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!
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!
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
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.
“We were delighted with the services that Bluebox offered us. Bluebox’s attention to detail through their Diamond Programme ensured that we were well prepared for when the business was taken to market and that the sale process itself was managed expertly.
We challenged Bluebox with finding the right strategic buyer and thereafter negotiating a deal that met our requirements. In helping initially to identify and to secure the deal with Mountville Mills they accomplished just that. Communication throughout was excellent and professional, managing each stage of the process. I would have no hesitation in recommending Bluebox to any corporate shareholder or private business owner looking to divest their business.”
Richard Millward, Former Client
“We were delighted with the services that Bluebox offered us. Bluebox were challenged with finding us the right strategic investor and, thereafter, negotiating a deal that met our complex requirements. In identifying and securing the deal with LGC they have done exactly that. The process itself was efficient and smooth, largely due to the excellent communication from the Bluebox team, who also demonstrated excellent experience at managing a very engaging auction process. I would be delighted to recommend Bluebox to any corporate shareholder or private business owner looking to divest a business.”
Helen Dickinson, Former Client
It has been a real privilege working with the team at Bluebox over this last year or so. Bluebox’s attention to detail ensured that we were well prepared for when the business was taken to market and the sale process itself was managed expertly. Starting the process, I had no idea exactly what this would entail and the volume of work that has been produced by everyone and the result reached today is nothing short of brilliant.
Hugh Morris, Former Client
We are delighted with the services that Bluebox was able to offer. They showed an intimate knowledge of a deal cycle, managed a tight auction process and were highly communicative from the start. I would happily recommend Paul and his team to business owners contemplating a sale of their business in the next 24 months. Experience is key and this has paid off for us.
Laurence Seward, Former Client
Aligning ourselves early with Bluebox, and entrusting the team to guide us through their process proved to be a highly rewarding investment from all viewpoints. Bluebox’s support significantly enhanced both the value of our business and its ‘saleability’. I would highly recommend Bluebox to business owners contemplating an exit in the next two years. The earlier the engagement the better so far as I am concerned.
Mike Minett, Former Client
We began working with Bluebox in early 2015 through their Blue Diamond Programme, as we were contemplating an exit. We found that the process focussed our minds on the key areas of growth in the business, and prepared us well for the inevitable rigours of due diligence. During the sale process itself, the advice offered by the Bluebox team was invaluable. We found them to be helpful, straightforward and honest.
David Stokes, Former Client
When selecting our adviser, it was extremely important that they had access to international buyers and were experienced in cross-border M&A. The team at Bluebox proved to be invaluable by identifying a strategic acquirer from America who was not known to us and by negotiating an excellent deal for all parties. I was also impressed with the process management from Bluebox, which ensured that the deal was closed in a timely fashion.
Jeff Weinstein, Former Client
When I first engaged with Bluebox, I was hesitant as to the benefits of using an advisor to firstly, find a buyer for my business and secondly, to get a deal over the line. However, now that the deal has completed with KPM, I can honestly say that the finer negotiation points handled by Bluebox and their overall management of this process has been nothing short of first class. I would be delighted to recommend Bluebox’s services to any entrepreneur contemplating the sale of their business.
Bill Ballard, Former Client
Bluebox worked closely with us over the following six months and helped us to implement some key initiatives which made InferMed a more attractive acquisition target. Once we decided to sell the business, the Bluebox team were very diligent in ensuring that no stone was left unturned. They negotiated expertly on our behalf to ensure we got the best deal possible.
Alan Montgomery, Former Client
The pre-sale planning programme that we signed up for with Bluebox made us develop our strategies and focus on the bigger picture. It proved to be a very rewarding investment from all viewpoints and significantly enhanced both the value of our business and its ‘saleability’. I would highly recommend Bluebox to business owners contemplating an exit in the next two years.
Nigel Parsons, Former Client
I have experienced first hand the value that can be created through highly structured pre-sale planning. It amazes me that it is not something that everyone does. It is so disappointing to see around 90% of transactions collapse before they complete and pre-sale planning will not only enhance your price, but also significantly enhance your chance of a closed deal.
James Caan, Investor
We worked incredibly closely with our advisers who provided expert knowledge of the sale process with which we were not familiar. We were truly delighted with the results.
Marten Nielson, Former Client
We appointed advisers to manage the sales process after we had received a number of unsolicited approaches for the business. I was incredibly impressed by the immense value that could be created by expertly negotiating with a group of already interested parties.
Paul Duckworth, Former Client
I was delighted with the service that the team offered and their real attention to detail. The deal was not without its complexities and it was reassuring to have such experienced advisers assisting me throughout the negotiations.
Peter Bennett, Former Client
Truly delighted with the way my sale process was managed. The fact that the team I worked with achieved such a great multiple is testament to their experience and their ability to create some true competitive tension.
James Averdieck, Gü, Former Client
The team at Bluebox provided invaluable support in negotiating this complex transaction. Their access to international purchasers, and exceptional knowledge of cross border M&A ensured that the deal was concluded efficiently, achieving a highly successful outcome for us all.
Jon Parslow, Former Client
“We selected Bluebox after a fairly long round of evaluating potential advisors because of their scientific, yet challenging approach to maximising value. During our initial meetings they showed us how far short of “ready” we were and consequently we completed more preparation in the early stages which meant we were equipped for what was to come. We were delighted with our choice of Corporate Finance partner. I do not hesitate in recommending Bluebox for any SME to consider.”
Simon English, Former Client
Bluebox provided invaluable advice in managing the negotiations with incoming investors. Their skills in handling these discussions were evident from the outset and the vital interface that they provided between the incumbent team and the incoming investors was truly beneficial.
Henry Braham, Former Client
Bluebox have a professional, dynamic and experienced team that is greatly assisting me with my focus on my exit within the next 24 months. Their structured approach is very refreshing and their ‘Blue Diamond’ programme is adding immense value.
Matt Evans, Former Client
The team at Bluebox provided me with a seamless service from the start of the engagement until our deal was completed. Attention to detail was commendable and their understanding of corporate M&A very impressive. I could not recommend them highly enough.
Victor Lewis, Former client
Having tried to sell my business previously – and failed – I was only too aware of the importance of pre-sale planning. This is a talented team offering a service that most people find out about, but too late.
Simon Hulme, Former Client
Bluebox are a quality outfit. Their access to International acquirers and relationships with the highest quality domestic investors was impressive. My shareholders and I received excellent service from start to finish and it was refreshing to be dealing with a senior team throughout the sale exercise.
Michael Clapper, Former Client
I cannot recommend the team at Bluebox highly enough. Their expert guidance throughout the entire sale exercise resulted in my shareholders securing an excellent deal with which the entire team was delighted.
Mark Rodol, Former Client
I’m really pleased with the service Bluebox provided. The team demonstrated excellent knowledge of the process to follow and led negotiations for the hospital in a way that allowed us to ensure we received appropriate value whilst focusing on reputational risk. Communication and service were of a very high standard.
Steven Davies, Former Client
With Bluebox’s expert advice we were able to find the right buyer that will benefit our business strategically. We’re delighted with the outcome and look forward to starting our new chapter
Clive Hillier, Former Client
The advice offered by the Bluebox team throughout the process was invaluable to the shareholders. We strongly believe that participating in Bluebox’s pre-sale planning programme was a significant driver behind the success of the deal. Their project management and negotiation skills throughout the sale process itself resulted in an exceptional deal being delivered to all parties involved.
Harpal Singh, Former Client