Entrepreneurs set out to Explain differences

May 5 2008 by Peter McCusker, The Journal

Planning for the future is never far from the mind of the entrepreneur, and in the latest of our series ‘Head to Head’ in conjunction with the Entrepreneurs Forum, we meet two entrepreneurs that have different takes on exit strategies, and life and business in general.

STEVEN Bell is a serial entrepreneur who started out working for his father in the Bell Stores chain, which was sold to Sainsbury’s. He is now a director of Newman Scott, one of the UK’s top shop-fitting companies that supplies Hugo Boss, Adidas and Zara to name a few.

He is also co-owner of The House designer stores in Yarm, Harrogate, Leeds and Northallerton and Chapters Hotel and Restaurant in Stokesley. Steven has just become a board member of the Entrepreneurs’ Forum.

David Shiel is the managing director of Newcastle based Explain Research that conducts customer insight research campaigns on behalf of some of the UK’s top household names, especially in the financial and utilities sectors. Explain employs 22 people at its Leazes Road offices and call centre, and counts Scottish Power, Yorkshire Building Society and Asda among its clients.

Steven to David

Steven: Last time we met you were in the grocery trade, what made you set up your own business?

I had a great grounding in the food industry; it promotes young people quickly and you get handed a great deal of responsibility early on. However, I felt in need of a new challenge after 10 years in the food trade and setting up my own business had been on my mind for some time. I’d worked in two big plc’s by then and a smaller business of under £50m turnover and had grown disenchanted by the waste of effort and expertise. My experience is that large companies can carry an awful lot of dead wood and change quite slowly, which didn’t suit the speed at which a 28 year old wanted to move; I guess I was impatient! I also wanted control and faster financial rewards – don’t we all? Although at that time the chance to move forward my business idea was uppermost in my mind.

Steven: And what were the good and bad experiences of the first years that made you succeed?

My first company was a marketing and design consultancy. It used much of my experience and many contacts from the food trade days, but with hindsight, it was a lousy idea and we never found the success I wanted either as a business or financially. It would be wrong to say it succeeded the way Explain has and more accurate to say it existed and gave about a dozen people a good living – but not real success. When I look back, the lack of success at that time was a great learning curve in strategic, people and financial management. Second time around we got there much more quickly and I knew what activities to spend our time and resources on.

Steven: Being the founder you will be passionate about Explain Research – have you thought about succession or exit planning?

My son Andrew is carving out a very successful career in Pitcher and Piano, part of Marstons, and he has never wanted to come into the business; I respect that.

However I have been incredibly lucky in getting some really good young talent on board. As an example our Research Director, Kim Davis has been with Explain since leaving university and she has brought so many additional skills to the company. Clients love working with Kim and that is a fantastic asset in client management. She is a natural successor and we agreed a buy-out plan over two years ago; a great foundation for both of us.

I have also spent time trying to find another senior executive with director potential and our new head of client services will be offered Explain shares in the next two years. I see her working with Kim very successfully.

Instead of worrying who to sell the business to in a few years’ time the deal is already partially done. It may not realize the highest price but I am fortunate that after the success of the last 10 years I can show Kim the loyalty she has shown me. Optimising the highest price was never a holy grail for me in any event and this way, succession planning is simpler and seamless. I will probably work in the business part time for another few years as chairman and pass the operational running of the business over to Kim, who will inherit a very good team of people.

Steven: At Bells we used to use the term Prey or Predator to classify competitors. Who is your prey or predator?

There are only a handful of really big research agencies in the UK, and I’ve had a few offers from predators who wanted to buy us. I wouldn’t merge or sell as I think they would mainly want the clients and senior staff but I feel the culture between large and small is different.

As for prey, there’s no-one operating in our market sectors that we would see as a good strategic acquisition at present. Fortunately our organic growth has been excellent and as long as we keep growing at 20% or 30% per annum everyone is going to be challenged.

Steven: You have some fantastic clients who will be passionate about understanding their customer needs. How many companies hire your skills when trading well to ensure they match customer expectations, looking for constant improvement, compared to those with a need to re-invent themselves due to poor results?

Most of our work is with businesses that simply want to do things even better, rather than those who are doing badly looking for help to get out of a hole. Many clients are well known successful brands, operating in competitive and dynamic markets, so they have to stay in touch with changing trends and stay committed to customer excellence. They are by and large, driven businesses, absolutely focused on constant improvement in processes and services.

