3Business staying in top flight by ringing the changes
Added: (Mon Feb 27 2006)
Pressbox (Press Release) -
The Herald, February 27 2006
What is the obvious thing to do if you've set up a successful telecoms business and you have an urge to diversify? Set up a flying school?
No, that's just silly. Well, how about opening a chain of bed supermarkets? Oh puh-lease, let's not venture any further into the realms of the absurd.
The thing to do, clearly, is ask Ian Vaughan, the Ferrari-driving graduate of Richard Emmanuel's DX Communications empire who set up 3business Group, a provider of business entertainment and mobile content services – such as ring tones – whose growth curve is heading off the chart.
The Glasgow-based group will post turnover this year approaching £5m, with profit margins which would have most businessmen gibbering like Crazy Frog. Staff numbers are up to 60 and the group is operating internationally, with a particularly lucrative seam in Australia.
So, what is Vaughan's answer to the diversification dilemma? Yes, needless to say, he's opened a bed supermarket and a flight school – both of which have taken off, so to speak, in a dramatic fashion.
The reasons will become apparent later, but the enterprise which put him in a position to take these seemingly tangential steps began just five years ago, when O2 took over DX and he did not like its rationalisation plans. He waved goodbye without a great deal of compunction.
"I was never a salesman, but DX taught me how to do it and I became their number two salesman in the UK," the ebullient entrepreneur said at his headquarters in a business park just behind the Iron Horse on the M8 at Baillieston.
"I started reselling telecoms such as premium rate services and moved quickly into ring tones. But I saw that the money was not in selling other people's services, but providing my own, so I hired a programmer from Bulgaria and built a system which ranged from simple tones to 16-tone polyphonics."
By 2002, 3business was a primary supplier, selling to the resellers, of whom there were thousands up and down the country. "Some of them," said Vaughan, "were kids sitting in a bedroom earning thousands of pounds a month."
What kept 3business ahead of the pack was tightly controlled accounting and billing methods, which allowed Vaughan to keep track of the huge customer base. It remains a primary supplier – with some 50% of its offerings original content – having seen off competition within the UK. Most competitors are now in continental Europe.
Vaughan's flying school, the Flight Academy, arose out of a bad experience with an existing flying school. "I did not want to go up in a 1960s Cessna held together with Sellotape," he said. Instead, he bought cool new planes, hired enthusiastic pilots and aimed the whole experience at younger people and women.
He instituted an online booking system which cut down on phone costs, and this Christmas supplied 95% of the vouchers for experience companies such as Red Letter Day and Virgin. The Flight Academy is now breaking even on turnover of £500,000 and Vaughan has added to its credibility by acquiring a school in Aberdeen with a terrific reputation for gaining private pilots' licences.
The bed business, called Offtobed, was inspired by a conversation with a former colleague who was now working with a major bedding retailer but was spectacularly dissatisfied. He asked Vaughan for a loan to set up on his own but, after a look at his business plan, Vaughan brought him on board and invested with a vengeance.
He opened the first retail outlet in spring last year and now has eight stores from the central belt to Dundee. Another 12 will open within the next six months, all funded by retained profits with some assistance from RBS, the group's long-term bankers.
"Next year will be boom time," said Vaughan, "when we see the investments we have made this year start to pay off."
Conscious that, with his divergent ventures, he might be in danger of taking his eye off the ball with the telecom side of the business, Vaughan headhunted another former colleague, James MacAteer of Fastrack company Opera Telecom. He is now a director with responsibility for maintaining the integrity of the core product.
The exponential growth of 3business has not gone unremarked, Vaughan said, and he has had several bid approaches from bigger players – all of which he has rejected on the grounds of the inevitable rationalisation of staff which would follow.
"And as far as I'm concerned," he said, "they might offer me £2m to walk – but that's not enough for the rest of your life."
http://www.3business.com/3Business_The_Herald_27022006.html