Spending hours behind the steering wheel of a car while working for her former employer gave Rachel Davidson both the time and the inspiration to think up a new business idea. Realising that the world of audio books needed shaking up, she launched her own business, and hopes to be hearing the sweet sound of success in the near future.
Name: Rachel Davidson
Business: AudioBooks4Hire.com Ltd
Type of business: On-line library for audiobooks on CD, providing a wide range of titles and genres to our UK membership
Start date: June 2005
When did you first decide you wanted to start your own business?
It was something I’d been mulling over doing for a while as a general re-think of my ‘life-strategy’. I had the true epiphany moment after a hard day and night at working for a US based IT business consulting firm. Driving back home in the early hours of the next morning I realised that working this hard for a distant American paymaster just didn’t make much sense and that I might as well work that hard for myself and get the rewards more directly. It was clear to me that continuing to clamber up the slippery corporate career ladder was not what I wanted to do – and especially so when I factored in wanting to have a family. Whilst setting up the business I fell pregnant – this and the subsequent arrival of a baby daughter have continued to keep me focussed on why I wanted to be my own boss and why the business has to succeed.
Tell us about your business
It’s an online library for audiobooks on CD, providing a wide range of titles and genres to a UK only membership. Our customers love to listen to audiobooks during their spare, ‘hands-tied, brain-bored’ moments, but find purchasing the books too expensive and wasteful, and don’t find it convenient to use their local public library’s audiobook rental service.
Was it your first business idea and where did it come from?
It was the first business idea that I’d had that really did seem to ‘have legs’. I had to do a lot of driving around the country in my salaried job and could easily spend more than 3 hours per day on the road at least – much more on other days. This time was effectively ‘dead’ time – I’d catch up with phone calls on the hands-free and work my way through the CD changer selection in the car. Pleasant as this was, however, I wanted a more productive and interesting way of spending the time and wanted to listen to a book. But audiobooks can easily cost £10 – and I was getting through these books in just three or four car journeys. Membership at the local library wasn’t an option either - it was very hard to get to a library to pick the books up and then guarantee that I’d be able to get the audiobook back to them on time to avoid the inevitable penalties. My most avid consumption of audiobooks was when I was able to borrow a work colleague’s collection – with him delivering the books to me at work and then being able to simply return them to him a couple of days later. I thought, 'if only there was a service that could post these books to me at work or home for a small fee – then all I’d have to do is get it back in the post to them when I’d finished'. Having been unable to find any other companies who provided a service such as this in the UK it started to become clear to me that there was a potential market-need out there
Was your decision to start a business inspired by any other companies or individuals?
My father’s experience in setting up his own company and having a much more enjoyable time working for himself rather than the corporate career he’d pursued for 25 years was very influential on me. It made it clear to me that there were other ways to earn a living than just working for a big company.
What makes you think there’s a market for your business?
Initially, the fact that I was so keen to find somebody who did this service. I reasoned that if I wanted this service then surely other people did too. But gut-instinct alone wasn’t good enough so I did research the whole audiobook and rental market. The USA marketplace, in particular, gives me confidence in the future of the UK market. The audiobook rental market in the States is huge and sustains tens of companies doing exactly what I do, but covering the North American marketplace.
Once you’d decided to start a business, what did you do first?
I started playing around with figures to see if a viable and profitable business was possible. I tried out lots of different pricing models to see which ones were the best and what numbers could potentially result. Having done this rough sketch modelling and reassured myself that the economics of such a service where positive I then set about doing more research.
What research did you do?
I researched a lot. I looked into the practical aspects of setting up a company, the laws governing patents to see if they could apply to my idea (they don’t by the way!). I researched all aspects of audiobooks, from the publishing perspective right the way through to the consumerism of audiobooks. I also conducted a paper-based questionnaire asking about general views of audiobooks and then in particular about the rental of them. As I’ve said, the USA audiobook marketplace provided a great deal of research rich-pickings and optimism. I also researched the UK competition (both direct and indirect) and used these to assess what I did and didn’t want to do with my company. All in all I spent about 9 months gathering data and figures.
What advice did you seek?
