The importance of location: Could an inner-city office help your business prosper?
The fastest growing urban businesses
A generous dollop of deprivation, a sprinkling of wanton crime and a large spoonful of unemployment. Not a recipe for success you’d think. But for Inner City 100 winners, it’s precisely these ingredients that have contributed to making this bunch what they are today.
In spite of such apparent drawbacks these companies have accentuated the positives their environs offer and more than coped with the negatives. Collectively, the 100 turned over £741.9m in 2002 and between 1998 and 2002 created 5,417 new jobs. Individually, the average Inner City 100 company is 10 years old, has generated revenues of £7.4m in 2002, employs 82 full-time staff and has grown 575% in the past five years. And, if you take a glance at turnovers for 2003 and projections for the next year, it’s pretty clear things are getting even better. So what sets these companies apart from the rest?
It’s all about competitive advantages
FACT: 83% of Inner City 100 firms rate their location as a great place to do business, citing good transport and affordable premises as advantages
When the police drag a dead body from the building adjacent to your offices most would think it was time to move. Not if you’re Dr Neil Rotherham or Jonathan Engler. The founders of £20.3m turnover clinical technology company ClinPhone (21) moved into long-time empty premises in one of Nottingham’s roughest districts 10 years ago.
Repeated bricks through windows and stolen fax machines didn’t sway an early conviction that their patch of desolate, derelict light industrial land could be just what they were looking for.
Now, their landscaped gardens and palm trees make for an exotic peninsula amid the resolutely gritty surroundings. And the company continues to thrive. From its base on the bank of the river Trent it works with the local community, taps into the steady production of suitable candidates from the local universities and makes the most of its position near the major roads to the north and south of the country.
It’s an uplifting tale. No matter what the downsides, the inner city locale has been a big factor in the success of these companies. Located in the shadow of Celtic Park in Glasgow, home to Celtic FC, is Stairlifts Scotland Ltd (59), which installs stairlifts in homes and public places on the recommendation of occupational therapists. Mother and daughter management team, Morna and Lisa Barry, say the first reason for the firm’s location is the nearby motorways, one connecting the north, the other to the south. The proximity to occupational therapists in the area was also key.
It took them three years to find the right space and, while it doesn’t have the profile of the west of the city and in their own words, was “derelict, overgrown and shabby looking”, its people have a history and skills they were able to draw on. “It’s comparable to the East End of London in that there have always been people here who knew how to make a pound,” says Lisa Barry. That and the heavy industry, which has left a legacy of people with engineering experience.
There’s no wide-eyed innocence when you’re running an inner city business. Pragmatism is a fundamental characteristic of these entrepreneurs. But not all made their initial choice strategically. “They won’t often describe it as deliberate policy to move into an area of high unemployment, but necessity or the fact that they hail from the area. However, the outcome is quite social and regenerative,” offers Deidre Coyle, vice-president of Inner City 100 in the US, who consults for the UK list.
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Tony Caldeira is one such owner. He started £5.5m cushion specialists Caldeira Ltd (30) in St Helens in 1991 and since 1995 the company has grown 50% year-on-year. Despite a history of textile manufacturing, the area and industry was in the grip of mass closures thanks to cut-price competition from the Far East. For Caldeira it was simply close to his base in Liverpool. But perversely, it also offered available workers, effectively over-qualified and on the dole.
Trevor Horner and brother Dennis are Rotherham born and bred. Having grown up in a family with a history of life down the pits and in the steel industry, they started print management company Horner Brothers Print Group (93) in 1982, when these traditional industries were in decline.
For them the decision to base in the city was simple. “We’ve retrained a lot of miners and steel workers over the years, which is ideal as you’re not taking so-called qualified printers with other people’s habits. They’re practically minded people and their loyalty has resulted in a low turnover of staff,” says Trevor Horner. As a testament to the brothers’ commitment, the firm now has revenues of around £15m each year.
It was the large urban population and transport infrastructure that initially drew 160-person laser eye surgery specialists Ultralase (14) to Leeds. Started by an American firm it has since been taken over by Christopher Neave, the man originally tasked with setting up its first UK operation.
It was the same story for Jump Group’s (17) Jason Butler. Inner city Leeds, and then other cities in the north, generated the kind of footfall the property retailer needs. Paying the premium for high street visibility has been justified many times over and the company is set to make £100m this year, following £47.7m in 2003 and £17.8m in 2002.
Basing events equipment supplier Thorns Group (45) in Tottenham, north London, had nothing to do with MD Graham Langley-Jones. He bought the family firm from the receivers in 1995 for £96,000. Three of his seven staff were family members and the business had its roots there.
Fortunately for him, he’s found a good labour pool to draw on at the lower end and now employs 118 workers. Turnover has rocketed from £290,000, when he took over, to £5.7m in 2003. As well as other occasions, the company services blue riband sports hospitality events, such as Ascot, Henley, Silverstone, Stella Artois tennis, and the Grand National. It has also opened additional inner city offices in Manchester and Birmingham.
