Smedvig Capital recently held an evening in conversation with David Hosking, CEO of Tusker, a Smedvig backed start-up success story and now a PE backed growth business in the FT top 1,000 fastest growing companies in Europe.
Tusker is on a mission to help businesses and organisations be more productive through happier employees. They do this by offering a ground-breaking Car Benefit Scheme. It means employees get a brand-new car and they don’t have to worry about the hassles and extra expense of running a car.
After starting out with Yellow Pages as a trainee telephone sales rep, David has spent much of his career in vehicle leasing. David joined Tusker in 2003 as sales director and two years later stepped up into the role of CEO.
At Home House David shared his experiences on ‘Plan B — making it happen,’ from becoming CEO of Tusker, to reenergising the business and dealing with its very rapid subsequent growth, as well as discussing the process of changing ownership.
How did you come to join Tusker and how did you become CEO?
I wanted to do something I was interested in and as I’d always been a petrol head, cars seemed the right thing. During the interview period at Tusker I was told ‘the business isn’t doing very well they’re going to shut the doors in about three months unless you can persuade them not to.’ That was quite a challenge and I was up for that. To put it into perspective, in 2000 the business plan was 0–10,000 vehicles in three years. I think they burnt through the best part of £5.8 million of cash in that period, with 436 vehicles to show for it at the end of those three years. When I came on board as Sales Director the business was burning £185,000 a month in cash. I was given three months to turn it around and then I was told that if I did a good job, over the next eighteen months to two years, I would get the opportunity to run the business. True to their word, I got that opportunity in 2005.
Plan A didn’t work for the business, so what was wrong with it and what made you realise it wasn’t working?
The original business plan was a good one, it was just about five or six years before its time. The idea was to set up an online leasing company. When I joined in 2003 we were going in to see prospective customers and saying ‘We can run your fleet online. Can we log onto your computer and show you how it works?’ They would get under their desks and unplug the fax machine to plug their computer into an ISDN line! Wi-Fi wasn’t there in 2003 — had it been five years later, I think the original plan would have worked. It’s fair to say, customers didn’t understand the concept at that point so we changed from ‘the e-leasing people’ to actually being all about delivering first class customer service and customer excellence.
What triggered the change?
My first challenge was to get the business through breakeven in 2006. After that, we continued to grow until 2008 when the credit crunch hit causing several issues. At the time, we had three funders, (to make it clear the business process is as follows: we take an order for a car, we buy that car and then we fund that car. As we don’t have enough to fund the thousands of cars we buy every year — last year we spent £125 million on cars — we fund it through asset funders.) But during the credit crunch our three funders became one. Subsequently, our one remaining funder, Lloyds, did what any business would do and doubled our interest rates which made us very uncompetitive in the market. This was when we came up with the pivot of the business; we went from being a traditional leasing company delivery company cars to a salary sacrifice car scheme provider.
What was the most challenging aspect of redirecting and reenergising the business?
We had a massive issue in only having one funder, so we looked at how we could address that. None of the other funders were interested in lending money in 2008–2009, so we went to one of our main competitors. They had plenty of money but they weren’t able to offer their customers a salary sacrifice scheme. We did a deal where we white labelled a salary sacrifice system for them and in return they lent us several million to buy vehicles at a much lower rate than we were getting from the bank, which made the whole thing work.
How did you cope with subsequent rapid growth?
It wasn’t immediate growth in the first instance. We came up with the idea of salary sacrifice car schemes in May 2008 and we were first to market. We launched on 1stOctober 2008, (we beat our main competitor by about eight weeks) but in 2009 we only took 61 orders for cars on the scheme. It was a challenge as we knew it would take off, but nobody else believed it would on the back of 61 car orders in 12 months. To put that in perspective, in the second year we took 790 car orders on salary sacrifice and the following year it was nearly 2,000. The growth didn’t start to happen until 2010–2011. 2009 was laying the ground works and going to see all the employee benefit providers who hadn’t heard of this new product. This then put us in a very good position for when they did get it.
Changing ownership is always challenging, how was the process for you?
