Be Careful What You Wish For (6 page)

The force behind the company’s expansion and progression was my direction and drive. I negotiated the commercial deals and
made
all the key decisions. It was never planned that way; Andrew just wasn’t as driven and confident as me. Nevertheless, his contribution was vital in the success and growth of the company. When we started the company we made ourselves joint MDs. But almost a year on, I felt that should change. A business invariably has one leader and that clearly was me.

I became the sole MD and Andrew became chairman, without relinquishing his 50 per cent shareholding in the company. Andrew saw the logic behind it and rather liked the idea of a statesmanlike role, overseeing the business. For me, this change needed to be made so that I could get about running the business and making the decisions that would benefit us both.

As our first year of trading came to an end we had a turnover of a million pounds, profits of £75,000 and had opened our fourth store – in Newbury, the hometown of Vodafone, the world’s biggest mobile phone network. We had always been on Vodafone’s radar, but now we were clearly in their sights.

Vodafone was buying out Astec and things were changing. Our relationship with Astec altered as our agendas diverged. At this stage we began to develop a direct relationship with Vodafone’s marketing team and especially Chris Tombs, who was the head of Vodafone’s channel marketing and someone who could provide the key for significant funding going forward.

In September 1995, we held the first of what would become an annual summer ball, which was attended by twenty staff. These events became bigger and more glamorous. The last one we held
in
September 1999 catered for 2,000 people, cost in excess of £350,000, and was held at the Royal Lancaster Court Hotel with entertainment that included Ben Elton. The balls were a way of rewarding my staff, but they also illustrated to the outside world how well we were doing.

During recent months I had pushed direct relationships with manufacturers. I had managed to open an account with Mitsubishi, and was working on one with NEC. This was what the big players did, and was a unique and aggressive strategy for a fledgling company.

As well as developing relationships with manufacturers we bought from wholesalers. Caudwell Communications, one of the biggest in the country, gave us competitive prices but wanted cash on delivery, cash we didn’t have. I found a way around this by dumping the cost on a relative’s American Express gold card, and because we were putting over £100,000 a month on it, it soon became a black card. Strictly speaking, we were in breach of rules and regulations governing the use of the card, which prevented you from buying items for resale. Caudwell’s sales team never should have authorised these payments but they were on commission. We paid the bill and everyone was happy, especially my relative who had more air miles than anyone in history.

These creative ways of thinking were critical to advancing our business, enabled us to gain more margin and allowed us to force the prices of stock down. Only big dealers had the clout to have direct relationships with manufacturers and wholesalers, yet we were doing it inside a year of trading.

By November 1995, we were up to 800 connections per month. And 60 per cent of those were Vodafone connections. We were now a respectable dealer in volume terms, but as I have said previously I had no desire to be a dealer, a dealer was a small business
that
only had a small amount of shops. I wanted to be a retailer and I wanted us to be the biggest retailer in the country.

As Astec was being bought out by Vodafone, they were trying to reduce costs. Connections from a third party like ourselves cost more money, and they also were not overly keen on our rapid expansion plans as they were part funding us. At the end of 1995, they terminated our contract, which meant we needed to find a new airtime provider. They had given us a period of time to find a new home for our business, not out of the goodness of their hearts, but because it was Christmas and they wanted the additional volume before completing their sale to Vodafone.

I negotiated a deal with another airtime provider, Unique Air, and then switched all of our connections immediately, ditching Vodafone in favour of Cellnet. I was furious that Astec let us down and extremely disappointed that Vodafone, despite our loyalty, had offered no help or support. This was a strategic move at the busiest time of the year to show that I could control our destiny. Effectively, I had stuck two fingers up at the biggest network operator in the world and with our store slap bang in Vodafone’s hometown, Newbury, signing customers up to their main network rival had political ramifications.

My audacious move had the desired effect. In early 1996, Ivan Donn, a Vodafone director, called me and hastily arranged a meeting with their airtime provider Vodacall. Ivan was keen to see us back in bed with Vodafone and recognised the fact that, although we were only sixteen months old, we had significant potential and a burgeoning reputation.

I secured an incredible deal with Vodacall. We received significantly more money than we had at Astec, we were given direct marketing and store funding, our commissions were to be paid weekly and they supplied stock on ninety-day terms. They also
agreed
to pay for the two stores that we had just opened. Sign the contract? I nearly broke their arms off. By a combination of skill and balls we had landed on our feet. We now had two airtime provider relationships: one with Vodafone and one with Cellnet.

At the end of our second year, our turnover had doubled to over £2.4 million. We opened a further four stores in very quick succession and were now up to ten, opening Reading, Harrow, Southampton and Uxbridge in quick succession. The spirit we had in the early days was replaced with achievement and massive growth, but the company changed, I changed and, despite all the gain and achievement that was to come, something was lost.

We were now cutting a bit of a swathe through the industry, ruffling the feathers of some of the market leaders. One was our old employers, the Carphone Warehouse, especially when we opened a store next to them in Guildford. We didn’t respect their self-appointed position as market leaders; they viewed us as upstarts.

Opening a store directly in competition to them in a very affluent town showed enormous courage and confidence. It illustrated that we felt we could compete with them at a time when most of the other mobile phone companies avoided going toe to toe with CPW. Quite frankly, I couldn’t care less. I wanted to have a store wherever it was profitable to have one.

Going into the lucrative Christmas market at the end of 1996, a war broke out between Carphone Warehouse and us over pricing. We now had fifteen stores, and CPW tried to squeeze us out of Guildford, lowering their prices to an unreasonable level. We followed suit. The networks tried to intervene as Carphone Warehouse went whining to them, but when Vodafone approached me I suggested that this was a conversation we should not have as
it
could lead to the thorny subject of price fixing and the matter was dropped. Christmas came and went, and we had a successful one, despite annihilating our margins in Guildford.

