November 10, 2016
This week we interview Paul Duckworth, experienced business owner and MD of Charlbury Group. Paul was previously CEO of XIT2 before selling the business in 2006. Paul is the Director/shareholder of various other SMEs. From investing in the right people to building a saleable business, Paul Duckworth shares with us his top tips in running a successful business, whatever the industry!
Where did you start your career and what roles did you do?
I left school at 18. At the time there was a recession with high unemployment levels and it was hard to get work. I was offered a job at NatWest as an office junior and took that opportunity rather than going to university. From there I left and joined Bradford & Bingley Building Society and worked my way up, then on to the Bank of Ireland as a National Account Manager, and then on to Credit Suisse where I ended up running their product development side for one of its insurance brands. Whilst I was there I was approached by a company who liked what I was doing and the way I dealt with people. I got offered a job for less money and stability but it was a great opportunity! That company was called Xit2.
How did your initial jobs prepare you for your life as an entrepreneur?
It is very difficult to say how working at a Bank prepared me for life as an entrepreneur but you soon learn about people (especially when working as a cashier). That experience gave me a good understanding of how staff and customers think, interact and deal with difficult situations.
When you meet someone I think you know whether they’ll be a good entrepreneur or not. If the individual is enthusiastic and has lots of passion and drive, you just know they will do well!
I think it is all about people. When we recruit we always try to employ the most intelligent and the most passionate. They may not have the most experience but that doesn’t matter we can provide that.
Would you say it is nurture or nature?
I do think you are born with a certain attitude/ passion and drive, this can be fine-tuned with experience but you need that spark to act as the foundation
To give you an example, this morning I met with the chef and business partner of a restaurant I am involved with. October and November are two of our worst months but he sees it as a positive! He views it with such passion and positivity and he’ll use the free time created (due to being quiet) to plan his menus and work out next year’s marketing plan. He’s not sat complaining about the numbers, he is saying ‘brilliant this is what we are going to do next year’. It is all about the passion and attitude!
What was your first entrepreneurial venture?
As a teenager, myself and a mate used to buy cars and fix them up, so I suppose a car mechanic? [Laughs]. Before that as a kid I used to service bikes for money!
Why technology?
I got into technology and IT services for UK residential lenders through Xit2. When I started we had 4 clients and by the time we sold it we had over 140. This technology was fairly new and we offered a solution for connecting the lenders with their suppliers on the survey side. We passed the validated data back thus helping with the quality of returned reports. We were the first company to do this on the web which meant we didn’t need costly terminals. This in turn made it very attractive and accessible.
Was it easy to get Banks to take on this new technology?
No! [Laughs]. It was very difficult. They were residential banks as opposed to investment banks and they were rightly very cautious. Many of them didn’t know how to do due diligence on our products. What we learnt very quickly was that we couldn’t charge the bank a penny, because if you did it had to go through another department (procurement) and as they didn’t understand what we did at that time, it slowed everything up.
We had to change our financial model to make our money as a transaction fee, so as we passed on the data we charged a fee for doing it. To work with banks can be very difficult.
Have you had many failures before making a success? What lessons did you learn?
Not really! My first success was XIT2 and that was my first venture. I used part of the money from the sale of Xit2 to invest in other SMEs and to be fair the majority of those have turned out alright! We had one that didn’t work how it was supposed to so we shut it down quickly and ensured that everyone was treated fairly.
The biggest lesson I learnt was DO NOT sign long term leases or fixed overheads until you are 100% certain. I’ve also learnt that you need to have plan B and plan C in case something goes wrong. Hope for the best and plan for the worst!
In your seven years at Xit2 you’re credited with transforming the firm from a small IT company to leading provider of technology in the mortgage industry. What are the 3 key things that helped you achieve this?
People – Definitely people, we built a really great management team and employed the best we could. We brought in people that we knew and we tended to pay the extra money to headhunt who we wanted. Interestingly, some of the management team are still with me. We have stuck together because we know one another really well, we complement each other’s strengths and weaknesses and we work very well together.
Luck! – It was at a time when the mortgage industry was expanding rapidly and the lenders were looking for ways to streamline the lending decision making process. So we got really lucky that we had the concept and product to fit the growing market.
Right time, Right place – Our product was a web based technology. This and what we were doing with the technology was fairly newish in the lending market. At home there were people using the web more and more. We hit the time whereby as well as the mortgage industry, the general public were accepting web and web based platforms were the way to go.
We wanted to be leading edge, not bleeding edge, meaning someone else would define the market for us, and then we would come and take advantage of it.
