AS OF OCTOBER 2013 Baxter Freight had no staff, no premises and no customers. By 2017, our business plan predicts a company with 100 staff, turning over £100m a year and generating an annual profit in excess of £2m.
Is it achievable? Well, in six months we have employed over 40 people and, after just two months of active sales, have 125 customers with further exciting partnerships in the pipeline. Despite this success, I have become increasingly aware of the many challenges facing not just Baxter Freight, but new business ventures in general.
A banking facility is clearly a pre-requisite for any new business. I had imagined that acquiring one would be a simple process, largely because we didn’t have a borrowing requirement. Suffice to say it wasn’t.
A number of practical issues delayed the process resulting in some difficulties during the early days of the business. While the account-opening procedure took longer than I had imagined, we are now receiving excellent service. My advice to other start-ups would be to be prepared for delays, especially if you require a borrowing facility.
When selecting a banking partner a local presence can be hugely positive for a start-up company. Personal relationships are critical and it is already clear that the team at Lloyds Nottingham are taking a real interest in our business. Their interest and experience will serve us well over many years.
Finding suitable premises is critical for any business, especially one with our growth plans. Initially we worked from home, but clearly not a viable option with 30 employees projected to arrive by the end of January.
Start-ups should be aware of the inflexible approach of some landlords. In our case, one landlord would simply not consider letting his empty premises to a company that had been trading for less than two years. Thankfully we found a more enlightened landlord with available premises of the right size and quality in a good location at a reasonable price, and moved into our fully refurbished offices by the end of January.
Our first major expenditure was the fit-out of the premises and the purchase of the associated furniture. As a new business negotiating with suppliers it is important to be direct and robust. Being clear with your demands is the best approach to achieving a mutually acceptable deal and building a strong, long term working relationship. At Baxter Freight we now have an inspiring and vibrant working environment at a reasonable cost.
Credit where credit’s due
Obtaining credit from suppliers was, not unexpectedly, an issue. However, what was surprising was being treated simply as a start-up with no consideration of the investors’ track record or financial backing. Start-ups come in many guises and it is important to ensure that your strengths are recognised at the outset.
At Baxter Freight we are fortunate to have long standing personal relationships with a network of suppliers who were prepared to work outside of the typical credit guidelines. I would advise every business to meet with suppliers personally to discuss plans and previous track records, so as not to risk a refusal of credit based purely on being a start-up company. Those suppliers that have shown flexibility to accommodate our requirements will be suppliers to the business for many years to come and will be well placed to share in our successes.
In a new business environment flexibility is key. In practical terms there is no hierarchy. Everything that you may have previously taken for granted will need organising and negotiating from scratch.
From property leases to office cleaning, from regulatory issues to stationery, all are important. Don’t underestimate the more mundane issues. In recent months I have at various times cleaned the kitchen and emptied the bins as well as provided cover to most job functions at one time or another. It’s actually a great way of understanding the business at the ‘coalface’.
The quality of staff is critical to all companies, especially a start-up. Ultimately businesses are about people, and recruitment is vital to the achievement of our business plan. In these circumstances it is vital to ensure that the business has an experienced payroll and HR resource. Our HR and payroll systems and procedures were in place well in advance of the initial recruitment phase and accordingly we are on target to meet recruitment plans.
At Baxter Freight we recruited our senior management team very early. This gave the company a robust structure – but it meant that the business had a sizeable overhead. Under these circumstances the recruitment, training, retention and performance management of revenue generating staff must proceed in line with the business plan.
The demands associated with hiring many people in such a short space of time cannot be underestimated, nor the challenges of moulding them into a cohesive team. In this regard, our decision to consider prospective employees based on their drive, enthusiasm and personality rather than, or at least as much as, their experience or academic qualifications has proved correct resulting in a unified team operating in a creative and motivated working environment.
Turning opportunities into customers
The success of our staff is reflected in our ever-increasing customer base but actually the customer base could be even larger. One of the key challenges for the FD is assessing the creditworthiness of potential customers. It is hugely important for a new company to identify the line between commercial opportunity and the appropriate level of credit risk. The last thing an FD wants to do is to be overly cautious in terms of the awarding of credit to potential customers, but neither can the approach be too relaxed. Getting this balance right and continuing to monitor it is critical.
There are of course a number of other factors to consider during the first stages of a company’s development but by addressing those above, any start-up company ought to be in with a fighting chance.
Steve Rafferty is finance director at Baxter Freight. Formerly group FD at RH Freight, Rafferty has almost 25 years of experience in the freight industry