February 2, 2016

Putting it all on the line

Taking charge of the family business after the death of his father, Peter Freedman persevered through tough times to grow Freedman Electronics from a single shop in the Sydney suburb of Ashfield to become RØDE Microphones – one of Australia’s great export success stories.

Taking charge of the family business after the death of his father, Peter Freedman persevered through tough times to grow Freedman Electronics from a single shop in the Sydney suburb of Ashfield to become RØDE Microphones – one of Australia’s great export success stories.

Designing and manufacturing world-class audio equipment from its Sydney base, RØDE Microphones exports its products to more than 100 countries around the globe. The company’s success was recognised when it won Australia’s 2013 Export Award for Manufacturer of the Year, while Freedman himself was awarded the EY 2014 Industry Entrepreneur of the Year for Australia.

These awards were just the latest in a string of accolades for RØDE Microphones, which are favoured by filmmakers, broadcasters and musicians around the world. But the Australian manufacturer is far from an overnight success story. The family business has stood on the brink of the abyss more than once over the years since Peter Freedman took over the reins from his late father.

Seven-year-old Peter emigrated from Sweden in the mid-1960s with his parents Henry and Astrid, who founded Freedman Electronics in Sydney’s inner west. It was the first dedicated professional sound company in Australia and the sole importer of the highly respected German sound systems brand Dynacord. The 60s saw Henry sitting behind the mixing desk for a young Tom Jones during his 1968 Australian tour as well as other major cabaret acts in Sydney.

While occasionally rubbing shoulders with the stars, it wasn’t all glitz and glamour for the family business. The “classic immigrant story” is how Peter describes it, recalling that his parents worked incredibly hard day and night, and never owned luxuries like a new car or spent money on themselves.

As in many family businesses, young Peter helped out in the shop after school and on weekends. Henry first started having heart problems in 1969, and as Peter grew older Henry’s health deteriorated. When Peter was 17 his father underwent his second open-heart surgery, after which Peter found himself practically running the business.

“The passion for professional audio is in my blood,” he says. “Some of my earliest memories are of sitting in my Dad’s electronics workshop in Sweden when I was three or four years old. There wasn’t a conscious decision to follow in his footsteps when we moved to Australia; it’s just what happens when your family runs a small business. I’d be hanging around in the shop after school and on the weekend. I would serve the odd customer, and started to enjoy and understand sales; it grew from there. I studied electronics, learnt sound system design, it was just a natural thing.”

Carrying on the family legacy

Henry Freedman’s health waxed and waned, but he remained a strong guiding force behind the growing business over the years that followed – a cool head to balance Peter’s youthful enthusiasm. Henry’s death came suddenly when he was struck down by a heart attack, leaving Peter in his late 20s to step up as Managing Director and carry on the family legacy – even though he had never finished high school and had no formal business training.

“When my Dad passed away it was a massive shock for everybody. You’re never going to be ready for something like that. Perhaps you’d like to run away, but you can’t,” Freedman says.

“Nothing teaches you about business like being dropped in the deep end. As a 17-year old I’d had these seemingly awesome business ideas that were completely stupid, and Dad wouldn’t let me do them, thank God. After he had passed away, I could do whatever I wanted, and that’s when I made plenty of mistakes.”

The young Freedman inherited a debt-free business but borrowed heavily in the late 1980s to fund his expansion plans. The timing could not have been worse, with a stock market crash, economic crisis, soaring interest rates and sales drying up – all bringing the business to its knees.

Deeply in debt, Freedman refused to declare bankruptcy. He lost his house, had to sell his car and walked to work every day rather than concede defeat and let his father’s business go under.

He says now, “I’ve been to the brink, and I know sometimes it’s tough to keep going, but my motto has always been ‘Never give up’. No matter what, you have to pick yourself up and keep going.”

Learning from his mistakes

They were formative years for Freedman the entrepreneur, who freely admits he made a string of poor business decisions. He emerged a wiser businessman but is not averse to taking calculated risks.

“These days I don’t make mistakes very often. Why? Because I’ve made every single mistake you can make in business – and I must be an idiot because I’ve made some of them more than once!

“It’s a balancing act: with the freedom of being the boss comes the challenge of making smart decisions. However, if you’re the kind of person who is over-cautious and constantly double-checking everything, then you’re probably never going to act. You can’t cover all bases, you’re going to get into trouble sometimes, but the magic in business comes from taking calculated risks, and going for it.”

A long financial struggle eventually saw Freedman pay off his debts, but those lean years had left the business in trouble. At the time, Freedman Electronics’ primary focus was installing large sound systems in nightclubs, but Freedman was on the lookout for any product he could sell to help keep the business afloat.

His luck turned around in the early 1990s when he met up with an old friend from the UK, Colin Hill. A master salesman, Hill was soon offered a job by Freedman and immigrated to Australia to become the company’s sales manager. This allowed Freedman to focus on technology and product and have some serious support in rebuilding his company.

Looking for anything to sell, Freedman turned to a cheap studio microphone he’d bought in China back in the early 1980s that was now gathering dust on a shelf. Hill shopped it around to a few local retailers and found a serious spark of interest, so Freedman imported another 20 from China. However, some of the internal electronics weren’t up to scratch, so Freedman Electronics gave the microphones an overhaul in Australia before selling them under the newly established RØDE name.