I used Business Link – both the website and the local branch – and found their checklists and general guides to be useful starter points. The local Chamber of Commerce has also been helpful in providing a form of ‘mentoring’ scheme. But this has proved to be a bit too ‘reserved’ for my liking. I am still looking for a mentor who I can consider a real shoulder to lean on when I have ‘dumb’ questions to ask and want to sound out an idea with. This is something that I know things like the Princes Trust do well – but I’m too old to take advantage of. I found my bank very helpful with business plan formats and tips to consider for the financial planning side of the business plan and the Startups website was good to go to for inspiration and valuable guidance.
What other help did you get?
Overall I’ve had a lot of help from other areas. My friends and family have been invaluable to me when my motivation and confidence has flagged. One of the best tips I got from Business Link was how to find a good accountant. I now have a good relationship with a local firm who have been brilliant at providing guidance on all things financial and have also helped introduce my business to local financiers etc. Feeling that I’ve got an accountant who is happy to discuss business strategy with me as well as fiscal policy has been great.
Does the government need to provide more help to people trying to start a business? If so, what should they do?
There should definitely be a reduction on the amount of red-tape. Many of the government schemes to help small businesses out are brilliant when you first hear about them. But when you try to follow through and use them it quickly becomes clear that to get selected for them is a rather painful process. The Small Business Guarantee Loan Scheme is a particular case in point. Based upon my experience, I do believe that it is pretty near impossible to qualify for this scheme.
Talk us through the process of writing your business plan.
I used the template provided by my bank to build up all the financial spreadsheets – doing projected revenues, costs and cash flows plus balance sheets and calculating an expected break even point. But money matters are only half of a business plan. So I used some Business Link templates to plan the businesses long-term goals and objectives, the initial marketing strategy and operational requirements. I did find reading books such as ‘Anyone Can Do It’ by Sahar and Bobby Hashemi of Coffee Republic fame quite useful for tweaking the business plan.
How useful has your business plan been and do you think you’ll stick to it as your business begins to grow?
Given the effort put into this document I’d be mad never to use it again. The finance side has been very useful to go back to over and over again. The investment in building some fairly complex spreadsheets that model pricing plans and revenues has paid off because now it is quite easy for me to go back and re-model new ideas.
How much did it cost to start the business?
It has cost about £35,000 - the vast majority of which has been spent on building the website and IT systems that control the day to day operational functions.
How did you fund this?
As I’ve mentioned before the whole subject of raising finance through governments schemes or through banks was something I looked at closely and attempted. But they were either impossible to penetrate or brought with them conditions that I was not prepared to agree to. So after much soul-searching I did decide to gather private funds and savings to use.
Similarly, how are you funding your running costs until the business takes off?
The business had been specifically designed so that its monthly running costs are relatively low. So I’m happy to report that sales revenue covers the regular running costs. However, the breakeven point on the whole start-up investment is a long way off still.
Have you made any provisions for business not being as prosperous as expected? Please explain them.
My husband works full-time and I still have a part-time salaried job which is flexible enough to fit around my business commitments. Should the business not prosper, or worse, fail completely then I shall simply resume full-time employment albeit with a very heavy heart.
When did you stop working?
I’m still working part-time at the moment so the transition to owning my own business has been a gradual change of focus to my working days. The business is what motivates me and the salaried work is definitely just a means to an end now.
Are you working from home or from premises?
The business is based out of a converted outbuilding in the back garden. I intend to continue to work from home in this manner for as long as possible in order to facilitate as much balance between family life and work life as possible.
How many hours are you working at the moment?
It is dependent upon when customer rental orders come in and the regular operational requirements of the business. Some weeks I can spend upwards of 40 hours on the business, other weeks it can be just 4 hours. The most important bit is that I can manage the scheduling of these commitments and so far I have never felt out of control.
How are you managing your day and what steps have you taking to ensure you’re able to get everything done without working around the clock?
I have a strict rule never to work weekends, but have been forced during the website development period to break this. But now that the business is up and running I am trying to stick to this edict. I am by nature rather organised and find that being tough on prioritising tasks into ‘very important and very urgent’ through to ‘not important and not urgent’ categories helps to keep me focussed during the working day.
What about staff, is it just you?
