Opening a second front

Many a business has lost its way as it opens in new locations, both in the UK and abroad.

Many a business has lost its way as it opens in new locations, both in the UK and abroad.

Many a business has lost its way as it opens in new locations, both in the UK and abroad. GrowthBusiness talks to CEOs who have learned from their mistakes.

Received wisdom has it that the real entrepreneur always has an eye on an exit. David Haythornthwaite, founder and chairman of Tangerine Group, a collection of companies specialising in the manufacture of animal nutritional supplements, takes the opposite view.

‘If you’re only looking for an exit strategy then I don’t think that is the right thing if you want to build a business. The only exit strategy I have is to leave in a wooden box,’ he says.

Instead, the focus for Haythornthwaite ‘is trying to build a great business that is going to be here in 100 years’ time, long after I’m gone’.

Man management

This approach is posing interesting questions as the company has expanded both in the UK and abroad. ‘We have 14 separate subsidiaries, of which five are overseas. We have different managers and one particular company has got into a situation – we haven’t kept an eye on it maybe as closely as we should have – and we’ve ended up giving away better deals and bigger discounts and special carriage terms.’

The power of the customer has grown to the point where it could unbalance the company. Haythornthwaite has no doubts about what the course of action has to be: ‘One of our largest customers is getting a 20 per cent discount off the trade price. We’re going to our customers, not just that one, to tell them we have one price across the board.

‘We have to keep the business simple. There can’t be any more of these deals. The manager we’re having this discussion with is saying: “Well, if you tell them that, they’re going to walk.”

‘We’re able to say: “Then so be it.” But we have to make this decision as it is right for the long-term growth of the business.’

It’s a textbook example of the problems that can arise as a business grows quickly. Alex Alway, group chief executive of brokerage Jelf, has steered the company from revenue of £4 million to around £78 million since joining in 2001.

After ‘30 to 35’ acquisitions, the company has 43 offices and over 1,100 employees. Alway says he was clear from the beginning about how he could expand the business at such a rapid pace.

‘One of the first cornerstones of our success was that we agreed a strategy on how to take this business forward,’ he says. In practice, that meant establishing clear reporting lines and levels of responsibility.

As the number of acquisitions picked up, an integration manager was brought on board. According to Alway, it’s vital to maintain a degree of flexibility: ‘If it’s a smaller company then they get integrated straight away into line management. What I mean by that is that if you’re a three- or four-man business, you get rebranded Jelf and report into the line manager.

‘If you’re a 250-man brokerage, we run a separate board with the governance to go round it. We can ebb and flow depending on the size of the company. That’s an intelligent way of doing it, as opposed to one size fits all.’

Given the nature of Jelf’s business, spread as it is over insurance, healthcare, financial services and commercial finance solutions, such an approach makes sense.

For other businesses, consistency and uniformity is everything. Sam Sharma, founder of carrier specialist Rico Logistics, says getting the company to where it is today, with 45 offices in the UK and Ireland and a presence in Spain, was no easy task.

‘We faltered for nearly four years during which we just couldn’t grow the business. By the time I got to about 15 offices, ten of them didn’t make money. We went and questioned the managers to try and understand why, and it became apparent that they came in and just did the job. Now, when it comes to bookings, you can perform that task well or carry on like “it’s just a job”.’

Employee engagement

The answer was to create a sense of empowerment and ownership among employees. ‘We incentivised a number of sites by introducing a profit share scheme. We put a target in place and if they go above that they will get paid a certain amount for performance over budget. We also highlighted the best-performing offices in a monthly league table and reproduced that in an internal newsletter,’ says Sharma.

Each regional manager now has to present to the board once a month, running through the numbers. ‘We give encouragement, telling them what they’ve done well and what needs tweaking. Occasionally, we’ll put a successful regional manager with an unsuccessful one and get them to spend four weeks together, training, guiding, showing and motivating.’

It’s this sharing of expertise that makes the difference, argues Sharma. ‘As you grow quickly, the mistake you make is that sometimes the requisite skills you require are overlooked. Assumptions are made that people just know these things.’

The company now generates turnover of £37 million and is profitable. ‘When you run two or three offices and you’re there to oversee them, it’s very simple,’ reflects Sharma. ‘Once you start to empower people to run it for you, the challenge is inspiring them to have the same passion, customer service skill and desire to succeed as you do yourself.’

Getting the blend of individuals right will be the make or break factor in your company’s development, especially as it becomes ever more vital to think internationally. Tangerine’s Haythornthwaite says the company exports 22 per cent of its products, selling the rest domestically. Over the next five years, he wants to turn that on its head. ‘Any company worth its salt in the UK can only grow through exports – we’re only a little island.’

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Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.