Karen and Nik Goodyear located their business, Office Solutions Europe Ltd (88) in Salford, Manchester for strategic reasons. Being near good wholesalers, it doesn’t have to carry a huge amounts of stock.
For Kevan Brown, founder of KGB Cleaning (16) the make up of his likely labour force was all important. “It helps if we’re in a cheaper area. People with a lot of money don’t tend to go cleaning,” he states logically.
It’s all about riding the competitive disadvantages
FACT: Crime and the perception of crime and the availability of good, affordable premises hinders Inner City companies
Most of the Inner City 100 companies relish the challenge of living with and preventing crime. There’s got to be something, as IC 100’s Sajid Butt suggests, that keeps them where they are, as rising insurance premiums certainly wouldn’t attract most entrepreneurs.
Tony Caldeira prefers to laugh in the face of adversity. “It’s like Fort Knox. Unless you’ve got a Sherman tank you won’t be getting in,” he says of Caldeira Ltd’s (30) premises. And it’s a sentiment echoed across the board.
Since suffering break-ins soon after moving in, ClinPhone (21) has been relatively untouched by crime in recent years. The firm stepped up levels of security, barring external windows, and adding shutters, as well as installing CCTV and a permanent security presence on the estate. “By investing, we’ve negated the severe threat,” says Rotherham.
Graham Langley-Jones of north London-based Thorns Group (45) wasn’t so lucky. It costs his company £100,000 a year to keep his site secure and says he had £20,000 of fuel siphoned from his 18-strong fleet of trucks over a period of six months. Now he has 30 vehicles he has to be even more careful. “It was a professional outfit and many of my staff have had their cars broken into outside our premises. It’s tempted me to move out and when we have a break clause in our lease in seven years we may cut our ties,” he says.
Office Solutions (88) founders, Nik and Karen Goodyear, are also mulling over a move. Their business unit is surrounded by three perimeter fences, monitored by full-time security and has CCTV, making it more expensive than elsewhere. “You do feel you’re in an oasis in the badlands,” says Nik Goodyear. He tells how he was recently followed to his car after popping out for a pack of biscuits.
Moonfish’s (100) co-founder Kate Drewett complains about the high cost of accommodation and she rates it above crime as a problem for her business, with only one incident involving intruders in its nine years of trading. Perception and image are important for an agency like hers, as it deals with major blue chip clients including Cisco, Intel and Sharp Electronics, which in part explains her struggle to strike the balance of affordability and quality of premises.
It’s all about regeneration
FACT: 63% say their location has improved as a place to do business in the past five years
Inevitably, with a group of fast growth companies like this, success has had an impact locally. Surrounding areas have improved on the whole, which is largely thanks to them. Fortunately for some, support from the government and private sector funding houses like Bridges Community Ventures, which finances small cap companies with a local bent, has been set aside for companies starting or operating in depressed areas.
But the support hasn’t always been apparent. “The government’s whole emphasis was on increasing the number of start-ups,” says Sajid Butt, UK project leader for the Inner City list. “Now there’s some emphasis on sustaining them. There has to be an understanding of local assets and what’s conducive to an area. It’s incumbent upon government and the private sector to understand the strengths of the region and what will prove successful.”
From talking to some of the winners, eligibility for grants and other forms of funding has proved difficult or impossible. One such company was Thorns Group (45). For owner-manager Graham Langley-Jones regeneration is something of a sore point. When he moved into the business’s current site, which had been empty for five years, he was led to believe it would get European funding as part of the regeneration of the area. He didn’t and has been counting the cost ever since.
Morna Barry of Stairlifts Scotland Ltd (59) has been a beneficiary of Glasgow City Council’s desire to regenerate the east end of the city. It has received considerable support as well as around £50,000 in funding for training and innovation. However, Lisa Barry has been less than impressed with Scottish Enterprise and jokes she would happily blow it up if she could.
Somewhat luckier was Rotherham-based Horner Brothers Print Group (93). The city had one of the highest levels of unemployment in the UK and even now has Objective 1 status, meaning its GDP is particularly low. The site the company took is on reclaimed steel works and is a result of money being set aside for the area. The business has been able to secure funding of £300,000 to help generate new industries on land left barren and devastated by closures to heavy industry in the area in the 1980s. It turned over £13.6m in 2003 and expects to break £15m in 2004.
Since arriving in St Helens, Tony Caldeira says the area has picked up, although it’s still considered fairly rough and depressed, with quite a high crime rate. Because of its status, inward investment has increased and Liverpool’s impending status as European Capital of Culture will have knock-on benefits for the area. Caldeira Ltd (30) has profited from a DTI grant of £70,000 and £250,000 from the North West Development Agency.
ClinPhone (21) is one that has had a direct impact on its area. Its stability, growth and commitment to its locality has helped to attract other businesses to its estate, relatively safe in the knowledge this will not become a ghost town. Many of its 300 Nottingham based employees have also set up home in one of the most deprived residential areas, bringing a greater level of prosperity and employment to streets previously riddled with crime and neglected housing. Even the long-derelict Boots Pharmaceutical plant has been reborn as a retail site.
