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Notes from a startup

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He tells Real Business about his journey and the lessons he learned along the way:

“When I started Spire Telecom in 1995 the UK was in the middle of a recession. Starting a business in a recession is a bit like taking an off-peak holiday – the costs are a lot lower and the welcome warmer!

“I’d been thinking about starting my own business for a year or so and I had even approached my employer to see if they would allow me to operate as a franchisee – not that they’d thought about franchising their business.  They said no, offered me a meaningless directorship and capped my salary in return for non-existent shares – sound familiar?

“By accident, Spire Telecom was born six months earlier than anticipated, largely because my mate Jono, who was designing the Spire logo, decided to send the design to my employer’s fax machine rather than to mine. They held me to three months notice, I sold more than ever for them and then didn’t get paid. Lesson number one: there’s little sentiment in business!

“I based the hastily prepared forecast on roughly half of what I had been selling as an employee and, when I shared it with an accountant, he said halve it again just in case.  I did, and ended up selling just short of £250k, the figure I had based the original forecast on. What’s more, the accountant offered to do all of my invoicing, book keeping and accounts for a fixed £10k which he’d based on his suggestion of £125k as a target. It was a bargain, and lesson two: if you can outsource cost effectively, do it.

“In the early days selling was the easy bit. On many occasions I would end up discreetly helping the contractors with the installation before changing back into a suit to collect the cheque. About half the year one income was derived from phone systems, the other half was from digging holes and burying cables, which didn’t matter so long as we were making money.

“It might sound a bit obvious, but your outlook is completely different when your responsibility extends beyond the sales process. You pay much greater attention to detail, timescales and making sure there are no reasons for non-payment. I had no overdraft to play with, just the £3k my wife Kay and I had saved, some goodwill and some bare faced cheek getting good terms from suppliers. “Within a year the same banks that had refused us a loan to start the business were soon queuing up to provide us with a ‘facility’. ‘It would help us to grow the business’, they said. And then one day, just after the dotcom crash, the banks changed their lending criteria and demanded security on the overdraft they’d been only too keen to provide and then extend. Lesson number three: banks only ever lend you an umbrella when it’s not raining and they quickly take it back if there’s a shower.

“I convinced Kay that security was a good use for our home and against professional advice we set about selling our way out of trouble. It was good for focussing the mind, but bloody time consuming justifying everything to the bank and extortionate in fees – talk about pound of flesh, bastards.

“The hardest thing was finding the time to be proactive because there are so many distractions and it’s too easy not to do your prospecting. The answer was to use one day a week for canvassing as this allowed at least three days for selling, which for me was about right.

“To create advantages wherever we could, we became very good at differentiation and creating unique selling points. I was amazed at how bad our larger competitors were (and still are) at selling against us. We had worked them out but they continued to lose business to a startup with no track record. Knowing your competitors is the important lesson here.

“Innovation was also a key factor in our success. It wasn’t very often that we said, ‘we don’t do that’. Occasionally it got us into trouble but more often it would be lucrative and scaleable to other businesses with the same challenges. Good examples of this are the managed billing service that we provide to business centres or the international data transfer business we set up for Formula One teams and the media.  Both of these niches were valued highly when we sold to Carphone because big firms can’t innovate.

“We weren’t planning to sell any of the business, which meant that Carphone Warehouse was very much a buyer (as opposed to us being sellers). It made us a great offer, the experience was a really good one and we got paid everything and on schedule. 

“People talk about exit strategies but it’s my experience that the best deals happen when you’re least expecting it. When Spire Telecom was just over a year old, we had a good offer from someone looking for an Oxford office. With hindsight we probably should have taken that offer but the emotional attachment was too strong. Making rational business decisions is a really important lesson.

“My advice to anyone who thinks they have what it takes is to go for it.  There are fewer barriers to entry these days – especially in telecoms – and if it doesn’t work out you can always go back to what you were doing before. Don’t forget, the harder you work the luckier you get – funny that!”

Cross’s five survival tips

Make time for prospecting. Spend at least 60 per cent of your time sellingBe cash positive – 50 per cent deposits and ongoing direct debitsMake sure you can deliver. You can’t afford to make mistakesNegotiate hard with suppliers for discounts & payment termsLook after the customer or someone else will (corny but true)

Related articles:Unemployed? Become an entrepreneur. Here’s how Picture source

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