What sort of small business turns over £2m a month after trading for just one year? The kind that has an experienced serial entrepreneur behind it who spotted a marketplace that hadn't been disrupted by the internet. And he made sure it became the online company to turn to for retailers and manufacturers looking to shift overstock, end-of-line and clearance stock, or returns to trade buyers.
As founder and chief executive of Stockshifters.com, Harvey Sinclair explains: "When I looked at surplus goods within the trade and wholesale market, I realised that this was not only one of the biggest markets I'd looked at, it was probably the most inefficient I'd ever seen. We're now the leading wholesale marketplace in the UK, and we've only been going for a year. We have good margins, and that demonstrates the size of the market we're in."
Sinclair says the business has won "big supermarket contracts" and already includes HMV, Richer Sounds, Carphone Warehouse and Virgin Phones among its customers. He reckons the transparent marketplace he's invested £2m on building, and the good recovery rates—"retailers can double the money they recover from excess stock"—are winning him new business. But he admits it's still "very hard" to build relationships with big retail groups and access a greater quantity of surplus stock for the thousands of verified trade buyers ready to purchase it.
"There seem to be so many decision-makers within these companies that you end up having 20 conversations with 20 divisions," he explains. "You have to go through the whole courting process. Getting in front of them is half the battle. And there's a conflict of interest within the warehouse [where managers often already have a relationship with their own traders]."
Sinclair has a proven track record. Before he negotiated the sale of Hotrecruit.com, the recruitment business he founded in 2000, to Trinity Mirror for £50m in 2006 he had listed it on AIM and acquired a failing competitor every 12 weeks for three years. Having "a bullet-proof finance director" was vital, he recalls. "The chief executive can get away with being creative and entrepreneurial, but if he doesn't have a high-calibre finance director there's no chance."
One of the things directors underestimate when they buy an online business, he says, is that the real value in a company culture is its people. "There's a very important team behind these efficient online businesses. They make the thing work, live and breathe. You can't just buy an online business and plug it in somewhere-if the entrepreneurial culture isn't harnessed the essence of the business can evaporate."
Sinclair has started other ventures, too. A hotel and VIP members' club in Verbier, Switzerland, and a student bar chain in Bournemouth and Oxford that will expand to 20 sites in the next three years. Each has its own independent financing strategy, confirms Sinclair, adding: "I've never experienced such a tough environment [in which] to raise money."
Investors are more risk-averse, he adds. "They're scared to make decisions in case they get it wrong." His advice to start-ups? "Find ways to get friends, family or high net-worth individuals to invest in the concept. A proven concept gives you the ability to go and get some proper money."