Surf Cat

Countless startups are launched because their founder was driven to ‘scratch their own itch’, solve a problem they’d encountered and monetize the solution. Moneypenny is no different.

A major provider of telephone answering, live chat and outsourced switchboard services, Moneypenny handles more than 15 million calls and live chats a year and employs more than 750 people in the U.K. and U.S. And it started after its cofounder Ed Reeves lost a business customer because of a poor answering service.

He hadn’t planned to become an entrepreneur. As a teenager he had no firm career plan, but studied sports science and business studies at college simply to experience student life. After graduating, his dream was to become a professional windsurfer, but that didn’t go to plan and instead he opened a windsurfing shop in Wales.

He says: “In the first year I chased sales over profit which was a big mistake. I was young, 23, and naïve, and it took me a while to realize that I could charge 15% more, halve my turnover and still maintain my 30% margin.”

The experience taught him some valuable business lessons, not least that people buy from people they like and trust, and that trust creates loyalty and loyalty builds businesses.

“I quickly learned that the best staff were the people who smiled the most,” he says. “Often the happy ones weren’t the most technically knowledgeable, but they always sold more. That’s one of the basic principles of Moneypenny today.”

In 2000, whilst away windsurfing in the Canary Islands, Reeves had hired an answering service to handle his business calls. When a customer rang to say they were unable to fax an order through, the person who answered the call told them they couldn’t do anything about it because they were ‘only the answering service’.

Reeves lost the customer and on his return to the U.K., teamed up with his sister Rachel Clacher, to work out why the person answering the phone can’t feel truly responsible for the business they represent.

“There were hundreds of small companies calling themselves call centers, which wasn’t what micro businesses wanted,” he says. “They wanted relationships, professional support, and someone who they knew and trusted, handling their calls as if they were based in their offices.”

He and Clacher came up with the idea for Moneypenny which would offer such as service, and knew that its success would depend on the right people, technology and marketing. “We hired people based on their attitude, and provided them with training, a stunning working environment and a culture that would make them want to stay.”

Technology was the biggest challenge, and Reeves admits that had they known how tough that would be to crack, they wouldn’t have started the business. Funding was another. The cofounders only had around £15,000 in cash, and the banks rejected their requests for loans. “The only solution was for us to generate a positive cash flow from our clients, or we’d never get off the ground,” he says.

That solution came via a direct debit facility. This allowed them to charge clients an all-inclusive rate up front to use Moneypenny’s services. It was a bold move in an industry where everyone invoiced their clients at the end of each month according to how many calls they’d handled, but it worked. They could now recover their marketing costs before they had to pay the marketing bills.

“We’d built a cash-free growth strategy and to this day we’ve never required any operating debt,” says Reeves. “We wouldn’t have conjured up this solution if we’d had plenty of finance behind us and it’s a lesson to all that being frugal doesn’t necessarily mean growing slower. With more cash, we might have grown a little quicker, but we’d never have been as profitable.”

With the U.K. business thriving they turned their attention to the U.S., and a market dominated by thousands of small call centers providing generic scripted call handling, much like the U.K. market a decade earlier.

Reeves says: “It wasn’t a question of whether the demand was there, but whether we could recreate the same ‘magic sauce’ that made us so successful in the U.K.; our people. The answer was a resounding yes, and we have managed to replicate the exact same values, attitude and ethos among the U.S. team.”

A large part of Moneypenny’s success is due to its adoption of new technologies that enable it to use the huge amount of data generated from the tens of millions of calls being answered, notated and categorized every year.

“We have the best informed and most accurate speech recognition enabled switchboard software, and we’ve incorporated learning algorithms into our Live Web Chat software, which will ultimately automate a large proportion of our clients’ enquiries,” he says.

Reeves recently brought ECI in as a private equity investor. He says: “We knew we could keep the company as it was and it would double again over the next few years, but we felt it was time to take some money out. Rachel had stepped back from the business to focus on her charity work, and was looking to reduce her holding.”

He also insists that PE is not an option to be feared. He says: “There are endless tales of woe out there, mostly from early stage enterprises pointing the finger at the investor in the event of a failure. Moneypenny is different. There’s no speculation, and no need to prove whether we can perform. The investors’ goals are precisely aligned with mine, we both have large amounts invested and we both rely upon and support the management team to maximise the return.”

Moneypenny is on track to turn over around $50 million over the next year, and Reeves is under no illusions that it is the people who have made the business what it is today. He says: “Surround yourself with people who are better at every single thing than you are, and if you do one thing brilliantly, be the best recognizer of talent there is.”