With a cool £20m in the bank, Dave Atherton can’t be blamed for spending the years since he sold dabs.com to BT, enjoying a life of leisure.
He bought and did up a luxurious mansion, bought a house in Spain and also bought a 39ft Winnebago that he later discovered could not be driven on the UK’s roads.
Sitting in front of an intrigued audience of resellers, vendors and distributors at the TCA conference at the Walkers Stadium in Leicester yesterday, Atherton was the epitome of calm, although he had admitted earlier that he was finding it more difficult to keep up with his younger channel counterparts at the bar these days.
Atherton had been invited to speak by TCA chairman Keith Warburton about how Dabs went from a three-man start-up with a £750,000 turnover in 1987 to £180m turnover when he sold it in 2006.
“I actually started with a partner, running a company called Dabs Press. Dabs was made up of our initials," he said. "We spent the time publishing books for home PC users. However, we set up a sideline called Dabs Direct, and the publishing business had disappeared by 1990. Dabs Direct was one of the earliest mail order players in the industry and it just grew and grew. I even remember our first invoice – it was for an HP Laserjet 2P printer which we sold for £895.”
He joked that he managed to get vendors to drop their pricing by promising to sell as many products as the top player in the industry.
“That is my advice to everyone – find out who is the market leader and copy them,” he said. “Our growth was all organic, and I ploughed all the money back into advertising the business. I think we kept the major IT publishers such as VNU and Dennis going back then.”
However, his biggest gamble was to take the business online, at a time when many other industry players had written off the web as a gimmick that wouldn’t last.
“I thought to myself that all our adverts were basically a database and it would be perfect for putting on a web site,” he said. “We handcrafted the site one night using raw html and we fed the accounts system and the current stock list, showing products in stock, item part codes and the price. We suddenly found that the page counter had been viewed 14,000 overnight and it was then I realised that we were onto something!”
He said Dabs ended up with 20,000 products displayed on its site, and quickly added product pictures. He claimed that because the site was available 24 hours a day, people were able to browse after working hours and take their time choosing the right product.
When asked what his single, most important decision was, Atherton replied it was to switch off the phones at Dabs.
“We used to get 10,000 calls a day, but when the phones were switched off it saved me the cost of 50 call centre agents and also a further £2-3m in advertising. I wasn’t in the habit of making staff redundant, but this was the best decision I made,” he said.
He added that he had sympathy for the current crop of channel players because technology now lasts a lot longer.
“Through the golden years of the industry, the most golden thing was the fact that PCs went obsolescent very quickly,” he said. “That doesn’t happen anymore and I think it is the worst single thing for the industry. Laptop replacements are more likely because they have been broken or stolen, although on the up side it has created a repair industry and also opened up the services route.”
Atherton said he didn’t think he would be able to build a business like Dabs if he was starting out now, but had some sage advice for resellers looking for an exit strategy.
“When taking a business to the exit point it is all about having HR fully compliant along with health & safety and insurance," he said. "You also cannot have a lot of people working on a promise – for instance we will give you so much more money when our income improves. Either do it now, or don’t do it at all. Many SME owners actually don’t tie up the loose ends and when you are part of a big sale you have to tie up the metrics about everything. It all has to be transparent.”
Because Dabs was bought by a plc, Atherton said, everything had to be exactly right.
“The main difference between private buyers and plcs, is that private buyers set the rules – they come up with a price right from the start. But a plc is working from UK Generally Accepted Accounting Principles (GAAP) and they will often offer a multiple of your profit,” he said. “Also you have to have your accounts done the plc way. It is not vague like a smaller company – it is an absolute tick box system. If they can chip away at something, they will.”
When pressed what the secret of his success was, Atherton said his main focus was on current profit.
“You have to focus on current profit. It is better to have 10 smaller accounts that pay now rather than one big one that might pay later,” he said. “We are in business to make a profit. Our function is to earn money and pay tax.”
Another piece of advice Atherton gave out was to keep the profile of the company in the foreground.
“You can’t sell a thing without a solid company,” he said. “You have to show that a company is real, tell people physical facts. Also enter awards and advertise your brand. We used to spend £100,000 a year on brand advertising.”
He said over the space of four years, he had entered himself and Dabs into 800 different awards and had walked away with 400 of them.
“Winning awards is definitely cheaper than advertising,” he added.
He finished off his advice to companies looking for an exit strategy to get some venture capital funding.
“They basically force you onto an exit track,” he said. “They want their £500,000 investment to grow and as a result this forces your turnover to grow along with it. They will also ensure the business becomes compliant and will take your business to the next level.”
However, Atherton also said that if anyone was interested in buying his Winnebago, they should get in touch.
“I paid £170,000 for it, but you can have it with just 5,000 miles on the clock for half of that,” he said.
Once a salesman…
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