Personal About Finance


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Personal About Finance

  1. 1. Alex Hilton-Baird Personal About Finance by Jolanta Stankeviciute and Ruta Aidis Background In 1997, Alex graduated with BA Hons in European Management from ESC (Ecole Supérieure de Commerce) Marseilles in France. Upon graduation, Alex applied for jobs at various UK consultancies. After receiving no offers, he decided to apply for a part-time MA programme in Transition Economics and Politics at the School for Slavonic and East European Studies (SSEES). His decision to apply to SSEES was influenced by a 6-month placement in Poland at Mostostal Wroclaw, a Polish state-owned enterprise, during his BA studies (in 1996). Alex fell in love with the country when he first visited Poland on holiday early in 1993, with his future wife who originally came from Poland. Alex was offered a place at SSEES and in the autumn of 1997 at the age of 23 he started his MA Programme there. At the same time, in order to start a career and also to finance his studies, Alex decided to set up his own business focusing on financial services. He chose this area because his father had been working in this sector for a number of years and had seen how other people achieved success. Alex and his father decided that they could also make it work, especially by going directly to business owners, rather than relying on referrals. Alex’s father provided him with substantial help setting-up the business and filled him with confidence. Alex’s confidence was also boosted by seeing other financial brokers that had already succeeded in their own businesses. A couple of them who were his father’s business contacts and who had become friends over time, were very helpful and gave Alex some important tips, especially regarding which finance companies to place business with: the hardest thing when starting up this kind of business is knowing which lenders prefer what type of businesses. It is also very important to know which are the best sales people to assign to potential clients. Alex started his business working from the living room in his student flat using his computer and telephone. He spent months cold calling potential clients without success. His first client was a referral from a financial services company, which is quite typical of the sector as it, to © Stankeviciute and Aidis (2006) 1
  2. 2. a great extent, operates based on reciprocal business: finance companies pass leads that they cannot help to brokers, especially if they feel that they will receive leads in return. For the first 3 years, Alex was not paying himself a salary, investing all revenue back into building the business. He survived by continuing to live on a student budget in shared accommodation. Alex’s parents funded the early years of the business from their salaries and savings. However by 2001, the business could support him and his father, reaching a turnover of £108,000. By 2006, Alex’s turnover had reached over £1 million. Hilton-Baird Group Today, Alex’s business, the Hilton-Baird Group1 incorporates 3 separate businesses: Hilton-Baird Financial Solutions (HBFS) was the first company which Alex established when he started his business in 1997. The other two businesses: Hilton-Baird Audit & Survey (HBAS) and Hilton-Baird Collection Services (HBCS) were established in 2001 when Alex’s father joined the business. (1) Hilton-Baird Financial Solutions (HBFS) arranges working capital solutions for owner- managed businesses in the UK & Europe. It specialises in asset-based lending and is the largest independent brokerage in the UK. Since owner managed companies often lack contacts and skills to get financing solutions, HBFS has taken advantage of this niche and is the leading provider of working capital solutions to such businesses. For example, HBFS helped the Advanced Vacuum Lifting Devices Company, a new start-up business with no supplier credit and growing sales, to secure a full factoring2 facility including payments up front and credit control. Before the company had to depend on its owner’s personal loan. Factoring resulted in cash flow generated from invoices, which funded new orders and immediately secured finances for the business’s future. (2) Hilton-Baird Audit & Survey (HBAS) provides outsourced risk management solutions for the UK’s clearing banks and independent finance providers, such as Lloyds TSB, RBS Invoice Finance, Barclays, Venture Finance, GE Commercial Finance and other blue chip lenders. Typically the lenders use the HBAS team to check whether they can lend money to a 1 2 Factoring entails selling of a company's accounts receivable to a third party in order to obtain funding. © Stankeviciute and Aidis (2006) 2
