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Lucy Nicholson reveals...
Meet the entrepreneur on a mission to cool down stresses execs over a hot stove at her base in Cumbria. EN reaches for the blue plasters as Lucy Nicholson reveals...
| They might be giants |
| Wednesday, 14 June 2006 | |
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A Manchester-based business has emerged from relative obscurity to become a market leader in just five years. Michael Fahy meets the managing director of EN’s Most Entrepreneurial Company 2006, Expansys.
It's taken EN approximately 18 months of mild stalking, including a gentle-but-consistent badgering of one of his key advisors, before Roger Butterworth finally agrees to meet us.  The company, which is based on Manchester Science Park, is an online retailer of handheld computers, PDAs and smart phones that has experienced remarkable growth over the past five years. Sales are up from around £1 million at the time when Butterworth joined in August 2000 to more than £55 million this year – a feat which earned it the Most Entrepreneurial Company at EN’s recent Entrepreneur 2006 Awards. There’s also talk of trying to break the a French distribution company Nomantica. It has also formed a holding company, Mobile & Wireless Group, to house the various businesses. Both deals explain a little about how the company operates. Although its intention is to grow organically, it will occasionally acquire a business if it fits with its goals or is simply a deal too good to turn down. Nomantica was one of those, admits Butterworth – bought from the receivers in February for a bargain price. Mobile Planet, however, was one of two strategic deals the company has carried out which have had a substantial impact. The California-based business was acquired in April 2005 for $3.75 million. By that point Expansys had managed to generate around $8 million in US sales since opening its US office in 2002, “but we didn’t have a significant place in the market”, he argues. “Mobile Planet was about stabilising our position – a year after doing the deal, we have a US turnover of $35 million and we’re seen as a genuinely transatlantic company by our suppliers.  “Also, the US is such a big market – around ten times the size of the UK.” The other 'strategic’ deal it carried out was the purchase of 21store in March 2001 – a larger UK rival that became a victim of the dotcom crash after burning through around £10 million of investors’ cash in six years. “They’d been spending money like sailors in a brothel,” explains Butterworth. Having investigated the reasons behind its demise (and fired its management), Expansys put in tighter financial disciplines and used its infrastructure to pull 21store up from being a start-up into a serious concern. “We put a proper logistics system in place for handling orders – they were still taking some details down on paper. We also increased the conversion rate and we made better profits as a result. These could then be reinvested, and our growth really came from there.” A year later, revenues had climbed to an impressive £6.5 million and costs had been slashed as 21store’s ridiculous spend on advertising was reined in. “They’d had posters on the London Underground, full page ads in the national press and had a huge commitment to online ad spending. And when we sat down and looked at their growth figures in the 12 months before we bought them, we’d outstripped them by 75 per cent. We’d spent £200,000 in the same period – and we’d thought that was really pushing the boat out.” A similar story has occurred in the US, where it slashed Mobile Planet’s advertising budget from $3 million to just $100,000. “They grew at a faster rate in the past 12 months than they had at any time in the previous two years,” he says. “We’ve always taken the view that word-of-mouth is the best way to spread news about a company.” His measly ad budget does, however, allow for direct mailshots to existing customers whose contracts are up for a renewal and offers a substantial discount on new equipment. “We do this because we believe you should always look after your existing customers better than the guy who walks in off the street, and it’s completely traceable. Generally, people aren’t interested in tracking their advertising.” He says the problem is most acute in fledgling operations like 21store (before it was acquired), because the chief executives of smaller operations “have to punch above their weight”. “You have to be 30 per cent of what drives the sales, but if he’s spending £10 million on advertising, he’s going to be making sure it’s as good as possible, and it’s not an effective use of his time. While he was concentrating on the Pantone shade of his full-page ad in the Daily Mirror, I was out talking to a corporate customer about 500 devices.” He says the bulk of Expansys’s future growth is likely to be achieved overseas – it ships to 139 different tax jurisdictions, including the Falkland Islands and even Antarctica, but the US and Far East offer the best opportunities. The company has offices in Hong Kong and China, and sales in the region have grown from a standing start two years ago to around four per cent (or £2 million) of last year’s turnover. “It’s not going to be our biggest business in the next two years, but it might be within ten,” he says. If he manages to achieve that, both he and Kydd would have played a significant part in turning a Manchester-based start-up into a world leader in its sector. They’ll also be sat on piles of cash, and they’ll never have to do another interview again.       |
