Blueback www.blueback.com This business provided a branded taxi experience in central London. I invested initially because I liked the area they were in and what they were trying to do – create a ‘Starbucks effect’ with taxi journeys. Again, given the increasing cost of owning a car, this business seemed to be set for good growth. This has been one of my worst investments and culminated last year in the business being sold with the shareholders effectively getting nothing. It is so true, that you learn more from your failures than your successes so I am happy to share with you the lessons that I learnt from this. If you pick up something from this, please feel free to send me a donation as they were extremely expensive lessons for me! The first thing I learnt was that management skills and experience need to match what the business is about. The management team had very strong sales and marketing skills – amongst the best I have seen. Coming from a sales background, I mistakenly thought this is the only thing that really matters in this business. I was wrong. The most important thing in a business like this is operational excellence – we simply did not have that skill set. It meant in effect that the salespeople were selling lots of contracts – but because of weaknesses in the operations, we could not either deliver, or we were doing so at a huge cost. Because of the sales and marketing expertise, the company also had a massive focus on weekly meetings. They took up a lot of time and they probably took at least one day of management time (a week!) in terms of preparation. My advice that falls out of this is that whilst I accept it is critical for growing businesses to have control over the business – the cost of getting information must be proportionate to the needs of the company. Develop simple and easy measures of learning how well your business is doing and monitor them on a daily or weekly basis. But if they are taking more than 10 hours a week (collectively) to gather, develop different measures. Bullshit bingo - A healthy way to break up long meetings The company was losing money (as was in the plan – and so was not a problem in the first few years) but then decided to pitch for the LutonAirport business. The terms of the contract would have meant we would always have to provide a minimum level of service at the site and we knew it would not have been profitable. But it was a real ‘win’ and would have put us on the map. It was a disaster and cost us a lot of money and accelerated our inevitable decline. When you are starting out in business stick to the golden mantra – “Sales are vanity, profit is sanity – but only cash is reality”. I know it sounds simple – but if you stick to this – you will not go wrong. We also failed to grasp that the reasons why taxis are very popular in London are for reasons unique to big cities. An operation in Luton would never have been profitable (unless we had done a tie-in deal with someone like EasyJet - but that never materialized). The other thing to add here is to know your customer. When you are spending £500 on a flight from Heathrow – you will not mind spending £25 on a taxi to the Airport. If you are flying on a budget airline - £25 to the airport may represent the cost of the return flight! There were two other lessons I learned from my experience with Blueback. You have to know the cost of a sale and the average revenue per sale. What I mean is, that because of poor delivery, we were not able to retain customers, so therefore we had a weak average revenue figure, but we had set up a cost base in our sales operation which meant that the cost of acquiring a customer meant that 15% of gross revenues were absorbed as a sales cost – putting further pressures on your margins. Finally (I did learn a lot from this experience!) I also learnt that this was a business requiring massive scale to become profitable. The Business should have had from the very start a very bold aggressive plan to acquire other operators and keep growing for a year or two. If this had been the plan, we could have raised more funds and perhaps made a success of it. (The business did raise over £4m as it was).
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aboutFrom business planning to business management, success in the world of business takes time, though, and consideration. A business information blog is a place where all three elements are combined to give anyone interested an outlet for sharing and discussing their views, as well as providing and receiving knowledge on the best practices for business success. Archives
December 2020
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