Breakthrough Clinic gives one company at a crossroads of expansion the chance to gain free advice on the possibilities for growth from an expert business adviser.

Brandedmedia – Company History

Brandedmedia is experiencing the sort of phenomenal growth that would make any business owner envious. In the three years since it was founded by managing director Sean Fergusson, turnover has shot up past £3 million and it’s one of the few profitable businesses in the market. It offers a bespoke service duplicating CDs and DVDs for a range of purposes, such as promotional products for large corporations, software CDs for distribution, film and TV DVDs for retail, and so on. ‘We’re producing more than one million CDs every week and about half a million DVDs,’ says Fergusson.

Brandedmedia’s popularity is evident from its client list, which reads like a who’s who of famous brand names such as Virgin, NTL, Apple, Sony and the AA. As Fergusson explains, ‘I think we hold on to big customers by offering a competitive price and a really good service – in my experience, you don’t often get both from the same supplier.’

Fergusson left school at 16 to work in retail, becoming an area manager with 35 staff at just 21 years of age. He went on to join a marketing communications firm and then a CD production house for four years, which is where he got the urge to start his own business.

‘I made them a lot of money and realised if I could do just 25 per cent of that with my own company, it would be a success.’

Giving up his six-figure salary, he set up Brandedmedia with a view to filling a gap in the market for a service overseeing the entire magnetic media production process, from concept through to delivery. ‘There were companies in Europe at the time offering either CD authoring or manufacturing, design and printing or packaging and fulfilment, but not the whole chain,’ he recalls.

Within eight months the company had hit £1 million turnover with net profit of 15 per cent, and last year saw turnover of £3.2 million with 12 per cent net profit.

Manufacturing is outsourced, which keeps costs down, and sales and account management staff are in-house. This arrangement enables Fergusson to concentrate on building a strong account management team. ‘I’ve got a fantastic team around me, who can be relied on to exceed client expectations.’

Brandedmedia employs 25 full-time staff at its head office in Basingstoke and up to 25 extra temporary staff when required. Fergusson incentivises staff in a variety of ways and is proud to reveal that only one member of the team has left since launching the business – and that was to go to University.

Current challenges

Fergusson started up the business using his own savings (he is sole shareholder) and organic growth has been funded from profits generated. Initially operating from a friend’s converted barn in Winchfield, Hampshire, within just a few months he was taking on staff to handle the volume of orders and even roped in his sister Fiona, who is now operations director. The business quickly outgrew this 750 sq ft property and went on to secure a five-year lease for its current 5,000 sq ft office in Basingstoke. However, it has outgrown this after just a year and plans are now afoot to move to new 9,500 sq ft leasehold premises in June. Fergusson admits organising this will take up a significant amount of his time, to ensure a seamless transition within budget. He also intends to hire more staff this year, doubling the sales force and account management team to meet realistic yet impressive turnover forecasts.

Believing that the business model can be easily replicated, Fergusson is keen to expand internationally. An operation is already running in Sweden and he plans to launch in Australia soon, relying upon his existing management team of three to help him drive this expansion. As separate firms with different shareholders, the overseas enterprises will initially buy from the parent company in the UK and utilise the existing infrastructure. Fergusson has no plans to exit the business in the foreseeable future, believing the company is nowhere near realising its full potential.

Neil Dimes, a partner at PKF (UK) LLP, visited Brandedmedia to witness first-hand its approach and discuss expansion plans with managing director Sean Fergusson. Here, he offers advice on how best the company can manage its growth going forward.

Relocation

Sean has recognised that the business has outgrown its current premises and has identified where he wants to move to. More space is needed to accommodate the extra staff required to resource the growth. Employees are key assets, so Sean is keen to move locally to avoid relocation issues for staff. Remarkably, he hopes to be able to finance most, if not all, the costs of moving out of cash flow, and he is negotiating to ensure his prospective landlord covers some of the costs of fitting out the new premises.

IT is critical to Brandedmedia’s operation. It’s imperative that IT systems, telephones and websites remain ‘online’ throughout the move. The company cannot afford to shut down for even one working day – a common issue for small firms moving premises. As such, it’s encouraging that Sean is thinking about back-up plans and getting new systems installed, tested and operational at the new site long before the move occurs.

The level of disruption to the business, and to Sean in particular, cannot be underestimated. Weeks of his time will be dedicated to overseeing the move, so he needs to make sure his management team can share the load for the duration. There are many businesses specialising in relocation that can take a large part of the burden off his shoulders, although they may be cost-prohibitive.

Finally, Sean shouldn’t under-estimate the PR opportunities that can be gained from the move. The company has a real success story to tell and that should be exploited to its full benefit. The rapid growth and job creation will be of interest to the local press, and can be used as a marketing tool for current and future customers, not to mention worrying the competitors! His PR agency should milk this for all it’s worth.

Recruitment

Sean estimates that he will need to recruit an additional 15 staff by the end of 2006.

Historically, Sean has not used recruitment agencies, preferring to advertise vacancies in the press and then undertake a thorough interview process himself. This is fine when dealing with relatively small numbers, but it is yet another draw on his time. He has fantastically dedicated staff, so I suggest he use them to attract new employees. Get them to recruit contacts they know and incentivise them by paying a referral fee. His employees are unlikely to recommend unsuitable people, so this will cut down on interview time. He should also be aware how much management time the training of staff will take up, and I would advise utilising the existing staff as far as possible to train their peers.

Management structure

As noted above, one of the main areas to be addressed in any rapidly growing business is the increased strain on the owner-manager and, consequently, the need to establish a sound management team. Sean has already started this process and has a small team helping him run the business. However, I would encourage him to critically review this area, to empower his team so he is free to manage strategy rather than everyday detail.

Being sole shareholder in a company can be an isolating experience, so it might be worth seeking some impartial advice, using an experienced entrepreneur or wise associate as a sounding board and confidant, or perhaps drawing on the expertise of professional advisers.

Finally, while Sean is understandably focusing on the ‘here and now’ and enjoying the challenge of growing a business, it’s advisable for him to have some sort of end game in mind, be it to float the business, sell it in five years’ time or whatever. With this in mind, he’ll be able to ensure Brandedmedia is structured in the most suitable way for the best possible outcome.