The Entrepreneur: Paresh Davdra, Rational FX
In 2005, 'twenty somethings' Davdra and Rajesh Agrawal - now deputy mayor of business - launched a foreign exchange service. Today, that company turns over £1.3bn...
Founders: Paresh Davdra and Rajesh Agrawal (recently appointed deputed mayor of London)
Company: Rational FX
Description in one line: RationalFX is the UK’s first online foreign exchange service
Previous companies: N/A
Turnover: Over £1.3bn
12 month target: £1.5bn
Describe your business model and what makes your business unique:
- We buy in bulk from our bank which enables us to obtain favorable exchange rates – we take a small margin and pass on the price benefit to our clients.
- We are a privately owned company and have remained profitable and debt free from inception.
- Our story makes us unique; starting with two young guys in their twenties in a small office in Brighton with only a phone and computer for equipment.
What numbers do you look at every day in your business?
- Number of new clients
Describe your growth funding path:
When we first started, we were a pair of twenty somethings with no money so funding was tough. We were continuously turned away from banks until Agrawal was given a £20,000 ‘car loan’ which got the ball rolling.
In 2005 our industry was only regulated by HMRC for money laundering so we just had to register with them and follow their guidelines for recording transactions. Also, as our business was money transfer that took place relatively quickly, profit was also banked just as quickly and we didn’t have the complications of worrying about facilitating credit terms.
It wasn’t until 2009 that the FCA started regulating our industry and we required a minimum capital adequacy but by then we were big enough to support that requirement.
As we grow and the market changes we have many projects in the pipeline in terms of tech development. Because we are still an organically-grown firm, many of these projects have to take a back seat whilst we complete the ones that we feel are a priority… But that’s business and it is important to continue have a balancing act.
What technology has made the biggest difference to your business?
Integration using API’s. We are integrated with electronic verification companies, to SWIFT, and even to local distributor Banks in India.
This allows us to provide a straight through processing low touch solution. It brings our costs down significantly and is, of course, scalable.
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Where would you like your business to be in three years?
We are currently growing at a fast pace throughout Europe. I would like to think that in three years we would have really made our mark. B
By this time I believe we will have also established offices in Australasia and the Far East, creating a global foot print and covering all time zones. I envisage a turnover exceeding £5bn.
What is the hardest thing you have ever done in business?
The hardest thing must have been navigating through the recession in 2008 – we were becoming increasingly successful in the three years leading up to it and then everything suddenly slowed down. In an industry like ours, the recession made a monumental difference to business but it taught Agrawal and I some valuable lessons and in turn helped the business grow stronger.
The recession taught us that haphazard spending is not the way to go. We learnt to be clever with money, as one can never predict what it would suddenly be needed for in the future. Businesses should always have a ‘rainy day fund’. During 2008, I matured significantly both personally and as a businessman.
Saying that, it is also important to maintain a balance if you want to grow your company. Growth costs money and takes risks – so when times are tough don’t become totally risk averse, don’t forget that the tough get going.
What was your biggest business mistake?
Over the years I have worked with many people and through naivety I have entrusted people and perhaps not been as thorough with employee contracts as I should have been.
I have been lucky that clients have stayed loyal to our firm but we have had instances where former employees have tried to poach them. As a result I am now insistent on fool proof contracts; don’t lose trust in people but do remember that greed can be an evil thing so act with caution.
Piece of Red Tape that hampers growth most?
I wouldn’t argue with red tape, providing it is common across the industry. I truly believe that we work in a very level and fair playing field.
I also believe that given the industry we operate in, it is important to have this red tape to ensure that everything possible is being done to prevent unethical practices taking place.
What is the most common serious mistake you see entrepreneurs make?
Many companies spend far too much time and money in perfecting a product and forget the fundamental ingredient; the customers!
How will your market look in three years?
I can see a lot of consolidation and this is already happening as the funded companies fight to acquire the successful non-funded ones.
There will also be new technology and more efficient ways of making payments – block chain seems to be the buzzword at the moment but a lot of acceptance is required if we want to see that change.
Lastly, as the world becomes a smaller place, migration is also on the up so the market size is continuously getting bigger and this makes it a fascinating industry to be in.
What is the single most important piece of advice you would offer to a less experienced entrepreneur?
Perseverance is crucial to being an entrepreneur. Life is challenging, and starting your own business is equally so. If you believe in what you’re offering, stick with it and others are sure to believe in it too.
Another piece of advice, in the same vein, is to be brave and take risks. We took some gambles when RationalFX was starting out – we had no money and no salary for the first few years – but it eventually all paid off. When a good opportunity comes your way, grab it with both hands. Don’t worry about being perfectly prepared because you’ll learn a lot along the way.
Finally and most importantly; never give up. Stick to your values and you can’t go wrong – this isn’t to mean you won’t fail, but it’s worth a try if you’re fighting for something you really want!
Executive education or learn it on the job?
Learn it on the job.
What would make you a better leader?
More confidence! I very often underestimate my own capability.
What one thing do you wish you’d known when you started?
It takes time to become a millionaire 🙂