How Naomi Simson executed a coup at RedBalloon
REDBALLOON’s co-founder Naomi Simson knew there was ‘sh*t’ that needed fixing at her business that became a $50m empire. She reveals how she staged a coup to clean it up.
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AS RedBalloon’s 70 mostly young staff left for this year’s Easter long weekend, next to none had a clue co-founder Naomi Simson was plotting a coup.
According to Simson, to many of them she was a stranger. They were more likely to have seen her on TV’s Shark Tank — or on LinkedIn, where she has 2.3 million followers — than at the gift-giving company’s Sydney office.
“People came and worked here and had never met me. They must have thought ‘wow, she thinks she’s so big and important’. No. I was told not to be here. The chairman literally said ‘you’ve got to let management do their job. If you’re around they won’t be able to do their job’,” Simson tells News Corp Australia.
However, the then chairman Ken Boundy, who left after the coup, disputes this and other claims made by Simson. He is not alone in doing so. Her ex-husband Peter Simson — a director and 50 per cent owner until the revolution — and the now ex-CEO Nick Baker also take issue with her recollections and characterisations.
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Naomi says her return six years after she stepped down was prompted by concerns about the company’s finances, culture and direction.
“There was all sorts of shit that needed to be fixed. I had to come back and clean it up,” Simson says.
“The cost of employment had gone up by a third in a year. That is unsustainable.”
And RedBalloon’s ethos of taking calculated risks had been lost.
“I came in to pick something up and 14 people were crammed into a meeting room,” she recalls. “I opened the door and said ‘What are you all doing?’ They said ‘We’re talking about the brand’.
The way she saw it, that was a discussion which didn’t require three external agencies and 11 staff.
“I said ‘Really? What do you want to know? I can answer that question in two minutes.’
“From being a very agile business it had become management by committee and risk averse yet some of the things they were doing and spending a lot of money on, they weren’t actually following through and finishing.”
Also, in her view, the business had lost sight of what made it successful.
“Nick Baker came in and he tried to do a pivot into travel. We are famous for gifting,” Simson says. “I honestly couldn’t stand it.”
But she didn’t just want to tackle the expense blowout and identity crisis. She felt the company was hamstrung by a “cold-war shareholders agreement” between her and ex-husband Peter.
In 2001, beginning with $25,000 in savings and second-hand computers, they built RedBalloon into an empire turning over $50 million a year.
What she formally calls a “cold-war shareholders agreement” was put in place — a move she now describes as a mistake.
“If we both didn’t agree with everything then nothing would happen,” she says. “That’s not a sustainable way to run a business. The chairman, I think, did a really good job trying to navigate through that. He couldn’t just always have it my way or Pete’s way. (But) it definitely was constraining the business.
“I would argue that Pete and I in the early days made really great business partners but over time we grew differently.
“At some point we had to move our futures apart.
“People say ‘why didn’t you just buy him out at the first opportunity?’
“Because he didn’t want to” sell.”
But Peter Simson tells News Corp Australia: “I don’t understand the context in which anyone would describe it as ‘cold war’. I’ve never heard of it.
“There were very few instances where it was my way or her way and Ken Boundy had to cut a path in the middle. I think that’s an exaggeration” by Naomi.
She says Peter told Nick Baker not to use her as the spokeswoman for the business and Boundy agreed.
“That was the challenge of working with an ex-husband who thought it had become all about me.”
But Peter says: “It was agreed as directors — Naomi, Ken and I — that she would step back. She was party to that. That was the advice from our advisers time and time again: the business has got to stand on its own two feet.”
It is during the conversation about her business relationship with Peter that Naomi cautions women against making their husband their business partner.
“I see a lot of women starting businesses and the first person they turn to for help is their husband. They trust them. But actually they might not be the best business partner in the world. They might not have the best skills.”
Naomi speaks much more favourably about Peter in her first book, “I Want What She’s Having”, published when they were still married. In it, she describes Peter as a “fantastic challenger and supporter”.
“Peter has always encouraged me and has been a great mentor,” she writes.
And at another point muses: “I must admit having a husband with a strong accounting/finance background is invaluable.”
Speaking more broadly, Peter says: “I think there are many, many instances where fantastic companies have been developed by husband and wife teams. I think it’s dependent of the individuals. I would always encourage people to look further than the home.”
Of Naomi’s claims about RedBalloon’s recent past, Peter says that in 2015 revenue was in decline. Travel and tourism was considered a good expansion opportunity.
So in January they brought in Ken Boundy — a former head of Tourism Australia — as chairman. Two months later Nick Baker joined from Tourism Australia, where he was chief marketing officer.
“Nick was very, very good on arresting the decline in the business that he walked into,” Peter says.
“The pivot into travel was slower than we expected and more complex,” he adds. “We learnt a lot about the complexities and idiosyncrasies of the industry and that the horizon for reaching profitability would be longer than was thought acceptable.
“Absolutely Nick did a good job. He was responsible for turning the business around. But on the pivot in to tourism, the board has to accept responsibility.”
Boundy says “Naomi and Peter had identified the gifting market had a ceiling on it.” The pivot into tourism and travel “was their idea”, he says.
He says it didn’t work out because it wasn’t set up separately from the main business and lacked resourcing.
Boundy says he was “pleased as chairman with the level of professionalism and respect in the boardroom given the context”.
Like Peter Simson, he challenges Naomi’s claim she was sidelined without her consent.
“There was an agreement that was reached in the boardroom about the transition from Naomi as the front-person for the company through to a business that was less reliant on her,” he says.
Baker also says the move into tourism and travel was Peter and Naomi’s idea.
“I was brought in to do two things: to return the business to growth, which I did, and the second was to find a profit path, potentially, around tourism,” Baker says.
“I believe we ran a very good team of people and we had plotted our way out of a position and were planning toward the future.”
That required investment, which was why costs had gone up, he says.
In a later conversation, Naomi agrees Baker was brought in because of his travel experience and that he did increase overall revenue “for about six months” after relaunching RedBalloon’s website.
Baker was replaced as CEO by David Anderson, who bought Peter Simson’s half-stake as part of the coup. Anderson, who made his money in car washes, had been Naomi’s alternate on the board since 2016.
Three weeks later the entire marketing team of seven was let go. In total, about 16 of the company’s 70 staff left.
“If you are not making enough money you can’t invest in growth,” Naomi says. “The cost base had gone up in every aspect. So we pulled a third of the costs out,” including by sacking the PR, digital and creative agencies.
“We are a marketing company, we should be able to do all that stuff,” she says.
Every staff member was interviewed and asked how things could be done better.
“I saw that we had a deep sense of passion for the business and a lot of frustration,” she says.
“It definitely wasn’t what I created at the start.”
Was the business in danger of failing? No, she says.
“But I thought my reputation was at risk.”