  3. 3. business. HBAS performs an audit of the business and reports to the lender on their suitability for lending. Once the lender lends the money to the business, the HBAS team is also used to perform checks ensuring that the lending is still secure. (3) Hilton-Baird Collection Services (HBCS) provides outsourced commercial debt collection for the UK’s clearing banks and independent finance providers. HBCS specialises in recovering money when companies fail. Normally funds have been advanced against the invoices of failing businesses, and HBCS’s role is to react very quickly and secure documents and data relating to the invoices, including delivery notes, accounting records, servers, contracts, etc. HBCS’s job is then to recreate the sales ledger and start chasing customers for outstanding payment. All three companies within the Group are dealing with the same clients, providing them with complementary services. Most of the new clients for brokerage services come as a result of direct marketing (e-mail marketing and telemarketing), whereas the audit and survey business and the collection services business find new clients mostly through ‘word of mouth’ marketing. The brokerage business (HBFS) has several hundred live clients while the other two businesses (HBAS and HBCS) work for over twenty financial companies. Hilton-Baird Financial Solutions (HBFS): A Closer Look An important role in finding the clients for brokerage services is played by the company’s high quality website3 which provides information about services, including success stories of its clients, and is used for tracking potential customers. The latter function is especially important because it allows the company’s funding consultant team (proactive telesales) to make calls to those clients who clicked on certain links on the webpage or opened a direct marketing e-mail message. Typically, it can take up to 45-60 days to close a deal. Once the deal is closed successfully and the client signs up for a service such as factoring, HBFS receives a commission. 3 © Stankeviciute and Aidis (2006) 3
  4. 4. Sometimes it takes several phone calls to the same business owner before he or she gets really interested in using the company’s financial solutions. According to Alex, one of his company’s competitive advantages is this personal approach which offers business owners a rare opportunity to openly talk about their financial problems. In many cases they have nobody else to talk to: they cannot talk to the bank because they have to appear successful; they cannot talk to their accountants because of the formal relationship; and, they cannot talk to their family because they do not want to complain and make them worried. So, the HBFS employees often act as ‘sounding boards’ utilising a high level of listening and communication skills. Alex built this approach because it proved successful in the past. He believes in it because, according to him, his company cannot hard sell its solutions. It has to listen to the prospects and match them with the correct solution. Emphasising this personal approach, the company has found a small successful niche with good growth potential. Asked about his HBFS’s competitive advantage against such big players as PriceWaterhouseCoopers, KPMG, Menzies, DTE Leonard Curtis or Deloitte and Touche, Alex says that his team is more enthusiastic and passionate. Besides, unlike his big competitors, Alex’s company only charges fees if the deal is closed successfully. Although it is not easy to continue building the Hilton-Baird brand after clients are introduced to big lenders and continue doing business with them, HBFS invests a lot of effort in maintaining a close relationship with its clients even after the deal is closed. Client satisfaction has been one of the main measures of HBFS’s success. HBFS is proud of comments such as the ones below made by satisfied clients: Without HBFS our business would have stagnated and probably failed (A rail sector company); HBFS were able to arrange a flexible facility that the high street lenders were not able to match (A packaging company); With the help of HBFS our growth has exceeded all expectations (A nationwide ground engineering solutions company). A typical client of HBFS is an owner manager or family business. It can be of any size, ranging from a micro business with a turnover of £100,000 per year to a large business with a © Stankeviciute and Aidis (2006) 4
  5. 5. turnover of £50 million per year. The common characteristic of HBFS’s clients is that they are very good at what they produce, sell or provide as a service, however do not have access to, or awareness of, financial solutions available to them before they start working with HBFS. HBFS’s main competitor Factoring UK has just sold their business to a finance company. At the moment, most of the company’s other competitors are ‘one man bands’, either smaller or of the same size as Alex’s company as it was at the start-up stage. However, as HBFS continues to grow, accountancy firms are becoming its competitors, and some of them are starting to copy the Hilton-Baird Group’s model. The Hilton-Baird Group: International and Domestic Market Potential In the beginning of 2006 the Hilton-Baird Group set up a subsidiary in Poland Hilton-Baird Polska4 to provide Polish SMEs with an independent choice for funding their businesses. Poland was chosen since it is a country undergoing rapid transition with a dynamic SME sector. An equally important factor is the fact that Alex has lived in Poland, speaks Polish and has many local contacts. For Polish clients, factoring provides an attractive ‘new’ solution since traditionally most of the funding was available only through banks. As a result, building on its existing expertise, the Hilton-Baird Group is replicating its ‘Financial Solutions’ business i.e. HBFS in the Polish market. So far, the factoring market penetration in Poland is still small, at about 5% (compared to approximately 25% in the UK). Hilton-Baird Polska’s future plans include co-operation with factoring and leasing institutions, banks, and joint venture funds, both regarding client acquisition and educating the market about modern sources of financing for SMEs (small and medium-sized enterprises). Hilton-Baird Polska aims to be a starting point for the Hilton-Baird Group's further expansion in Europe. Additional markets targeted by HBFS include the fast growing factoring markets in Germany, France and Australia. In Germany and France, this is caused by the increasingly dynamic SME markets. Also, businesses in all these countries are demanding more flexible funding solutions. 4 © Stankeviciute and Aidis (2006) 5