At the moment it is just me running the business. I want to keep it like this for as long as possible and would prefer to employ family members before employing ‘outside’ people purely to cut down on the amount of red-tape that employing staff brings with it.
Is the amount of red tape that comes with taking on an employee something that concerns you?
Yes. Inevitably if the business is to be as successful as the business plan hopes it will be, it will be necessary to employ a larger workforce. However, my long term aims are to outsource and sub-contract as much as possible whilst keeping the core business activities under the control of a small group of employees to minimise the impact of employment red tape.
What marketing and advertising have you done so far?
I did a direct mailing to launch the business – but this has not produced the results I would have liked. Nevertheless it was a useful exercise and the investment in artwork and copywriting is not lost because these can all be reused in other marketing campaigns. Other marketing efforts are focussed on advertising in corporate employee magazines, sponsorship and PR opportunities and web optimisation activities to ensure good listings on Google. But the best marketing foundation to build is the ‘holy grail’ of word of mouth recommendations. It is this tactic that I hope to exploit the most during 2006.
Where do you hope to be in 12 months time?
I would like to be at least 10% above target on customer numbers and have been able to give up the part-time salaried work to concentrate full-time on the business.
What are the main obstacles to growth?
The ever present worry of cash flow. The start-up fund is spent now and so the business now has to ‘wash its own face’. For example, a key expenditure for the business is refreshing the library stock to ensure that the latest books are featured. The planning of these purchases has to be done very carefully. Not to spend the money could strangle the business growth, but to spend too much or choose unwisely would also be dangerous for cash flow.
How do you plan to overcome these?
I hope to negotiate better terms with my suppliers and to keep a very close eye on the business accounts in order to manage cash carefully.
Tell us about your website.
The website IS the business! It is the only channel to market that I have and so is absolutely crucial to the success of the company. In order to support the business and pricing model that I wanted it was necessary to commission a fully bespoke website and supporting database and so I employed a third-party software consultancy company to do this. The development project was much longer and more arduous than any of us thought it would be. But that is the nature of IT projects – and especially true of bespoke projects. Luckily, I had written a detailed functional design document, which stated each piece of functionality that the website needed to provide, and had negotiated a fixed-fee for the project. So the delay to launch, whilst costly in terms of delaying the day when sales revenue arrived, was not costly in terms of having to pay more for the website systems. Whilst specifying how the website should operate I found Steve Krug’s ‘Don’t Make Me Think’ book invaluable for keeping me focussed on the things that would add to the usability of the site and to avoid obvious mistakes. The functional design document turned out to be a very valuable document and has paid back the effort to write it many times over. It has been the governance document to keep the third-party company on track and keep everyone focussed. I’d recommend writing one of these to anyone who needs a complex website!
What have you found difficult about starting up and what do you wish you’d done differently?
It has been hard to keep my motivation up at times and certainly there have been days of great despair when I have been convinced that I must be insane to put myself through such stress. Looking back I’m not sure that there is much that I would do differently – because even my mistakes have taught me some valuable lessons and so I’m glad I made them! However, I am now obsessive about chasing up suppliers on a regular basis to ensure project delivery dates don’t slip and I always operate with the mindset that mistakes will happen and manage accordingly. That way I can manage the risk before the disasters happen!
What skills and personal characteristics do you need to start your own business?
I think you need to have high self-confidence in the first place and then back this up with determination and persistence. There’s a Calvin Coolidge quote which goes:
“Nothing in the world takes the place of Persistence; Talent will not, nothing is more common than unsuccessful men with talent; Genius will not, unrewarded genius is almost a proverb; Education will not, the world is full of educated derelicts; Persistence and Determination alone are omnipotent, this slogan present and always will solve all the problems of the human race” It is to this quote that I look whenever I encounter an obstacle to my plans or when I’m dealing with an obstinate supplier! It reminds me that these are the fundamental skills that a business-owner needs to have.
So what advice would you give to anyone thinking of starting a business?
Be sure that it really is what you want to do – because your faith will be tested many times over and try to find a way that means the challenge ahead carries as little risk as possible. That way when the going gets tough the stress of it won’t paralyse you. Business is of course about taking risks, but they should be calculated risks as much as possible.