It’s all about job creation
FACT: Inner City 100 companies have created over 5,417 new jobs in the past five years
Inner City 100 companies are about people. When you speak with them it’s clear giving locals jobs is high on their agenda, particularly as most of the areas they operate in are beset by high unemployment. The example of Horner Brothers Print Group (93) is a good one where giving something back to the people Trevor and Dennis Horner grew up with offered a sense of fulfilment.
“We’ve people that have been with us 15 years who were unemployable at the time, and now have families and settled lives,” says Trevor Horner of his 172-strong workforce.
Some make a point of using the local job centre. Stairlifts Scotland Ltd (59) is one such company. It finds local people have a greater affinity with the business, are more committed and often do little things in their own time for the users of the stair lifts.
Craig Cronshaw and Paul McKinney of Arrow Mailing (67), which increased revenues by £300,000 to £2.8m in 2003 despite losing one of its biggest clients following a takeover, have also utilised the local job centre, plucking considerable numbers from the dole queue and training them up.
For Office Solutions Europe (88), recruiting locally is a contributory factor in crime prevention. “By doing that they won’t throw breeze blocks,” says Karen Goodyear wryly.
Most of Caldeira Ltd’s (30) workforce has come from the local area and Caldeira himself estimates that within a mile radius his company is the biggest employer with 160 staff, something he is immensely proud of. And around two thirds of £2.2m turnover digital communications company Moonfish’s (100) 25-person team are Mancunians, giving the right kind of urban north identity with clients.
But it goes further than mere job creation for IC 100 firms, says Sajid Butt. “Most of the companies would tell you it’s an advantage and they have developed innovative employment schemes. These businesses are particularly creative when it comes to solving market problems or situations.”
ClinPhone (21) has Investors in People status and was ranked 47th best company to work for in the Sunday Times list. This is partly due to the company’s view that it’s equipping staff with skills which will help them in the working world, recognising they will want to sample other things beyond the business and not penalising them for it.
And a number of the group are either going for Investors in People – such as Moonfish (100) – or have been looking into it. KGB Cleaning (16), which generated £8.8m in 2003 is one company that’s going for it. As an ethical business it already provides uniforms, training and NVQ programmes with industry body, the British Institute of Cleaning Science. It also offers English courses for staff where English is a second language. The company has 200 full-time staff and 1,400 in total cleaning some of the most high profile buildings as well as many public contracts in London, Birmingham, Portsmouth, York, Oldham and Kent among others.
Langley-Jones of Thorns Group (45) also feels it’s important to take care of staff. Some of his employees joined his events equipment supplier washing plates and have now moved into middle management. “It’s partly because I’ve come from there,” he says. After leaving school with no qualifications he moonlighted as an admin assistant at London’s Spitalfields Meat Market, doing an early morning shift and as a night porter at Whipps Cross Hospital to pay his way through college. “It’s got to be more than money. You’ve got to give people the chance to earn a bit of respect and make them feel worthy.”
It’s all about community
FACT: 96% are actively involved in their community
“Virtually everyone has something to say about the environment and the community. Sponsoring local schemes and mentoring are core business activities for many,” says Deirdre Coyle of Inner City 100 in the US. “It’s not always charity, but these businesses create wealth for the community.”
One such company is Jump Group (17). According to founder Jason Butler, owning a house is the right of all. So he set about funding purchases for first-time buyers in deprived areas. While the company started life in Leeds, it’s gaining renown elsewhere with 22 sales outlets and 30 more set to launch in 2004.
The last thing he wants to do is to become a white elephant in the neighbourhood and the advantages are obvious. “You put local people into a local business and they perform better. They’ve lived there and know the people they work alongside. And it’s important to be seen to be helping,” he says. To this end the company sponsors local football teams, sports people and supports fundraising efforts. The firm also runs a scheme whereby local home owners put up ‘For Sale’ style boards in their gardens advertising the opening of a new sales outlet. In return, for every week the board remains the company donates £5 to a local charity. Cost-effective marketing and good cause benefits in one.
ClinPhone’s (21) Dr Neil Rotherham is also involved in the locality. His role as trustee of the charity that runs a football in the community scheme with Notts County FC has helped take the malcontents in the area off the streets and onto NVQ courses. The firm also gives each staff member a ‘charity day’ allocation.
Ultralase (14) also has a philanthropic side. It has had a 10 year association with the local hospital and makes its personnel and equipment available one afternoon each week for NHS patients. This association has added a credibility Neave feels would otherwise have been impossible to achieve. “Being ethical is extremely important. It’s difficult to pitch it higher than any other values.”
Helping change Salford’s reputation for crime and deprivation is one of the motivating factors for Nik and Karen Goodyear of Office Solutions Europe (88). The company arranges work experience with local schools and donates office products. In part at least, that’s desire, across the board, to make a difference that keeps on adding to the bottom line. “I would like to help change it in a small way, rather than see it rot,” says Karen Goodyear.