Growth Business talks to five competitive success stories.
Strategy building
When you employ 150 people, but only have three months of work, life can be sticky. Like most managers, Janet Lord spent her time worrying where the next job was coming from.
She is the granddaughter of Wilfred Lord who set up a building business in Rochdale, specialising in decorating and refurbishments. ‘We’d been going donkey’s years,’ says Lord, 38, who runs the business with her brother Andrew. ‘Profitability was good, but we had little innovation or change. In a small family business, you never have time to plan and think strategically. There is too much happening day to day. It is a constant battle to win more work and keep everyone busy.’
Five years ago, she took a step back for the first time and started to assess the company’s strategy. ‘We had a steady turnover of clients, but we were not winning many extra ones and the construction business was moving towards partnering. Our jobs of £250,000 to £500,000 were being packaged into massive contracts. With a turnover of £7.5 million, we were not really large enough to tender for this kind of work.’
So she and Andrew set themselves some targets. They wanted to push turnover up to £18 million in five years, of which 60 per cent was to be on a partnership basis. They then reviewed their 120 clients and ditched 50 of them, because they were only producing small, one-off jobs that were more trouble than they were worth.
Instead they began to concentrate on winning more business from people with whom they already had good relationships. They stopped putting in dozens of competitive tenders, which were won or lost on price, and started to put themselves forward for larger, more collaborative contracts that were mainly awarded on the basis of quality. ‘It is a new game for us,’ says Lord. ‘It is more complex, but you are looking at a partnership for five or ten years.’
It took 18 months before First Choice Homes in Oldham picked out Wilfred Lord as a small company with potential and awarded it a refurbishment contract of £30 million over five years. A second ten-year deal followed from Accent, a housing association, to look after external repairs for its 16,000 properties.
By 2004, Wilfred Lord’s turnover had almost doubled to £14 million and this year Janet Lord already has £10 million in the bag. ‘It is a huge improvement for us. Now we can look ahead to the next ten years. And our margins have improved. The industry usually operates on two or three per cent. We are up to eight per cent.’
On the back of these improvements, Wilfred Lord was last year judged to be the SME Contractor of the Year by The Contract Journal. ‘We might have been middle of the pack five years ago,’ says Lord, ‘but we have hit the front now.’
Beyond the menu
Atul Dawda started with an empty shell in the suburbs of Leicester at the age of 23. He now runs two of the city’s top restaurants and is looking to take his eclectic style of Indian cooking to the rest of the UK.
He arrived in Leicester from Uganda at the age of six in 1972. By his early 20s he was running his own chain of video and gaming shops. He franchised them and bought a failed 60-seater restaurant in Syston, a suburb of Leicester, which he re-opened as The Spice of India. Without any experience in food and in an out-of-town location, no one gave him much of a chance.
From the start, he set out to create exciting menus. Working with Indian chefs, he insisted on using quality foods and gave people the chance to order as they liked. ‘You don’t have to have what is on the menu. If you want more chilli or less garlic, we will do it for you. We don’t prep everything in big pots. It is a pain logistically, because you have to have more chefs, but it works really well. People always keep coming back.’
Designed as an eccentric gentleman’s lounge in raspberry and turquoise, the restaurant has now extended next door and can seat 135 people with room for 50 more in a function room. Sales are running at £500,000 a year, making it one of the four busiest restaurants in Leicester.
Swatlands, Dawda’s second restaurant, which he runs under licence from Everards, is just as lively, with takings of £8,000-£10,000 a week. Compared to The Spice of India, which is a volume business, Swatlands charges a premium and has a more contemporary format with wooden floors and chrome cabling.
Unlike his competitors, Dawda spends heavily on marketing, sponsoring local clubs, networks and charities. ‘People come to the restaurant, have a really good time and word of mouth spreads quickly.’
His next ambition is take his distinctive fusion of Asian and English culinary styles to a much larger audience and he is negotiating for licences elsewhere in the country with pub chains, such as Punch. ‘We have the right ingredients and the know-how to make it work,’ he says.
Reframe the market
Chris Brunsdon’s family has been replacing windows in Oxford for 40 years. Most of his customers in old buildings prefer a traditional wooden frame, although they worry that it will warp, letting heat out and draughts in. Plastic windows might not look as good, but they do keep you warmer.
Frustrated by the inability of suppliers in Britain to solve the age-old complaint about timber frames, Brunsdon started to look for answers elsewhere. In an old hangar on a deserted airfield in Poland, he found the glazier’s holy grail: a wooden window with all the qualities of modern materials.
‘Initially we went to Poland because it cost less,’ he says. ‘We were going to teach the natives how to make good wooden windows. It all turned on its head pretty quickly. We saw state-of-the-art, computer-controlled machinery used to make timber components of almost any imaginable shape.’
