Luxtech: Russell Lux
Russell Lux went from selling PCs to fellow students at university to running a multi-million pound IT firm
Russell Lux became an entrepreneur almost by accident. While selling computers to fellow students at university, Lux admits that he spent the money as quickly as he earned it on a typical student lifestyle.
But after realising there was real money to made in his venture, he embarked on a path that has led to the formation of one of the UK's fastest growing new IT companies and unearthed considerable entrepreneurial talents in the 28-year-old founder.
“It wasn't originally the plan to be an entrepreneur,” Lux says. “Once I started making money from computers, it was clear that was what I was good at. I ended up failing my university exams, so I carried on selling computers.”
While continuing to provide consultancy services to local businesses after leaving university, Lux realised there was an opportunity to sell broadband services in the London area.
“At the time, there was a massive need for broadband – people wanted cheaper and faster internet connections,” he explains. “BT had just started selling broadband and I became a premier re-seller.”
Such was the demand for broadband, Lux and his four commission-only salesmen were overwhelmed with orders that BT could not fulfil. He then decided to set up a wireless technology company that he sold on for “virtually nothing” before returning to his original business model – providing IT support services.
Started up in the spare room of Lux's London flat, Luxtech was founded in January 2001 and raised its first invoice in July 2002. Embellished with £2,000 of funding, which came from Lux's savings, the business was initially simply equipped with a computer with broadband connection.
Lux gained clients through word of mouth. He targeted solicitors and accounts as they are client-based business and could recommend his services on to others.
“I built up a good reputation,” Lux recalls. “London is a huge market to attack, but I had to do business through an introduction, it was very difficult to walk in off the street and introduce yourself.”
The increasing number of clients saw the business naturally outgrow the flat, prompting Luxtech to move to a small serviced office. The move saw a sharp increase in clients – using his networking skills Lux took on the business of 22 other start-up companies who also used the serviced offices within the first six months.
It's a trick he repeated when moving to larger serviced offices in Camden, north London. Luxtech took on 42 extra clients – every business in the building.
“We moved into serviced offices because we didn't have any infrastructure costs – we didn't have to pay for desks, chairs or telephone systems,” Lux explains. “We found the place through the internet and made lots of business contacts while there.
“It was great for them because we were on their doorstep – they had IT support literally down the corridor. It was like a large corporate – you had an IT department, a finance department and a marketing department there.
“Something that's made our business grow so quickly is that out clients have been growing quickly themselves.”
This growth is illustrated by the steeply climbing turnovers Luxtech has experienced.
In the first year of trading, the business had £80,000 worth of sales. The second year saw this figure rise to £400,000, while the year after has seen turnover soar to £1.2 million. This year is projected to see income rise further to £2.2 million.
The business has successfully courted large businesses, securing contracts with Travelex and Thomas Cook, among others. Luxtech does not provide the IT and telephony systems itself – clients' technology are supplied by a company called Networks First. Lux hopes that the business will soon be big enough to fulfil both roles.
Lux is a staunch believer in ploughing as much money as possible back into the business – a tactic he feels has generated the impressive expansion of the business.
“They key is to not take anything out of the business if possible,” he insists. “The old saying cash is king is true – the only way to grow a business is to have cash.
“You should hold on for as long as you can before taking out dividends. When you need to raise money from venture capitalists or banks, they are going to want to see that you're putting the money back into the business and that you're dedicated to it.
“We've constantly used our own cash. I still earn a very minimal amount of money out of the business because I want to grow it – I'm the lowest paid member of staff in the company! It all goes back into the business.”
Lux openly admits that he operates in a crowded and competitive market. He feels that the reputation the company has gained, along with some recent marketing work, has paid dividends.
“There are a lot of IT companies that will say they will do this or that, but don't have the expertise to do so,” he says. “We never say we can do something that we can't deliver on, and deliver on well. That's how we've built the business.
“We started doing some marketing about 18 months ago with Intelligent Marketing, who were in the same serviced offices. The idea was to establish a decent Luxtech brand and get the logo and branding out there.
“That was a key part of the first stage of the marketing and it was a good year's work. We didn't start with flyers and telemarketing until a few months ago – it's been more about building the brand.”
Following a final move to their own offices, also in Camden, Luxtech now employs 17 members of staff – mostly made up of technical engineers, supplemented with sales, finance and admin workers. Lux admits that finding the right staff was a struggle.
“It was an absolute nightmare,” he says. “Our technical guys need to be able to talk to out customers – they are the front line of the business. We've got to find technical staff that are great at their jobs as well as sociable – you try and find them! It's a tough one, but we've found them.
“We are still looking for more IT staff, but we're finding it very difficult.”
Another hurdle has been the problem of late payment. There can be an 80-day gap between Luxtech buying the stock, installing it and getting paid.
Unsurprisingly, such challenges have impacted heavily on Lux's personal life, with his working day stretching over 12 hours. The 28-year-old entrepreneur had the added burden of his age being an issue during the formative period of the business.
“It was definitely an issue with older guys,” he recalls. “They think you're inexperienced and expensive – a flash boy who turns up with a Porsche outside.
“It's improved since programmes like the Dragons' Den. There's lots of talk now about young entrepreneurs doing serious business. The majority of businesses we deal with are run by people under the age of 30, which is fantastic.”
The future looks bright for Luxtech – Lux expects the business to double in size over the three years, with turnover of £15 million and 45 staff. Which is quite a long way from selling PCs to students at university.