Clients in the utility sector have the added pressure of the regulator whose job it is to ensure they give the customer a good deal at a fair price. The research we carry out can ends up on their desk so in the case of Northumbrian Water, CE Electric and Scottish Power they have OFWAT and OFGEM looking over their shoulder. Utilities can be penalised for poor service so that does tend to focus management on the value of Explain’s customer insight.

The other challenge is to provide clients with research when they are setting up a new brand, product or service. An example of that last year was the research we did for Asda, developing their financial services proposition across insurance, loans and their credit card.

Steven: Customer Data capture from a business IT software is key to a successful business; how do you use that?

Many more companies are cottoning on to capturing well profiled customer data, it’s true, but few know how to analyse and use it for better performance. It is often simply used as a marketing tool. We can analyse clients’ data and go into far more in-depth information, profiling customer habits and predicting their behaviour.

This is the key; being able to predict behaviour means you can plan effectively and stay ahead of the competition.

David to Steven:

David: Newman Scott has developed an impressive client list in a relatively short period of time; how did you set about gaining credibility against more established companies?

Newman Scott has been in business for 15 years; the first three years were about survival, and we worked on turning the business around during the recession of the early 1990’s when times were tough. Our aim was to target customers that were opening multiple sites each year, and we learned on each job better ways to improve productivity and profitability.

Some of our customers have been with us since day one and our businesses have grown together. Each time you get a blue chip client, it lifts you up another level. We landed the chance to fit the UK’s first ever Adidas store, which was a big coup and brought us bigger and better projects like Hugo Boss on Sloane Square and Zara’s Regent Street store.

David: In a previous life you were a successful convenience food retailer. What have you found are the key differences in the business model between Bells and Newman Scott?

I come from the shop floor, as I started work as a youngster for my dad. Therefore I could do every job within a store, and wasn’t worried about losing people so much as I could always temporarily fill someone’s shoes. Bells Stores was expanding at a fast rate and this was a full time role taking up all my time and passion to have a more involved role at Newmans

This meant at Newman Scott I had to have a different approach. The MD and Bells Stores FD agreed to bring in a legal director, a finance director and a contract director from the outset, and gave them shares in the business which has brought us great commitment and drive to succeed. In a nutshell we put together a really good top team.

The two models were completely different but both succeeded. We were able to use Bell Stores’ track record and credibility with the banks in growing Newman Scott, and introduce proven processes and systems.

David: In a large business like yours, do you see your role as being primarily strategic or do you still like to get your hands dirty in operational matters?

My role is primarily as an investor at Newman Scott where we have monthly board meetings to review how we are doing and where we are going. It wouldn’t be fair to the management team to be any more hands on than that; I let them do their job.

However in my latest ventures into the retail and hotel trade with The House designer wear and Chapters hotel and restaurant I am more involved as they are both early in their business life.

At the House with my brother Peter we meet every Monday visit the stores and discuss how to drive the business where it needs to be, how we grow our sales margin, review the financial statistics and agree any actions.

With Chapters Hotel I visit most days as it is only three miles from home. Victor the general manager and I discuss daily its performance and how we can improve.

Both businesses have good daily, weekly and monthly reporting systems that I get at home by email to keep me in touch and involved .

David: What is the trade-off between marketing the Newman Scott brand and letting your client list do the talking?

Newman Scott is in the top 35 best shop fitters, a lot of our work now comes from repeat business, both with the client and with design agencies that like what we do .

This is always more effective than just looking for more and more new customers. We never take it for granted though; you are only ever as good as your last job.

David: What area of business gave you the biggest headache last year?

Business goes in cycles, and if you’re not careful you can get complacent. In shop-fitting, we can turn over the same amount but our profit can vary dramatically on projects.

We always go back and look at processes and learn from each project.

Skills shortages used to be a major problem in our industry, but with the influx of foreign skilled labour that’s less of an issue. It just goes to show you must always revisit your business strategy, as influencing factors can change.

Head to Head is run in conjunction with The Entrepreneurs’ Forum – a membership organisation that brings together business owners at all stages of their journey to share experiences, knowledge and support.

The Forum runs a series of events throughout the year around the region. They also run a mentoring programme to help people running growth businesses benefit from the wisdom of more established entrepreneurs. For more details go to www.entrepreneursforum.net