The only trouble was that windows in Poland open inwards, whilst those in Britain open outwards, so Brunsdon spent a year developing windows in a style to suit Oxford. ‘Together we talked, we planned, we sketched out our ideas, we built prototypes, we drank vodka. Finally we invested directly, bringing in machinery and tooling to establish our own production line within the Polish factory.’
Brunsdon might initially have begun by looking for a new supply source for his family firm, Oxford Double Glazing, but he soon realised that the potential was much larger. Window companies in Bath, Cambridge and other historic towns were in the same position as he was. So he set up TimberWindows as a separate trade supplier and this year was hoping to get started with 15 dealerships. He already has 35 in place.
Lower labour rates in Poland mean that Brunsdon is saving a third of his production costs. ‘We can sell at the same price as our competitors, but offer a much better product. ‘We are still in the high-risk start-up phase,’ he says, ‘but we are getting phenomenal interest from the public.
Last one standing
If you could trust him with a pencil, then you might trust him with your software, was the basis on which George Karibian kicked off his business in 2000. In fact, pencils and other office products have proved much more profitable than expected and Karibian has put off his original idea of supplying IT programmes over the web.
He set up Euroffice in 2000 after building up a £50 million telecoms venture in Europe. In partnership with two other MBAs, he raised £3 million, which was dwarfed by the millions at the disposal of other new entrants, such as Mondus, Group Trade and Biz Buyer, who were all looking to transform the office products market.
Five years later, Euroffice is the only one left. Focusing on everything an SME might need in the office, from stationery to furniture (but not PCs), the company is now making £10 million a year with profits currently running at £60,000 a month.
The first thing he did right, Karibian believes, was to absorb as much best practice as he could. ‘We looked at hundreds of websites to find out what worked and adopted it without always understanding why. It saved us a lot of time. We continue to benchmark and use anything that makes sense for us.’
He has also been prepared to pay for industry knowledge. ‘As analytical MBAs, we soon realised that we knew nothing about merchandising. That only comes from 30 years of experience. So we searched out the grandfathers of the industry who understood the customers’ mindset.’
But to act on their insights, Karibian wanted a team of energetic people. Of the 16 who are now on the staff, none has a background in office products. ‘They have no limitations on how they think business should be done.’
From the start, Karibian was also committed to scenario planning. In 2000, he locked his management team away for two days in a service office to thrash out how the industry was going to look in five years. After hours of debate, they agreed that the real competition was not from other new entrants, but from Viking, part of Office Depot, which sells office products to SMEs in the old-fashioned way, through catalogues.
To compete, Euroffice developed a clear value proposition for its 20,000 products, distancing itself from the tactics of mixing deep discounts with hefty mark-ups. To sustain its offer of value for money, Euroffice uses technology to strip out any inventory.
But the indicator that Karibian watches most closely is the cost of customer acquisition. ‘Our cost of customer acquisitions started at £100, but is now running at £12. Some of our initial competitors were at £400, which was unsustainable.’
By tracking the numbers, Euroffice is managing to grow at 35 per cent a year in an industry where total sales are declining.
Next year Karibian is looking for ways to double Euroffice’s sales and he has asked his staff to come up with some ideas. The eight with the best suggestions will then go to a luxury hotel for another two days of scenario planning.
Great customer service
With a redundancy cheque for £2,500, Carole Nash launched her insurance business from a kitchen table at home on the outskirts of Manchester 20 years ago. An enthusiast for vintage mortorcycles, she concentrated on offering policies to bikers. By the end of her first year she had a hundred on her books with an income of £30,000. Today her company, Carole Nash Insurance, insures 25 per cent of all motorcycles in the UK and has sales of £70 million.
Instead of competing on price, Nash sets out to be customer-friendly, giving additional services such as unlimited mileage, free bike collection and valet services. She has also created a network of approved repairers, reducing the cost of claims by 13 per cent.
For Warren Dickson, who has been Carole Nash Insurance’s marketing manager for the past 11 years, price represents a pretty blunt marketing tool. ‘It can only ever be seen as a factor, albeit an important one, in the successful marketing of personal insurance. The crucial factor is value, which is inextricably intertwined with the delivery of excellent customer service. Customers may initially be enticed by low prices but they won’t put up with poor service for long.’
He adds that a loyal customer is the holy grail because they will not just repeat purchase the product, but will buy additional ones too.
Carole Nash Insurance has already extended itself into vintage cars and is now planning to enter mainstream motor insurance. Is Warren Dickson put off by the intensity of the price competition that he is going to face? ‘Not at all,’ he says, ‘because the price is low, it doesn’t necessarily mean it is right. Our products combine price, market suitability and service excellence in one value-laden package.’
