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“The recession is nothing compared to a CVA”

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Richard Seel launched the startup, then known as Xera-Logic, in 1993. Seel, a former Xerox executive, left the print giant to set up the firm, which was devoted solely to selling his former employer’s products. Together with a partner who has since retired, Seel took on the exclusive rights to sell Xerox products in first Lincolnshire and later Nottinghamshire.

Xera-Logic thrived. In the first three years of operation, Xera-Logic was named Xerox partner of the year and Seel watched happily as the profits rolled in.

The entrepreneur’s success was rewarded in 2002 when Xerox encouraged Seel to sell a wider range of products – an offer only open to an exclusive number of top Xerox sellers. That same year, with Seel’s original business partner Wally Welford now retired, Seel brought in one of his former colleagues at Xerox to help him manage the growing business.

Dave Rollo had been instrumental in setting up Xerox Facilities Management in 1990 – a division which had gone on to be one of the most lucrative arms of the print giant’s business. Rollo had been responsible for the division’s Midlands area – which alone had a turnover of £36m by 1995.

After taking early retirement from Xerox, Rollo joined the startup as business manager and he and Seel began to eye opportunities for expansion.

Seel says: “We looked at the map and saw that no one was doing very much for Xerox up in Scotland. We knew there was a lot of potential up there and we decided to tap into that.”

With Xerox’s blessing the entrepreneurs set up Xera-Logic (Scotland), appointing a management team to run the business out of Edinburgh. The move appeared to be a great success but soon it became apparent that not everything was as it seemed.

Seel and Rollo learned that their management team in Scotland had negotiated with Xerox to break away and launch their own business. “It was a low point,” says Seel. “We had to wind up our Scottish operation and only when we came to do that did we become fully aware of the state of the company.”

“There was a high level of debt which we had to absorb.” continues Seel. “For a moment it wasn’t clear if we would be able to carry on. In the end we met with the creditors and decided to go for a CVA (Creditors Voluntary Agreement) and rebrand the company.”

The move was approved in court with 100 per cent of all creditors voting in favour of a four year payback deal starting from December 2005.

Seel and Rollo were still in business, now trading as Xact Document Solutions, but the reality of running a business subject to a CVA soon hit home. “A lot has been said about this recession we all find ourselves in right now but for us the credit crunch started in 2004,” says Rollo. “The CVA made it difficult to recruit good people and some companies wouldn’t deal with us because of it. Worst offenders were the finance companies who refused to enter credit agreements with us which meant our customers couldn’t buy expensive machines from us on credit.

“We had to focus on selling the stock which we held already,” continues the entrepreneur. “There was quite a bit of that after what happened in Scotland. Slowly we turned it around. Each year the profits increased. But it was a real battle.”

Seel adds: “The CVA presented multiple challenges to trading. It makes borrowing impossible so everything has to be financed from cashflow. It effectively meant I was operating the business but I didn’t own it anymore.”

The entrepreneurs finally paid back the last of their creditors in full in February this year – ten months earlier than necessary under the terms of their CVA. Rollo says: “I do feel immensely proud of what we have achieved. Around 80 per cent of businesses subject to a CVA fail in the first 12 months yet we have battled through and fought back to where we are today – all our creditors paid off and a turnover of £6.5m.”

Seel says, “It may be a cliché but it really was a case of going back to basics. Good customer service is the keystone of everything we have achieved as is having a strong team of talented people who feel a part of what we have done here and have helped us to turn things around.

“There are still plenty of challenges ahead,” he continues. “We want to sell more product through the Xact website where we can cut our costs and reach a much wider audience.

“What we have been through means we are now in a much stronger position than many other businesses who are only now struggling to come to terms with the problems of trading during a recession.”

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