How I beat the last recession
Three business veterans tell us how they weathered previous economic storms
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Founder and joint CEO of Epoq (legal software company)
Turnover: £2 million
Our company started in 1994 and we were still feeling the effects of the last recession.
The environment was tough, so we had to develop a strategy that made it harder for others to compete with us. We moved from being a software provider to concentrating on legal applications in the mid 1990s.
There was no money to market our desktop product for lawyers then, so creating a brand was important. We teamed up with Save the Children and came up with a scheme that let people donate money through their wills to the charity. A proportion of our revenue went to Save the Children, and we benefited from their brand exposure.
When we launched the internet-based version of our product in 1999, we were riding high on the back of the dotcom boom; there was a lot of money around and companies were overvalued. A lot of other businesses spent their money on advertising, while we were busy developing and investing in technology. When the dotcom bust came we scaled back, but we knew we had a robust product, and if that is at at the core of your business, it will speak for itself in tough times.
David Gee
Director of investments at venture capital firm YFM
Managed funds: £300 million
In the early 1990s, I realised the importance of stepping in directly to work with companies I would invest in and paying attention to the fundamentals of the business. This involved things like reducing debt and ensuring that the companies were credit-checking their customers.
One company I was working with was dependent on retailers as it provided shop photography and displays. When retail slumped it got hit badly, so we advised the management to take professional legal advice early with regards to making redundancies in order to prevent any possible lawsuits arising. We also put the employees on a three-day week until things improved.
As a venture capitalist, you need to recognise the companies worth backing early on and be prepared to stand up for them. You can offer advice and financial expertise, but you also have to be prepared to back them with cash – providing the structure of the company is solid.
As conditions improve, it all pays off.
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CEO of Zamano
(telecoms company)
Turnover: £15 million
Zamano was founded in 2000 and the first two or three years were really tough for our sector, so we had to be very conscious of cash and expenditure.
We couldn’t get any investment at that time, being both in telecoms and based in Ireland, where venture capital just wasn’t available. This was obviously a problem as we were very much in a growth phase.
However, by making our platform scalable our cost base was very low. So the business was in a position where it could double its revenue without having to increase staff, as we used an automated selling system to send out texts.
Back then we all took pay cuts and had a rigorous view on expenditure – something which has left a lasting impression on the model of the company. Right from the start we’ve had our feet on the ground.
Cutting our expenditure really gave us breathing space for when telecoms did pick up again in 2003 to 2004.