Mike Frizell started the business with a $5000 website. Credit:Brendon Thorne Frizell has worked as an engineer, investment banker and consultant and drew on this background to be very strategic in his approach to starting a business. He decided to focus on pet retail after identifying it as a fragmented market with strong macro trends. Importantly, pet goods are viewed as a non-discretionary spend and spending in the segment continues through times of recession and downturn. Frizell and Edwards started the business in a co-working space in Ultimo using a nearby 16-square-metre Kennards storage space as a warehouse.

Mike Frizell founded Pet Circle just over six years ago. Credit:Brendon Thorne They paid $5000 for a website and listed 16 types of pet food on the site and then sat and waited for the orders to come in. None came. This was Frizell's first lesson in the lead time needed for pet food. "There is a cycle," he says. "You have to wait for people to run out of the product. You can't force it."

If we did retail it would look nothing like a pet store. Mike Frizell The early days allowed Frizell to prove that Pet Circle was not just a transactional business – rather, it attracted life-time customers that kept coming back. "We quickly discovered this is scaleable," Frizell says. "We finally found ourselves in the position where customers are loyal and we can get them but they cost money to get." After nine months trading, Frizell ran the financial models as to when the business would "make good sense" and calculated it at $30 million in turnover. He then worked out how much money he needed to get from zero to $30 million and concluded he needed $423,000 which he acquired through friends, family and bankers in Pet Circle's "first foray into capital markets".

In funding the business, one of Frizell's set rules has been an ordinary share deal with no preference shares which has made it hard at times to attract investment. Frizell says he doesn't agree with investors having the ability to get their money out first. "I think personally that misaligns people," he says. There have been challenges along the way, including when Pet Circle outgrew its warehouse and so shipping was slowed down by 24 hours. "The difference in shipping in one day and two is huge," Frizell says.

It's the one time Pet Circle didn't grow. Another challenge was setting up an office in the Philippines after Frizell looked to replicate what someone would do if they tried to attack his business. "It was horrific for the first year," Frizell admits. But now with the benefit of a real-time live feed between Pet Circle's three offices, the Philippines office is functioning well and has helped cut Pet Circle's costs. Frizell credits business networking and support group the Entrepreneurs Organisation as a major source of support in growing Pet Circle.

"It gives you a lot more confidence," he says. "In the early days you second guess yourself. In the early days you are kind of asking 'Am I insane?'" The second guessing has paid off with Pet Circle now occupying a 7000-square-metre warehouse in Alexandria and employing 130 staff. "It brings you a whole world of different problems to solve," Frizell says. "We are still growing at 100 per cent a year, that's revenue, customers and staff. It's now a very different beast to what it was even 12 months ago. This is now heavy. I have a board, I have investors, I have directors and obligations." Pet Circle is now the third largest online pet business in the world and Frizell says there are lessons to be learnt from US based Chewy, which holds the number one spot and sold earlier this year for $US3.5 billion. Chewy has a team of 200 people full-time doing oil painting of pets and sends cards to all new customers and all customers whose pet has died.

Frizell says he wants to incorporate some more elements of "surprise and delight" into Pet Circle's offering. "We want to be number one in pet in Australia and New Zealand," he says. "That probably implies not staying in ecommerce and not staying in Australia." The reporter was a guest of the Entrepreneurs Organisation. Follow MySmallBusiness on Twitter, Facebook and LinkedIn.