We now had a significant marketing spend so we employed a specific marketing manager to work alongside Andrew, and after opening another five stores brought in Mark Hodgson as our sales director, who had been at Astec Communications and instrumental in us getting our initial deal with them. Mark’s appointment saw us take on our first board member and probably marked the beginning of the deterioration of my relationship with Andrew as it was no longer just the two of us at the helm. For some time Andrew had gently mooted that he wanted to sell the business and now his overtures were becoming even stronger, but I told him to sit tight.

Mark and I set about restructuring the sales team bringing in a new raft of management – area managers. Over the last two years I had pushed, cajoled and driven my staff, making stores phone and report their sales figures to me on the hour. This had made the staff very focused. By bringing in area managers I would, via Mark, concentrate their minds on driving the stores even further forward.

In my all-out pursuit of growth I woefully under-resourced the finance department. We had twenty outlets and pushing towards a hundred staff on the payroll and were doing 3,500 phone sales per month. Simply speaking our accounts were in a mess and the inaccuracy of financial information was beginning to affect the business. I put Steve Maddocks, the poor bugger, who was working pretty much on his own, under tremendous pressure, which on more than one occasion reduced him to tears.

By the end of 1996 we had a cash balance of £1 million but
our
account lurched dramatically as we had to pay big stock bills, a sizeable payroll and an ever-increasing quarterly rent bill. Opening stores was now not only about increasing volume, it was about keeping the snowball of cash flow building.

In early 1997 in an attempt to get a bit closer to Cellnet, we binned Unique Air and signed up with Cellular Operations Limited, a Cellnet-owned airtime provider. At the same time we were being transferred to the biggest airtime provider in the Vodafone Group, Vodafone-Connect, as we had outgrown Vodacall. This put us into the same arena as CPW.

Chris Tombs at Vodafone was trying to get more money to support our expansion and arranged a meeting with Vodafone’s marketing director Mike Webb. It was a complete waste of time, as Webb showed no interest and asked me questions he already knew the answers to merely as an exercise to see what I knew. I intensely dislike people humouring me and like even less being patronised. I became so agitated by his behaviour I completely lost my temper, called him a wanker, and brought the meeting to a swift halt.

Tombs phoned me afterwards and said, ‘What the fuck did you do that for? It has taken me ages to get that meeting and you call a main board director a wanker.’

The story did the rounds over the coming days and I got some pretty good kudos out of it. It may have been that a few others in Vodafone shared my view and subsequently I got their extra money although I never dealt with Webb again.

Having now spent just over two and a half years with our head down and running, it was time to make some fundamental changes the business needed. Firstly we acquired a proper head office as we could no longer use the back of the Slough store as our headquarters, and created new departments like Human Resources and Customer Care.

It became apparent to me Mark was not running the sales team, I was. Mark was better suited to dealing with the marketing side of the business so I moved him out of sales and into heading up Marketing.

Coupled with our expansion and evolvement we enlisted the services of Ulrika Jonsson for the ‘nominal’ sum of £500,000. We planned to open a further fifty stores in 1998 and Ulrika was to be the face of the company. By the time we moved into Eton View House, our new head office in Slough, we were up to thirty-seven stores, opening twenty-two in 1997 alone, and selling over 7,000 phones a month.

Cash flow, given the level of expenditure and costs increases, was becoming a nagging worry as always, so I increased our bank overdraft. We had never used or even gone into it but as our status increased I felt we should take advantage of the situation and have access to money we might need at a later date. The thing that amused me about the bank’s attitude at the time was the security offered by us for the overdraft was a charge against stock and cash; of course if you are using an overdraft you have no cash and the first thing that often goes if a business were to fail would be stock.

Martin Cox, my former boss at CPW, had left them and I took the decision to appoint him as the new sales director. This didn’t appear to go down well with Andrew who had worked for Martin at CPW. But he took on board the fact that Martin now worked for him.

We also needed a real-time online point of sale computer system and, using my computing background again, I sat down with David Goodman and designed one. Until that point we were still using the sales system based on our unlicensed copy of the Carphone Warehouse’s system.

By the final quarter of 1997 we were ready to fully launch our
new
computer system. It was online, real time, tracked every single transaction and I could get sales figures from all the stores at the push of a button. I now had cyber control of my business, not relying on phone calls every hour from area managers but getting figures from locations all over the country by the second. The investment into this system was significant, with Goodman on a retainer of £20,000 a month, with an expected total cost of in excess of £1 million.

The new computer system was sometimes brilliant, but had teething problems, at times it crashed for no reason but worse than that …

The system worked on unique telephone IP addresses for each store that dialled up the server, got the information and logged off. What we didn’t realise was that once it went online at shops in the morning it stayed online until they closed.

I had fifty stores logged on for nine hours a day, six days a week for three months. Before then, our quarterly phone bills were coming in at around £60,000, so you can imagine what happened when one arrived for £400,000 – I dropped short of having a heart attack. We eventually resolved the issue with new software, but it still left us with a major financial headache.

Sales for our fourth year were over £24 million, with forecast profits of £1.2 million. But the disaster with the computer system wiped out a large percentage of them.

By now we had seventy-one stores and needed additional working cash. Financing this massive growth was always going to be bloody difficult, and with the whack we got from the telephone bill we needed more cash. I had a brainwave: approaching 121 I offered them a guaranteed 200,000 connections the following year. In exchange I wanted £3 million to finance our expansion and to increase our marketing. I knew they would bite my hand off as
this
kind of volume was what they were missing and would help their market share.