This is the 22nd chapter about CitNOW, the company started from a kitchen table in Winnersh, Berkshire. If you’d like to read from the beginning, here’s a link to chpt 1. Each chapter is a 5-minute read. It’s an early draft of a book.
CitNOW was founded by Andrew Howells and Donna Barradale in 2005, although the company was only registered in 2008. In February 2018, we sold the company to Tenzing, a UK private equity company. It has been sold again since.
I recently read a quote by James Clear (author of Atomic Habits**) in his 3-2-1 newsletter. It resonated.
There are many ways to win in business, but there is one surefire way to lose: run out of money. Entrepreneurship is a game of survival.
Our first significant moment had arrived. BMW’s endorsement meant we had our biggest month, quarter, and year rolled into one. The new sales app, delivered on a simple-to-use iPod was suddenly a hot product - well, that’s what it felt like to us. We’d also achieved it with a significantly underfinanced company where our sales forecast, vital as it was, was always second to watching the bank balance.
Alistair often recounted later to our growing list of employees about the old days and how he used to ask the same question at our monthly meetings - how much do I need to sell this time? There was certainly some simple maths going on. We knew what our monthly overhead was and our need to exceed it to continue investing in the future.
We had no clear end in sight beyond the usual five-year timeframe to sell, which, of course, was total nonsense; it took us twice as long. Our plan consisted of a spreadsheet and an executive summary for reference, which proved to be most useful when dealing with banks. The secret is not to waste too much time because the numbers are never correct and out of date as soon as you finish. It’s surprisingly difficult to predict the future of a start-up.
Even though we were enjoying a significant increase in monthly licensing revenue due to the BMW group sign-ups, our costs also began to rise. For a start, Alistair and I needed outside help to train all the new BMW and Mini dealers. We enlisted freelancers to help because we had deadlines to meet as new orders continued to arrive. Neither of us wanted to train every day when there were now so many more opportunities to win new business. Equally, a day when we trained meant less cost because we were already bought and paid for.
It was why we decided to hire Martin, our first grown-up employee and full-time trainer. We had more work than he could ever have coped with, so he got a big tick when he announced his near immediate availability. After a short one-week induction, spent mostly in dealers where we were each training in different parts of the country, Martin spent the next seven years showing us how it should be done.
Having launched an app, we wanted to share it with as much of the industry as possible. The most effective way was to attend one of the Automotive Management (AM) events and advertise in their magazine. We hadn’t reached the dizzy heights of being a speaker on stage yet, but we could purchase exhibition space, which allowed us to meet some of the dealers attending. We, with others, were the entertainment during coffee breaks and lunch.
We might have been adding to our cost base, but we’d have been crazy not to be there. It proved one of the best ways to gain attention, as was our growing relevance as a news creator. We also hired a PR agency - the two Andys - as soon as we could afford them - the steady drip (and monthly cost) steadily improving our awareness in the market.
This was all good news, but we still had to find a solution to the debt we had built up with Codevio, and we needed to see more working capital if we wanted to make the most of the opportunity we’d been given. The problem was well illustrated by the simple fact that we now had to buy lots of iPods from specialist wholesalers, trying to obtain credit terms to buy time while we waited for dealers to pay.
This is not a criticism of our customers. Dealers were nearly all prompt payers on standard 30-day terms. It also helped that we sent out monthly recurring invoices for the CitNOW service.
I’m sure you’ve heard this story many times before - the banks were never our friends when we really needed them.
Donna and I had initially opened a business account with HSBC because Donna banked with them, and there was a convenient local branch. I think the overdraft facility was limited to £5000 when we started. We were always shopping around because our business was compromised as we constantly butted up against our limit. Donna was having to spend too much time on the phone trying to clear payments so we could fulfil our growing list of orders.
Regardless of our business plan and the quality of our client base, no bank would even consider the sort of overdraft facility we needed unless we were prepared to accept a charge on our properties. They all made a big fuss about having to insist on such a draconian step, and despite such a move, their main concern was us, so they said, who they wanted to help and protect from the unthinkable thought of ever having to repossess our homes.
Despite such contradictions, those were the rules because they protected themselves from the stark reality that 90% of start-ups fail, most doing so between 2 and 5 years.
We owed Codevio over £100,000 and needed a similar amount in working capital. The only way we could see to resolve the outstanding debt was to sit down with our Scottish friends and explore whether they had more of an appetite for risk and a more permanent future working with us.
*CitNOW was our company’s trade name before we sold it in 2018.
** Atomic Habits, written by James Clear, is a comprehensive guide to changing your habits. It has sold over 20 million copies
Great days Andrew, I remember turning up at 44SBC with the rain clattering on the tin roof thinking it wasn’t the plush office I expected however the enthusiasm of yourself, Donna and Alistair plus Rachel and Stevie in the office consolidated my belief in the product. My first impressions when I met you and Donna were that this feels right and the product has legs. What legs it had, all down to a few people believing initially then thousands of converted believers. It was fantastic to be a small part of such an influence on the motor industry.
"A bank is a place that will lend you money if you can prove that you don't need it."
Bob Hope