Finding his way back

From there Freedman’s luck began to change: he was soon selling around 100 of the Chinese-made RØDE NT1 microphones a year. The follow-up NT2 model, also based on a Chinese import, helped RØDE gain a foothold in the US market, and an Australian export business was born.

Freedman says he was “in the right place at the right time” with the RØDE NT1 – offering a product at a quarter of the price of the competition to musicians looking for an affordable studio microphone for the then emerging low-cost, high-quality digital recording revolution.

“People don’t like it when you say it was luck,” Freedman says. “There is a lot of luck involved in most success stories, it’s true, but business opportunities are there all the time if you can recognise them, do something with them, and think big. In the beginning, I dreamed of selling 500 of these RØDE microphones a year across Australia, and I think you could say we’ve now come a long way. We expect to sell 750,000 microphones in the next 12 months – sending them to every corner of the globe.”

As RØDE Microphones found success, other microphone manufacturers also began to look to China for a price advantage. Aspiring to compete on brand, performance, quality and customer support rather than purely on price, Freedman gradually weaned the business off Chinese imports, doing more and more of the work locally until all RØDE products were completely designed and manufactured in Australia, as they still are today.

His passion paid off, with RØDE winning the favour of superstars including Barbra Streisand at the expense of larger rivals such as Sennheiser from Germany. His friendship with Streisand’s sound engineer Bruce Jackson saw Freedman overseeing the development of a custom-made RØDE microphone to cut down on unwanted noise from the orchestra as Streisand moved around the stage during her shows.

“Barbra loved our microphone and used it on stage for her last world tour, which was a great win for RØDE as she demands the best, regardless of price – plus it upset Sennheiser, which was fantastic,” says Freedman with a grin.

Bringing manufacturing back to Australia

Building quality RØDE microphones in Australia has bucked the trend of outsourcing manufacturing overseas. Some would have considered this an unwise business move, but Freedman is adamant that Australian manufacturers can play on the world stage if they choose their battles wisely.

“It was probably wrong on a purely economic basis years ago when China was very low cost, and the volume was low,” he says. “But now with a team of experienced designers, engineers and production people and a factory full of the best automated manufacturing machinery, we have no problems designing and manufacturing here, and being even more competitive than China – or anywhere else for that matter. We are number one in many categories worldwide and we’re even the number one selling high-end microphone brand in Germany.”

Rather than competing purely on price, when pitted against cheap foreign labour, the opportunity for Australian manufacturers lies in establishing a strong brand with a reputation for excellence, he says. A respected brand allows Australian manufacturers to charge a premium for their products, rather than competing with cheap imports in a race to the bottom on both price and quality.

The trick is to be strategic, he explains, and RØDE cherrypicks its product lines while moving quicker than the competition to take advantage of new opportunities.

“You have to be smart about it,” says Freedman. “There are areas where I know we’ve got nothing to offer, or where I know we just can’t be competitive because of the amount of manual labour involved, but as the volume increases we can automate most production.”

RØDE has about 100 production workers, but they don’t touch the product for long during assembly.

“It’s seconds, so the labour component of the entire build is low,” he says. “A large proportion of the people who work for RØDE are highly paid mechanical engineers, industrial designers, electronic engineers and acousticians, but that is irrelevant to the end product cost. Come to my Sydney factory on the weekend and you’ll see computer-controlled metal lathes, mills and plastic injection-moulding machines.”

Building a successful team

Freedman might be an old-school businessman, but he’s also open to change and passionate about new ideas and technologies. While he didn’t finish high school, today he sits on the Business School Advisory Board of the University of Technology, Sydney.

His advice for budding Australian entrepreneurs is to “know thyself”: appreciate your strengths and weakness when deciding which roles you should tackle yourself, and which you should hand over to someone else.

“Sometimes people can’t let go, or perhaps they find themselves in a senior position simply because they inherited it,” he says. “That doesn’t mean that you know what you’re doing. I’m very good at what I do now, but I also employ the best in areas where I am totally useless. My passion for the business is multi-faceted. I love the pro audio industry, but I love the ‘sale’. Marketing strategy and tactics are still a buzz, even after 40 years, although I’ll admit I’m still an enthusiastic amateur. That’s the secret to success. Don’t be too big-headed to ask for advice, and hire the best.”

He says that it’s the same with industrial design. “I have my ideas, I come up with most product ‘concepts’, but our industrial design artists bring things to life in a way I never could. A growing business needs to be a successful team, which means you need to appreciate when it’s time to let go.”

Now an international success, RØDE Microphones remains a privately owned family business. Freedman’s wife, Lou, is a psychologist who works with children who have special needs. While that’s her passion, she has also been handling RØDE’s books from the beginning, and still oversees the finance department as Chief Financial Officer.

As a self-made businessman who started out on the shop floor, Freedman admits finances aren’t his strong point, and says his wife’s contribution to the business has been invaluable.

“Business is a cruel and hard school,” he says. “You get the test first, and the lesson afterwards. You need to do the hard yards. It’s not just about business plans and numbers on a page – you’ve got to get out there. The business is not in your little office, it’s out there in the big world waiting for you.”

This article was first published in Business View magazine (Summer 2015). For more articles and interactivity, download the iPad edition of Business View for free via our app, NAB Think.

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