David Barker reflects on resisting the temptation to say ‘Yes’ to the first offer when he opened his data centre, and how choosing instead to diversify his client base at launch has enabled 4D Data Centres to maintain rapid growth in a recession.
Probably one of the best business decisions I made at my company, 4D Data Centres, was to resist the temptations of the early big orders.
When opening the Surrey data centre we had several approaches to take the majority, or even all, of our available space.
Now, these were very tempting offers, especially as it was a fledgling centre at the time and the prospect of having all the space filled immediately was a good one. To explain, data centres operate very much like airlines in that if you have rackspace sitting empty for a month then that’s lost revenue which can never be recovered.
However, saying ‘No’ was definitely a good move, as although we would have had the security of the facility being filled within a few months of opening, this would have been at a significant discount on the standard rates. Moreover, it would have made my start-up company beholden to one client.
The risk associated with having all 4D’s revenue dependant on a single client was too great (in fact, that company has since gone bust). I also didn’t want to get the reputation of having low rates for the first year to incentivise new clients, and then at renewal have to increase the pricing 30-40 per cent.
What I did instead
The route I ended up taking was to try and get diversification in the client base across different industries and company sizes, as well as offering multiple services. By doing this we have been able to avoid any ‘risk concentration’ of having a large proportion of our business dependant on the fortunes of a particular industry sector or service that we offer.
More on Best Business Decisions:
- John Bramm – Promoting the brand directly to the consumer
- Jeff Hughes – Switching operations to purely business-to-business
- Philip Letts – Listing on the Alternative Investment Market
- Tom Galvin – Diversifying our client base
With the way the economy has been performing over the past five years this strategy has worked out well. I had originally factored in a 10 per cent churn rate of our clients, but in reality this has been nearer to 1-2 per cent. This is due to not being exposed to any one sector that has suffered, as financial services did between 2008 and 2010.
There have been a few other decisions that could be considered for the ‘best’ spot since I started in business as a teenager in 1999. But in hindsight, and given the current economy, ensuring we have a range of clients across many sectors was probably the best to ensure a stable business.