XLN Telecom: Christian Nellemann

Telecommunications operator XLN is growing at a rate of knots. Founder and managing director Christian Nellemann explains how the company is ‘stealing’ customers from BT

BT are very clever, but they can’t slash prices because it would be anti-competitive. That’s why it’s such a land grab for companies that do the right things – literally a goldmine,” says Christian Nellemann, founder and MD of telecommunications operator XLN Telecom, the company taking the fight to BT and expecting a £20m turnover in only its second year.

Nellemann, a finalist for the Ernst & Young entrepreneur of the year, started the business with his own money and that of two private investors. Of the £1.25m fund, half was spent on securing a gateway into BT’s exchange. The rest has largely been spent on customer acquisition and to date it has 20,000 business customers.

XLN’s offering centres around aggressive pricing of calls – including £2.99 a month for unlimited local and national calls – and bulk-buying line space. The focus is specific. Small businesses employing between one and 10 are the target customers. “Typically that group has got a raw deal from BT. For anyone else to go after that market would be difficult,” says Nellemann.”But if you have a phone system, we’re not interested.”

Given that the company employs a trim 14 you can see Nellemann’s point. And it seems the prices and marketing are bringing them in in droves. XLN expects to have 30,000 customers by the end of the year and 100,000 by 2006, which he equates to 500,000 residential customers in terms of value.

He’s clearly one for statistics and also boasts of a £850,000 monthly turnover growing at 15% per month. You might wonder where the profit margin is. Nellemann is happy to admit the company is “sacrificing a bit of profit today for growth – besides, it doesn’t make sense to make big profits and pay tax”.

Low overheads are achieved by having no costly legacy systems, no duplication of processes, and no major call centre – six people handle all of its customers at present. Yet he claims the levels of service remain fairly high. “We deal with all issues, but automate as much as possible,” he says.

It seems to be working, with bad debt of only 1% and churn of only 5%, compared to an industry average of 8% and 30% according to Nellemann, who boasts that for once his plans are being met and exceeded. “Usually with every business plan I’ve been involved with I’ve missed targets by 50% and costs have been twice as high. But we’ve hit and exceeded them with XLN,” he says.

Nellemann’s no-nonsense approach and XLN’s rapid growth have got venture capital firms sniffing around already. “Having been through the dotcom era where we prostituted ourselves to VCs, they’re now approaching us. The shoe is on the other foot.” Surprisingly, he’s already prepared to talk of exiting the business. “I’m not the best manager.

I’m good at finding opportunities, providing vision and getting people pulling in the right direction.” You get the impression it won’t be too long before he feels he’s played his part.

Making the most of your marketing budget

For XLN, each customer costs around £25 to acquire and Nellemann has taken a somewhat novel approach to marketing to make sure no outlay is wasted. “We’ve used ‘touch marketing’ – a term we coined ourselves. We run a multitude of different initiatives, such as advertising on the radio, door-to-door selling, or search engine ads. We work out which are the most costeffective and what are the most effective in generating referrals. But with any initiative there aren’t any silver bullets you can scale ad nauseum.”

This might involve one email,one phone call, one letter, one visit and the likelihood of thecoming across one of XLN’s adverts. Nellemann believes this is less obtrusive to the customer. “It’s better than to stand there with a hammer getting them to sign,” he says. He admits that some schemes have failed and have been instantly dropped. “Sandwich  bags were a complete turkey. While they were inexpensive, we got no response. Beer mats didn’t work either.”

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