You sold Xit2 in 2006, did you have any unexpected challenges to overcome to make your business ‘sellable’. If so, what were the unexpected challenges?
The management team came from a background of working in large regulated businesses so we already had an understanding of due diligence and corporate governance. But when you come to sell, you tend to underestimate what being bought by a larger or listed company means and amount of work needed to comply with the rules of that company. Therefore things can change literally overnight and certain processes can slow you down.
What do you think in your view are the key components to having a sellable business and secondly, what areas that are within your control do you think maximise the value that you are able to achieve for a business?
Value – Focus on the bits that actually generate the value in the business. For example, in IT, getting a contract for a platform build signed and moving on to the next build is great but it doesn’t create real value. If you can focus on the products or the areas that grow value in the business that’s what really counts.
Scalability – In the transactional IT world, when you design the software, try to ensure that it could easily grow to take 100% of the markets transactions, so you don’t have problems with scalability later on. One of the first things an acquirer will look at is whether it can grow your product.
Succession planning – Ensure you have the right people, and that they are incentivised to stay. Anyone looking to buy your business will be looking for a strong management team to drive the business forward.
You’re director/shareholder of a number of SMEs. What key characteristics do you look for in the companies you are a director and/or shareholder of?
I tend to invest in a company because of the people. I NEVER thought I would be involved with the restaurant trade but the guy that approached me was SO passionate that it couldn’t not! It was hard not to be infected by his enthusiasm! If you’ve got someone who is bright and passionate about what they do, they’re going to get there!
I tend to look at what they’re looking to get out of it. Although I’m there to look after them, I also want to get my money out in 5 years or so, whereas they might be looking to stay on forever. Therefore it is helpful to get a good understanding of the exit strategy and timings right from the start.
What I have found with working with SMEs is that many struggle to understand the basics such as a balance sheet, cash flow and profit and loss. Using the restaurant example, he is an incredible chef and manager but it took him about three months to understand the difference between P&L and cash flow and that making a profit is irrelevant if you haven’t got the cash flow to keep the business going! I’ve found that in all the SMEs I’ve been involved in and it’s important to get those messages over clearly. It also helps because our roles are clearly defined and our knowledge complements each other.
Ultimately it comes down to the people and can I work with them and can they work with me! [Laughs]. The relationship might not work!
Within your work at ‘The Charlbury Group’ you have some big name clients such as Santander, Barclays and HSBC who use your products. What are your tips for securing blue chip clients?
Have a strong product and a good reputation. You also need to understand what they want from a supplier. For example with us, the due diligence was a lot of hard work but it turned out to be a great barrier to entry. I wouldn’t say my past relationships with the banks directly helped as we dealt with different departments but because we understood how residential banks worked it was an advantage.
If you could write a letter to your 25 year old self, what advice would you give?
[Laughs] I’m trying to think of where I was aged 25! I think it would be a case of just keep going! I know it’s an old fashioned saying but it isn’t a coincidence that that the ‘harder you work the luckier you are get’. I would also say keep plugging away it will eventually come right! Keep going for it and don’t get disillusioned.
My goal has always been to work as hard as I can so I could be in a position to retire at 45 which meant I was an extremely driven individual.
What lessons have you learnt along the way by running and owning your own businesses?
Research EVERYTHING. Ask questions and don’t assume everything you are being told is correct. The person telling you may believe it to be correct but sometimes that’s not always the case. Trust and verify is a great phrase.
I’ve also learnt that if you’re in a situation – to ignore it and do nothing about it is unforgivable.
There is a phrase which goes ‘He who rides a tiger is afraid to dismount’. Whatever I get involved in a business I look at the exit strategy. This goes back to what I was saying earlier you’ve got to know when you’re getting off and how. There are times when I’ve not known exactly when ‘I’m getting off’ but I always have a plan A, B and C and you have to be adaptable.
Do you credit a certain person for helping make you the successful person you are today? If so why and how?
Not one individual but I credit everyone I’ve worked for and with, I’ve learnt something from all of them!What is the motto you live by every day?
It has got to be – People, People, People – from the people you employ, your fellow directors and your customers. Make them all happy and you’ll be fine!
Quick Fire!
I don’t have one, I read a lot but depends on what subject I’m focused on….currently it is economics. I enjoyed the subject at a level and have started to read Keynes again
Brown sauce!
Tudor times… but you’d want have a few quid! London was just starting to get exciting and become the main hub…it is a fascinating place and that period has a lot of growth and movement.
Fat and northern.
Early bird