Scott Fletcher: How I kept afloat in the dotcom bust
James McKeigue Jul 26, 2012
Scott Fletcher succeeded where others failed
By 1996 Scott Fletcher, then just 22, had already seen two of his employers go bust. But he wasn’t bitter. “Both companies gave me great experience. I saw first-hand how not to run a business.” In particular, he learned the importance of cash flow. “They were good firms and with a bit more financial expertise they could have done well.” Rather than risk a third disaster, Fletcher decided to launch his own business, ANS Group.
His plan was to take over where his old employers had left off – installing and maintaining IT systems for corporate clients. He was given a headstart when his old boss gave him the green light to contact existing customers. “Not everyone wanted to switch over, but within a week I had £100,000 of contracts.”
He hired four of his old workmates, including his father who had previously worked in the same firm. “He was 50 and I was 22 so it was a bit weird being his manager but it worked out well.” He saved money by putting some of his new employees on training-for-work schemes. “I had no cash but I invoiced clients one month in advance and paid employees a month in arrears. I used credit cards to balance the difference.” He also took on a partner who handled customer service and administration.
By keeping a tight grip on cash Fletcher managed to succeed where his two previous employers had failed. The economy had picked up steam by 1996 and the arrival of the internet meant clients had to overhaul their IT infrastructure. By the end of the first year sales had reached £300,000. After two years Fletcher bought out his partner (“she wanted to take the money”) and brought in a new one, Paul Sweeney.
Another former colleague, Sweeney was “the best salesman I have ever seen”. The pair had worked together for years and “the only reason he wasn’t in the business from the start was that he had just started a family and needed security”. The pair hammered out a deal: “we didn’t waste money on lawyers or contracts, we just wrote it down on the back of a beer mat and shook hands”.
Sweeney’s sales nous pushed revenues up to £1.5m by 2000. Now the pair decided to list on Plus, the British stockmarket for smaller firms, to raise extra finance. “It was the dotcom boom and valuations were crazy.” They sold a 30% stake in the firm for £1.5m. A chunk of the money was used to buy a rival. “Sometimes you need to buy a firm to breakthrough to the next level.” Then, just after the deal had been done, the dotcom bubble burst.
Fletcher decided to “sit on” the remaining cash and wait. That decision meant the firm was well-placed when IT spending began to pick up a year or so later. In 2006 they snapped up Bios, a British firm that was a Cisco partner. It proved a shrewd move that helped drive sales.
ANS Group was also an early mover in cloud computing – the technology that allows firms to outsource some of their IT needs. The pair began specialising in the equipment, software and skills needed to help clients. Another acquisition in late 2010 gave ANS yet more cloud computing expertise and last year the firm’s sales hit £44m. The pair have now delisted ANS Group, because “the market valued the firm too cheaply”. Fletcher, still only 38, has his sights set on expansion.
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