I recently had the honour to speak as part of a panel of entrepreneurs at Leeds University. Thank you Professor Nigel Lockett for the opportunity. I really appreciate it.
Rachel’s story stood out to me because we have very similar backgrounds as she started with a “BIG 4” traditional professional services firm. She went on to establish a market leading service based business that she successfully managed to exit. She grew the company from zero to a turnover of over 22m in five years before exiting the business in 2010.
Enjoy the interview. There are some real gems in there! Share it and leave a comment if you enjoyed it.
1.Describe your business
I now have what some would call a portfolio career which means I work with a number of organisations rather than focusing exclusively on one. I am a Non Executive Director for a small number of businesses and do advisory and consultancy work with others. This ranges from work around change management and efficiency, to helping them get the most out of their people, especially in terms of leadership and management development. I am also a Business Angel which means I invest in start up businesses or those who need investment to grow.
2. Tell us a little bit about your background?
I have worked as a tax accountant, recruiter, HR Consultant and spent time in broader management consulting and corporate finance. Much of my experience has been gained in helping organisations to run more effectively and I have had a real focus on the people aspects of businesses as well as the financial ‘nuts and bolts’. The first business start up I was involved with was a small manufacturing business about 18 years ago and was in my ‘spare time’. I focused on the general business, financial and people elements, while the MD and his team ran the sales and manufacturing operations. More recently in 2003 I co-founded a search and selection business that became a national market leader in its specialism of senior public sector appointments within 7 years. Successfully exiting this business in 2010, having built up a strong management team to take it forward, I now invest in new or growing businesses. I also work on a consultancy basis with organisations to help them grow and operate more effectively and get the most out of the talent they have already or help them attract people from outside. I also use my business skills helping a range of charities and third sector organisations on a voluntary basis.
3. Tell us how you started your business(es)
The manufacturing business came about as the MD previously worked for a company who had decided to stop production and buy products in to sell on. He felt this was the wrong approach and that quality would be compromised. As he headed up manufacturing operations it also meant he was out of a job. Rather than getting another job working for someone else and perhaps ending up in the same position again, he wanted to start his own business. He felt this would give him the opportunity to be the decision maker and because he felt he had the experience to make better products that people would want. As he had no ‘business’ or financial experience he asked me to help him.
In terms of the search and selection business again it was created to a certain extent through circumstance. I worked in HR Consulting and Search and Selection for PwC when they sold this division to another company who I did not particularly want to work for. It was a great catalyst as without it I would probably still be working for PwC and really enjoying it. However I may then never have taken the opportunity to start another business, the success of which has ultimately allowed me the freedom to go and do so many exciting and interesting new things. I set up the new business with an ex PwC colleague and we started from nothing. The first thing we did was to develop the values that we wanted our business to embody. The second thing we did was write a detailed business plan for year 1 and then more high level plans for the next 3 and 5 years as it is important to know what you are aiming for. We also did detailed financial forecasts so we knew what the cash flow would look like in different scenarios depending on how much work we won and when we recruited new people.
4. How did you fund them?
For the manufacturing business we put in our own savings, but at this time we did not have enough to fund the start up in terms of capital to buy the necessary machinery and for working capital to employ people and start trading. We got the additional funding required from the bank on the basis of our business plan. However in today’s climate we may not have been able to get bank funding without it being secured against assets or personal guarantees as we had no trading history or track record at the time.
For the Search and Selection business I and the other co-founder put in a significant amount of our own money and gave personal guarantees to the bank so they would give us an overdraft. If the business had failed we were at risk of losing our homes. Luckily things went well and after 2 years the banks released us from the guarantees.
5. Did you know how you were going to make money with it? How did you do it?
I am a firm believer that making money should not be the sole reason you start a business. For me a real passion and belief in what you do and a desire to deliver a quality service or product has to be the starting point. If you do that well financial success should follow. Clearly you hope to make money as this is the reward for the risk you are taking and we were confident that our individual reputations and track record would mean we could win work and therefore make money. In the Search and Selection business we knew the market and the competitors and had a good idea of what we could do to add value, whilst trying to make sure we represented value for money. This required us to be more efficient and we were also helped as being a small start up our overheads were lower than the big firms. We could deliver a higher quality service than our competitors with the added value of the personal touch. It worked and we made sure that everyone we employed had the same commitment to our culture of delivering excellence at a fair price. We learned however it is important to value the service you provide and not be tempted to use price alone as a way of winning work. As we got larger and overheads increased a constant focus on business efficiency and using innovative ways of working enabled us to stay competitive on price.