  6. 6. In addition to financial solutions, the Hilton-Baird Group is also engaged in education and consulting in the area of factoring. It recently tendered for a contract with the European Bank for Reconstruction and Development (EBRD) which views factoring as the key instrument for stimulating growth in developing countries. The tender was successful and in 2006 the Hilton-Baird Group was awarded a contract to provide training at two banks in Moldova on how to establish and run a factoring company. Furthermore, the Hilton-Baird Group is involved with Russian factoring companies and has supported them in establishing the East European Factoring Association. The growth potential for the Hilton-Baird Group in the UK is also high since currently only 40,000 small businesses (out of 300,000 potential customers) use factoring services. The market has over 90 lenders, and it is hard for SMEs to choose the right partner. Increasingly, companies are choosing financial facilities based purely on price, without giving consideration to the service side of the facility. Clearing banks dominate 80% of the factoring market in the UK. Meanwhile, being a relatively small company, the Hilton-Baird Group bases its competitive advantage on arranging personalised long-term funding relationships for its clients combined with charging only success-based fees. The Hilton-Baird Group: Organisational Structure and Human Resources All three businesses that make up the Hilton-Baird Group have the status of limited companies and are owned by Alex and his parents. The company’s structure (Figure 1) is quite flat, with three levels of hierarchy: Alex is Managing Director of the Hilton-Baird Group, his father Alan Baird is Director and Ian Tramaseur is Operations Manager in addition to several team leaders. The main departments are the Collections Department which collects invoices due, the Auditors/ Surveyors who mostly work on clients’ (potential borrowers’) sites, the team of Brokers who introduce the deals to the lenders and the Funding Consultants whose main job is follow-up using telemarketing on e-mail marketing campaigns, as well as keeping abreast of existing clients’ changing needs. © Stankeviciute and Aidis (2006) 6
  7. 7. Alex Hilton-Baird Ian Tramaseur Helen Mason Chris Moyle Alan Baird managing operations marketing business director director manager manager analyst Ian Moody Clare Pinder Simon Davidson Lindsey Webster Marcin Zaliwski audit & survey collections funding consultant broker director manager manager team leader David Huff Nicola Cheshire Jocelyn F-P Martyn Price Dorota Osiej trainee forensic funding funding advisor auditor consultant consultant consultant Sam Tehrani Part Time Afaj Ali Tomasz Flipczuk business marketing funding funding analyst assistant team consultant consultant Charlie Christie Andrew Massey Alex Vukmirovic Bozena Lwaniak collections it network funding funding advisor administrator consultant consultant Pauline Hoare collections assistant Figure 1. Organisational Structure of the Hilton-Baird Group (source: the Hilton-Baird Group’s internal document) © Stankeviciute and Aidis (2006) 7
  8. 8. Alex hired most of his employees (currently 25 full-time members of staff) via word of mouth – most of them originated from the Hilton-Baird Group’s previous clients. Being a small company, HBG offers potential employees the opportunity to switch between diverse tasks. Alex’s Human Resources (HR) philosophy is that an employee should jump from bed in the morning and go to work knowing that he/she has fun there, enjoying what they are doing. Working for such a small company often means hard work but Alex believes that people should have the right work and life balance, so if necessary, his staff can work flexible hours. Alex himself tries to stay away from day-to-day business, focusing more on strategic issues, however he tries to be very accessible to all employees. Even more so, as the Hilton-Baird Group is currently based in a recently acquired open plan office in Southampton, Hampshire, where it is easy to maintain direct communication with employees and generate a sense of team spirit. The Hilton-Baird Group: Key Stages in Business Development Reflecting on the evolution of his business, Alex specified a number of important milestones: 1998: Alex closes his first deal after 9-10 months of cold calling. This deal brought an income of £300 2000: Growth of turnover in the course of 2-3 years from hundreds to thousands to tens of thousands of Pounds. 2001: Adding 2 additional businesses (HBAS and HBCS) creating the Hilton-Baird Group and developing the business to a level that allowed for his father to join the business. 2002: Buying property in Eastleigh (Hampshire) and establishing an office. It was a major boost of confidence and credibility, as before Alex used to meet his clients in hotels and restaurants. 2002: Alex hires his first member of staff: a personal assistant who later becomes head of the brokerage at HBFS. 2003: Alex employs a former bank manager from Lloyds TSB. 2004: Alex hires an Operations Manager for the Hilton-Baird Group. 2006: The Hilton-Baird Group establishes a Polish subsidiary: Hilton-Baird Polska. © Stankeviciute and Aidis (2006) 8
