Global Family Business Event 2017: How to grow a family business into an empire using synergy

 

How does a family business become an empire? Through offspring, of course – and not just the flesh-and-blood variety. At this year’s Global Family Business Event, father and daughter Johannes and Christina Suriadjaja shared how they each built synergic startups which allow them to divvy up clients, industry contacts and business wisdom.

Based in Indonesia, Johannes runs the core family business, Surya Semesta Internusa, a conglomerate handling construction, hospitality and property development for industrial, residential and commercial estates. It’s an opportune time in a growing economy where infrastructure-building is booming as the government scrambles to increase connectivity between 13,000 islands in the world’s largest archipelago. At age 23, Johannes’s daughter, Christina, founded Travelio.com, an online home rental provider for Indonesian domestic and inbound travelers. Often compared with Airbnb, the now two-year-old startup manages the secondary and investment homes of investors and property developers.

Infrastructure development is on the rise, especially in Jakarta, the capital city

Both businesses feed into one another: when Surya Internusa completes a residential construction project, the property developer who buys it can opt to list some of the vacant unsold units on Travelio.com for short-term rentals, thereby generating more income than by simply waiting to resell the units after market appreciation. Likewise, Travelio.com feeds into the family business by enlisting Surya Internusa’s hospitality division to clean and manage the apartment units for a 10 percent margin, larger than the 6-7 percent slice the company would claim had it acquired the property on its own.  

“Of course, in every type of business, it can’t just be a one-way – it has to be mutually beneficial,” Christina explained. “I don’t want to use up all my family’s resources just because I’m a family member.”

Recovering from economic downturn

Founded in 1971, the family business weathered two economic downturns (a regional one in 1998 and the global financial crisis in 2008) and a near-collapse in 1991, when the family gave up Astra International, a conglomerate in real estate, automobiles and construction now worth over $24 billion. A family member had racked up over $1 billion in debt from mismanaged loans, careening the business towards bankruptcy. During the economic crisis, the banks charged 18 percent interest on loans in US dollars, compared to an eye-watering 80 percent for the Indonesian Rupiah.

“Initially, I didn’t want to work in the family business, I wanted to be a professional,” said Johannes, who started his career as a banker for Chase Manhattan Bank (which became Chase Bank after a merger with JP Morgan) in Jakarta, Indonesia. But as family finances continued to spiral, his father called for all-hands-on-deck to salvage the business.

Gran Melia Hotel Jakarta

The Gran Melia Hotel in Jakarta was the first hotel property the family acquired

 

“The next two years were like hell,” he recalls. “Nobody wanted to see us, nobody wanted to know us. We called the banks and they said ‘We don’t know who you are and we don’t want to meet you.’” In 1994, the company received a loan from the bank where Johannes used to work, courtesy of a former colleague, to build the Gran Melia Hotel, a five-star abode with 400 rooms close to the central business district of Jakarta.

Done right, property is a huge capital investment that pays for itself several times over. In 2016, the company started expanding again with the ultra high-end resort in Bali called the Banyan Tree Ungasan. The ocean-side hotel boasts 73 spacious villas, each with its own private pool. 

Up next was an investment in one of the largest toll road constructions in Indonesia at the time, to the tune of $1.3 billion. “We managed to sell it in 2017 at three times the book value in just over three years of investment,” Johannes explained. “So this is how I’ve been driving the company during those hard times.”

Banyan Tree Resort Ungasan, Bali

The Banyan Tree Resort Ungasan in Bali, Indonesia

Generational differences between family members 

As with any family business, succession planning involving the next generation is on everyone’s mind.

“I’ve gathered my nephews and nieces and talked to them about the business, about what values are we bringing in and what values they have to carry in the future just in case I’m not there anymore,” Johannes said.

His daughter, on the other hand, has made it clear that for now she prefers to fly solo. “Whatever advice my dad gave me after [college] I don’t think I followed any of it,” she laughs. Instead of working in banking or hotel management for a few years to get her feet wet to join the family business like her father wanted, Christina decided to pursue Travelio.com full-time after she met her cofounder, taking leave from Cornell University, where she was pursuing a Master’s in hospitality management.

Already listing over 12,000 properties ranging from chain hotels to private apartments via hostels and house-share, Travelio.com has raised over $2 million in seed funding from Anthill Ventures and four other investors. The next milestone is raising a third round of financing, with six committed investors from Indonesia, Singapore and Japan. Christina says that it will be her biggest achievement yet.

“It shows that the business model is validated,” she said, “and I don’t have to ride on my family’s background.”

Despite wanting to set herself apart as an entrepreneur, Christina still values the synergy between her business and the family business, and the family values she learned from her father growing up. “I still carry the family values of honesty and integrity and it’s still implemented in my workforce culture until now.”

 

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