6. What decisions or opportunities led to your business’ explosive growth?
When we set up the search firm whilst it was not a time of high growth in our market sector, clients were getting fed up with having little choice outside of the large firms who all offered similar services. We benefitted from being different and especially from being independent. We could also make decisions quickly and take advantage of opportunities that arose more rapidly than our large competitors, who had to get corporate approval to invest in new areas, often from distant decision makers who were not close to the market.
We also listened to our clients and although initially we had made the decision to only deal with permanent appointments, when clients started asking us if we could supply interim leaders and managers we responded. This was probably the largest single reason for our rapid expansion. It broadened our networks and diversified our income giving us the confidence to move into other areas such as leadership development and stand alone assessment. It also meant we could invest in technology that enabled us to lead the way on offering new services that were less resource intensive but were effective if people had a smaller budget to spend. It helped us not only to grow, but to weather the downturn in the market much more successfully than many others in the market.
7. What was your inspiration/motivation?
I was motivated by the idea that we could do things better and deliver more than people expected. I am my own worst critic and constantly feel I can do things better and achieve more. Running your own business gives you the freedom to try new ways of doing things. Not all of them work, but trying to continuously improve is part of who I am. I must also admit to having a real fear of failure. The result of this for me is that it motives me to always want to do more, but you can’t let it stop you taking risks or trying new things.
In terms of the work we did at the search firm I was also highly motivated because the people we were appointing had such a huge impact. When you are helping a Council appoint a Director of Children’s Services for example, the difference between an excellent person being appointed, or just a reasonable person has a real impact. Services such as education or child protection are paramount and can massively impact on the life chances of children and young people. I never forgot the importance of the roles we worked on and it helped me to always try to go the extra mile.
8. What was your highest moment?
When I realised that the business we had created was seen by people externally as a leader in its field and the benchmark for quality. I was also proud to have created a large number of jobs. I must also admit the fact the sale of the business gave me the financial freedom to pursue what interested and was important to me felt good, rather than having to do a job to pay the bills.
9. Were you ever scared? How did you manage the fear?
Absolutely, if you are always in your comfort zone then you are not trying hard enough! My biggest fear was that if we didn’t get things right, people would lose their jobs. You have to be a certain type of character to put everything on the line to start a business and you have to accept that it might go wrong and you will have to start again. Most successful entrepreneurs are pretty resilient and usually quite confident in their ability to succeed and so we are prepared to take this risk. However I was scared of getting things wrong in case it meant employees who had put their faith in us lost their jobs. I dealt with that fear by ensuring we took a responsible approach to growth, not over committing in any one area and always keeping an eye on the bottom line. The thought of losing my house personally if it had not worked was also pretty scary, but I used that to spur me on, especially when still working late at night when everyone else had gone home!
10. What is the most important skill you had to learn to enable you achieve your business goals?
Delegation and ‘letting go’. Learning that there are other people who are better at many things than you and your role is to find them, empower them and give them the space to succeed. If you don’t ‘let go’ the business can only ever grow to a certain size and it also means it will be difficult to sell if you do not have a strong management team to take the business forward when you’ve gone.
11. What is the most important lesson you learned along the way?
Listen to the experience of others but make your own decisions. Realise that you never stop learning and that often you learn the most from making mistakes. Finally always be open to new opportunities and be flexible in your thinking, otherwise you may not recognise it when you get a lucky break and miss out as opportunities may not look exactly the way you expected them to. I have also found that the harder you work the luckier you get!
12. As a business angel what do you look for in a business venture?
- A business with a high quality product or service that is passionate about what it does and that there is a clear market for.
- A strong management team with an impressive track record in their field.
- Something I can get excited about, whether it is the business concept or the people; preferably both.
- Realistic expectations from the management team about how hard they will need to work and the fact that if I am risking my money to back them, they will need to put some money in as well. It doesn’t have to be a lot, but enough for it to hurt if they lose it, as this is an added motivation.
- That they can demonstrate how they will build the business effectively and that they have an exit plan.
13. What piece of advice do you have for business owners out there?
Focus on striving for excellence in everything you do and be ambitious to be the best in your field – achieve this and the financial success will look after itself. But… don’t take your eye off the numbers, as someone once said to me ‘cash flow is king’. However good you are at what you do, if you run out of money or over expose yourself financially things can go wrong fast. Finally treat everyone as you would like to be treated, having integrity is priceless, for you and your business.
You can connect with Rachel on Linkedin at: http://www.linkedin.com/pub/
If you also run a service based business then you should check out this book.