  9. 9. 2006: The Hilton-Baird Group’s website is created and the client website is re-launched by transforming it from a simple online brochure to an interactive tool offering instant financial solution estimates, immediate contact forms, case studies of successful clients and other useful information. 2006: The Hilton-Baird Group tenders for and wins an EBRD project in Moldova. 2006: The Hilton-Baird Group buys a new office in Southampton with four times more space than the previous office. With the move to the new office in Southampton now complete, Alex intends to hire students from the University of Southampton to start in telemarketing positions and allow them to move up to other jobs within the company. Moving to the new office will enable the Hilton- Baird Group to expand its operations by employing more people (up to 50). Alex believes that he will manage to maintain the existing team spirit and flat structure, empowering people to lead the business in the direction he wants. He believes that his tolerance for mistakes, ‘as long as they can be justified’, will help in this process. The Hilton-Baird Group’s operations are decentralised. For example, although the Polish office is a wholly owned subsidiary of HBFS, the office and all day-to-day decisions are made by the Polish Managing Director Marcin Zaliwski. At the same time, Alex is a member of the Polish Board of Directors and he meets its members every month to discuss budgets, planning, etc. Reaching for the Impossible According to Alex, his eventual business success was due to the fact that he is a ‘stubborn’ person who likes to take calculated risks. Also, the entrepreneurial spirit can be traced in his family. His father was often self-employed: he first worked as a lobster fisherman in Scotland, then he established his own manufacturing company and eventually shifted to the financial sector (risk management). Alex grew up in the Highlands of Scotland, where his family lived for 8 years. Life was very simple there: his father was fishing, while his mother was looking after Alex and working as a nurse. He is an only child. They all moved back to England when his father could no longer © Stankeviciute and Aidis (2006) 9
  10. 10. make a living from fishing and also because Alex needed open heart surgery to repair a heart murmur. After the operation Alex was able to become active in sports, something that was previously physically difficult for him. He played field hockey at the county level and was captain of his college field hockey team which won the national championships. Alex’s dreams as a child were about doing something related to the ocean as well as something that involved travelling. He always dreamed about living in Paris and actually spent a year there before university. While Alex was at school, ‘A’ levels and university were not even ‘on his radar’ as he attended a ‘working class school’ and his parents had never attended university. Alex was never top of his class at school in spite of putting in a lot of hard work. However he was brought up to believe that anything was possible if one wanted it enough and worked hard enough to get it. Eventually he used this conviction to become a successful entrepreneur. According to Alex, his parents are his role models, not least because they are very easy going regarding letting Alex make his own choices. Another role model was Alex’s economics teacher, Jerry Fisher, who was also his field hockey coach at college. He taught Alex to question things and had an infectious passion for economics. Alex sees himself as an entrepreneur because he is always looking for new challenges and new business opportunities. He is also not afraid of trying things that others might consider impossible or too hard, for example, setting up a factoring company in Poland or Moldova. Although his first marriage ended in divorce, Alex is currently in a happy new relationship which provides him with great moral support and stimulus to succeed even further. Business and SSEES Alex graduated from SSEES in 1999. Reflecting on his part-time MA studies programme, he emphasises the importance of mixing with students from Central and Eastern Europe (CEE) and being taught by professors from transition countries. The course provided him with deeper knowledge about the region and exposure to the opportunities of doing business in CEE countries. Based on research undertaken for his MA thesis ‘Funding Barriers to Growth © Stankeviciute and Aidis (2006) 10
  11. 11. Faced by SMEs in a Transition Economy’, Alex set up the first UK owned factoring company in Poland as a consultancy project in 2002 for Bibby Financial Services. The business now employs 40 people and has over 200 clients. Addressing current students, Alex’s words of wisdom are: Setting up your own business requires enormous amounts of energy and perseverance. Do not necessarily try to reinvent the wheel with your business plan - there is often room to do things a lot better than your competition. If you exceed your customers’ expectations, they will keep coming back. © Stankeviciute and Aidis (2006) 11