MANAGING the affairs of a fast-growing business is a fairly complex endeavour in and of itself, but throw operations in several different countries into the process and complexity ramps up very quickly indeed.
After ten years essentially operating as a research and design house, software provider Validis began trading its SaaS audit suite in earnest in 2012, bringing in revenues of £300,000, growing 50% in 2013 and 20% in 2014. Given the acquisition of clients including four of the top five accountancy firms, those numbers are set to grow much further, while a tie-up with Xero will also increase its reach.
For that first embryonic decade, the company’s R&D activity was funded by its high-networth investors, who now hold the lofty ambition of 500% growth over the coming five years.
“The investors knew at the very start that this would be long-term, but now we are seeing the fruits of that,” FD Ajay Golam tells Financial Director. “We aren’t there yet to reward the shareholders, but it’s not too far ahead. It’s all been funded by the shareholders; they’re still funding and fundraising. Recently, I did a complete due diligence on the company for potential investors because we’re quite new to the market and we need more working capital to fulfil our potential. There’s no debt.”
He arrived at Future Route – the company that trades as Validis – in 2013, in what Golam readily describes as an “operational” FD role.
“When it comes to financial planning and modelling, the role becomes bigger and more important,” Golam explains. “In all companies, the financial aspect is most important. We recently moved into an overseas market in the US, and that’s a lot of work on the legal side. On the financial side, you’re considering whether it is feasible and whether it will be profitable. Eventually, we reached the decision that it is, and that’s a market we are moving into.”
In order to do so, a limited liability company was established in Texas, and today, Validis has offices in both London and Austin, Texas, and is considering establishing another office in Canada. Much like the UK, Texas – and Austin in particular – has made great play of attracting tech companies to the area with tax incentives.
“The big thing about the US is knowing where to set up your entities, because not all states have as beneficial environments as others,” Golam notes. “We are still expanding in the UK, but it’s slow because the market is more mature than the US. In the US, they accept technology quicker than the UK. At the end of 2015 or the start of 2016, we are looking to open a branch in Canada too.”
Managing that process poses multiple challenges to Golam and his team, with issues regarding foreign exchange and working capital all playing their part. For the vast majority of businesses, exposure to the fluctuating value of different currencies introduced additional risk and volatility.
“For us, it’s about whether it’s worth hedging at such an early stage or later on,” explains Golam. “Differing systems cause difficulty, whether it’s currency or tax, so it’s imperative to take advice from those who know and have experience. As far as the US is concerned, we used advisers and our staff there to help us reach the right arrangement, because you don’t want to get it wrong.”
It is not, however, the greatest drain on resources for Golam. That, as ever for FDs, is the preserve of IT.
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“The main areas of capital expenditure are hardware and software,” he says. “Other operational expenses such as wages and rent, and now increasingly marketing and advertising, are becoming more prominent because we are now looking to penetrate markets and gain the attention of business.”
The most delicate area has been aligning the expansion strategy and finance, explains Golam, as well as managing expectations.
“It’s about containing excitement. People get excited about growth and if it’s not controlled, we could find ourselves in hot water but we’re not going there,” he says.
And so Golam is now looking to build his finance team – which currently comprises just him and one colleague based in the US – in order to help keep those expectations in check and the finances managed.
“I’ll be looking to grow that team simply because I’m finding myself staying two or three hours in the office at the end of the day which isn’t good,” he says. “As we grow, we have to be able to deal with that.” ?