“Own Your Own Customers”

If you are trying to build long-term value in a business and create something that you might want to sell in the future, then the issue of customer ownership needs to be very high up your agenda.

Our fundamental business model since the early days of telesales has been a sell-direct-to-the-customer approach, in which we find the customers, do the selling, contract directly with the end customers, invoice them, take the credit risk, and then collect the money. Not only does owning this complete life cycle give you a higher margin opportunity, but you are also then free to market additional products and services to your customers and build on this direct relationship. This cross-sell opportunity is becoming increasingly important to Radius as we diversify away from fuel.

The downside of this model, though, is that it is a high-cost, high-operational-management one, which means it inevitably takes quite a long time to both build the business as well as get a financial payback. For us, as the overall business transitions from one that was fuel-card-only for the first twenty-five years to one in which we are now a wider mobility and connectivity supplier, this direct-to-customer access is proving a critical differentiator and helping us add enormous value. Not only are we able to create very low-cost leads from our base of four hundred thousand existing customers (mostly in the fuel division), but we have also found that we get a double benefit of them becoming more sticky, helping us to dramatically reduce our churn rate.

This doesn’t mean that we don’t do any indirect or white-label business, only that we see this channel as one that helps to give us scale and capabilities rather than as our core source of income. Today, across all the divisions, we are about 75 percent direct-to-customer in terms of volume and over 90 percent with respect to gross profit, which we believe is a good balance and one that we want to maintain going forward.

In some ways, having a direct-to-customer model has slowed our growth versus some of our competitors, many of whom operate on a purely indirect basis. This is especially true in telematics, where companies such as Geotab, the world’s largest company in this sector, have seen exponential growth through their global reseller relationships. However, for us, by operating in the direct-to-SME space, we think this approach gives us a unique position with higher margins and greater overall sustainability in the longer term. As I said earlier, we believe it is also helpful when it comes to business valuation, as having lots of direct customers can make a material difference to the EBITDA multiple someone is willing to pay for your company.

As you build this base of valuable customer data, you also have to continually improve the way you protect it. This might be from either external cyberattacks (which are now almost a daily occurrence) or something much more old-school, such as when a devious employee leaves you to join a competitor with a list of your customers. This particular issue has been a constant challenge since the early days, and I thought it might be useful to give you a taste of just one incident that happened over twenty years ago, when one of our employees left and then sought to profit from selling our data to a competitor.

For a little background, one of the advantages of our original JV structure in the UK was that customers often moved between our different brands without necessarily realizing that the companies were part of our wider group. As we operated these JVs in a very hands-off way, even most of the sales employees were sometimes unaware of our group structure, and we just let them compete freely with each other in the marketplace.

Well, one morning I received a call from the MD of our JV in Burnley, saying he had been contacted by a salesperson who had recently left our UK Fuels team in Crewe. The guy was offering to sell a spreadsheet containing the full contact data of several thousand customers that he had downloaded onto his laptop just before he left. He said he was offering it to them first, and if they weren’t interested in it, to just let him know so that he could then try one of the other fuel card companies in the area.

Once I heard about it, I definitely didn’t want the risk of this happening and was desperate to try to get our data back as fast as possible. I immediately contacted the local police in Burnley to tell them about the theft and said that if they thought it was useful, I could arrange for someone to meet this person and pretend to be from our JV so that they could potentially arrest him and retrieve his laptop.

This was definitely out of the ordinary for the local constabulary; however, I eventually persuaded the station chief to take me seriously and said I would drive up there immediately and meet him to agree on an exact plan for the sting. At the same time, I contacted an old friend of mine who lived locally, who agreed to play the part of the willing buyer, given that we did not want any chance of anyone he knew being recognized.

The MD from Burnley got back in touch with the fraudster and agreed to a meeting at two in the afternoon at Banny’s, a famous fish and chip restaurant at the end of the M65. After I explained my plan to the police chief, he agreed to send a van with three officers to wait around the corner until the guy arrived and showed my friend the data on his laptop.

I waited in the car park to watch from a distance as the trap was sprung. At about a quarter to two, the officers stormed into the restaurant, and the fraudster was arrested, read his rights, cuffed, and put in the back of the van.

I then went inside and met up with my mate for some well-deserved fish and chips to thank him for helping before heading home after what had been a pretty tiring day. After a night in the cells, the guy was eventually released, and although he only ended up receiving a caution for his crime, we got our data back and knew that he wouldn’t be doing anything like that again anytime soon.

The moral of the story is to own your customers and protect this very valuable data with your life.