors, but nothing that really bridged the gap between what the big picture professionals were given and the small stock-specific insights for retail investors.”

The content of the Eureka Report was ultimately shaped by this insight.

The customer is king

Identifying the right opportunity at the right time was key to the success of Kohler’s venture. But so was the process of refining the report and defining the right approach to potential customers. “From the very beginning we were conscious that the quality of the journalism was critical,” says Kohler. “Nothing we publish is just tossed off.”

The high quality of the content helped Kohler and his team create the kind of exclusivity they felt would best support their subscription model. “We’ve tried to develop a different mentality where we have a membership rather than a customer base,” he explains. “This helps our readers feel like they’re part of a club rather than just consumers of a product. One of my core beliefs is that journalism is a service and the customer is king. So we needed to deliver content that they absolutely needed.”

While Kohler was chiefly focused on content, he recognised early that building a powerful distribution base was critical. And he has stayed largely focused on what he was good at and found the right partners to manage the rest. “Early on I did two important deals around distribution. One was with E*Trade, the online stockbroker, for website advertising in return for content, and another was with Fairfax, where we gave them a percentage for any subscription that came through advertising in The Age and the SMH,” he comments.

But, like any SME business owner, it proved impossible to simply wield the pen and let the rest take care of itself. Kohler wore through some shoe leather meeting and greeting potential subscribers, talked himself hoarse speaking at shareholder events and shook a lot of hands at financial planning forums. “It was a major process, but a lot of the value of the business resides in the distribution list, so it was very important,” says Kohler.

Fine-tuning the finances

You’d expect a finance commentator to have a pretty good grasp of what makes a business tick. And Kohler is in no doubt about how to keep the lights switched on. “We have an absolute focus on costs,” notes Kohler. “In fact, our greatest innovations come in the area of cost control.”

He’s adamant that even a business as technology-dependent as the Eureka Report doesn’t need to be outrageously expensive. “We were a first mover in using video on our site. That was very cutting edge because most of our customers were on dial-up at the time,” Kohler recalls. “I spent $300 on a little video camera and $50 at Bunnings on a plasterer’s light, and we shot our footage cheaply and quickly.”

Fine-tuning his pricing paradigm was equally critical. “When I started the Eureka Report, I undervalued it because journalists don’t tend to assign the right value to their output,” he comments.

Initially members paid $180 per year for a subscription, but the company had to quickly adjust the price because it simply wasn’t economical. Handling price increases is a major problem for many businesses, and Kohler says it took careful management. “We put our prices up on July 1 each year and for the last month before the increase we make sure our members are aware that they can beat the price rise and subscribe at the old price for the coming year,” says Kohler. With 12 months before the flagged price rise kicks in, it’s no longer a nasty shock when it comes.

Riding out the market

The move from spectator to Spectator hasn’t been without its challenges. While the Eureka Report launched at a particularly fortuitous time, Business Spectator faced a stiffer challenge.

The site was launched in October 2007, just as the credit crisis was hitting, by Kohler and fellow journos Stephen Bartholomuesz and Robert Gottliebsen – badged ‘the KGB’ – as a competitor to Kohler’s former alma mater, the Australian Financial Review, where he was editor from 1985 to 1988. As a 24-hour financial website it was far more ambitious than the Eureka Report, with higher staff costs but the same revenue.

“Because the crisis was so devastating, it was actually good for driving traffic to the site,” says Kohler. “But revenue fell short because so many people started cutting back on their advertising.”

The site was advertising-dependent so the pancake-flat market was a real problem. “We learned so much about managing our cash flow in this period,” notes Kohler.

The company’s discipline around cost control paid real dividends in this period as did access to the cash flow from the Eureka Report and the deep pockets of some key individual supporters. “We were able to manage our cash so we didn’t have to raise more equity in this period, which really preserved the value of the company,” says Kohler.

In early 2007, the company completed an internal capital raising of $2 million, with Kohler, investment bankers John Wylie and Mark Carnegie, and publisher Eric Beecher chipping in, and that’s all that was needed.

Subscriptions for the Eureka Report flattened during the GFC but Kohler wasn’t dismayed. “Many investment newsletters saw their numbers halve during the GFC,” he says. “Ours didn’t grow but they didn’t really shrink either so we were at least replacing our churn.”

On probation

Alan Kohler attributes much of his business success to one simple principle: only hire the best. The principle applies at all levels of the company. “The original editor of the Eureka Report, James Kirby, is still in place, and so is my very first hire, Catherine Cardinet,” he says. The value Kohler places on top people is evident in the roll call of talent on his mastheads, from fellow Business Spectator owners Stephen Bartholomuesz and Robert Gottliebsen to contributors like economist Steve Keen and journalistic luminaries Jessica Irvine, James Kirby, Ian Verrender and Elizabeth Moran.

But how do you make the right hires and find the right contributors? When it comes to hiring, Kohler stresses the importance of making full use of the probation period. “The interview process can only tell you so much,” he comments. “We use the three-month probation system to great advantage. When it’s really not working you need to move people on.”

As for attracting the contributors that add so much to the brand, he believes it comes down to making it clear that the advantage works both ways. “It really isn’t just about money,” he says. “People need to feel that they’re aligned to a brand that stands for something.”

This article was first published in Business View magazine (May 2013). To enjoy more articles and interactivity from our latest edition of Business View for free, download our app, NAB Think.

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