The process was fantastic. People always say, going through a P.E transaction is a nightmare, it’s loads of work, which it is, but it’s great fun. It’s exciting and you’re working 14–15 hours a day then going home and doing the day job, so you’re working 18–20 hour days for the months during the transaction. It’s great from a team perspective as well and the rewards are fantastic if you get it right. We were lucky as we had a huge amount of interest and a long shortlist of potential new investors.
Explain a bit about customer service at Tusker
I think we do things quite differently at Tusker, things we’re not contractually obliged to do. When we looked at how we wanted to differentiate ourselves from the market we came up with the elephant manifesto. It’s about doing the right thing for the customer and treating them as you would like to be treated yourself. Everyone in the business thinks that way now and hopefully we have a good reputation for it. That’s not the reason we do it, it’s just about doing the right thing. As far as I am aware we’re currently the only leasing company that has dared put themselves on Trust Pilot. We have a score of 9.2% with over 550 reviews, it’s a completely independent gauge of our customer service. Treating customers the right way should be a way life but it pays dividends at the end of the day and it differentiates us against all our competitors.
How do you work with your board of directors?
We have a senior management team of ten and four operational board directors. We’re very inclusive with each other — we share decisions, no one makes them by themselves and if we have issues we share them with each other. If you don’t communicate, you end up making bad decisions for the business. We talk every day, even in the evenings and at weekends — we all know what we’re working on and how projects are going. If you’re lucky enough to be in a business that you love, it never feels like work.
If you were running a masterclass for entrepreneurs, what would you tell them?
I don’t think I would be running a masterclass for entrepreneurs, I might get a guest pitch! I think I’d talk about how it’s all very well coming up with the idea for a product or concept but that’s not the difficult part, the difficult part is delivering it! Then it’s turning it into a commercial success, as well as planning, implementing, launching, relaunching and scaling it to make it worthwhile. There are lots of companies who have great products, but they haven’ been able to scale them to create the value that we all want to generate as part of the P.E community.
Philanthropy is important to you, why? And do you think entrepreneurs should be incorporating philanthropy into their businesses?
I didn’t really get involved in charities until seven years ago. In 2010 my 21-year-old daughter was diagnosed with leukaemia and we spent the next four months in and out of hospital with chemotherapy. She was on the Teenage Cancer Trust Ward in Birmingham which was just fantastic. I don’t know how she would have coped without the support that they were able to give her. During 2011 she went into remission and then at the back end of 2011 we lost her during a bone marrow transplant. When you lose somebody that close to you, it makes you think differently about life. As a family, we wanted to support Teenage Cancer Trust because they’d been so fantastic. So, that’s how we got involved personally and then Tusker became a corporate sponsor of the charity. In 2013 a group of 26 of us, about half the business at the time, decided to do Tough Mudder and we raised more than £25,000 for Teenage Cancer Trust. From that we have continued to support the charity. We did Tough Mudder again in 2014, we do cake bakes and dress down days amongst other activities. We’re actually doing Tough Mudder again on 6thMay, there’s 61 of us doing it this time — it’s a big part of the business now. Doing things for charity are the best team building events that you can do, it helps to create a great culture. I think it’s absolutely a good idea to incorporate that into any business.
What’s your future and the future of Tusker?
I think I’m still young enough to have another couple of turns at this. The last two years since Smedvig exited and ECI came on board have been great fun, the business has gone from strength to strength. We are now, as of last week, listed in the FT as one of the top 1,000 fastest growing companies in Europe, we came in at number 605 across 31 countries. And about six weeks ago we were number 28 in the Sunday Times Profit Track. It’s been a good three years for us. To put that in perspective, EBITDA’s gone from £3.6m to £7.4m to £9.5m and we’ll be somewhere around £11m this year. I think ECI’s typical investment hold is three to five years, we’re two and a bit years into this and I think their aspiration is to get an EV well north of £200m — I don’t see that being far away. In terms of my future, I’m having a great time. We’ve invested just over £3m in the last six months with new finance and back office systems, as well as new telephone systems — we won’t see the return on that until next year but it’s a great thing to be managing. I think I’m still young enough to be around in five to seven years’ time through the next transaction and then maybe disappear on the one after that to go and sit on a beach somewhere.
Originally published at www.smedvigcapital.com on May 24, 2017.