This is the story of BeatThatQuote.com, a company that started life in its founder’s living room in 2005, and scored a turnover of £1m in its first year. Not many entrepreneurs have the kind of business idea that translates into first year profits of £100,000 and even fewer can go on to expect second year profits of £3m, on a turnover of £10m. With such impressive credentials it’s not hard to see why the price comparison site received top honours at this year’s Startups Awards.
But the man behind the NatWest Business of the Year 2006 is commendably gracious in victory, given his level of success. In fact, he seems to be genuinely surprised by this accolade. “I really didn’t expect to win,” protests John Paleomylites, whose fledgling company also scooped Online Business of the Year in a category sponsored by BT. “I thought the subject matter was too dry and the company too young.”
The age of the business undoubtedly played a considerable part in securing the judges’ votes. After all, this is what puts the financial success into context and illustrates the company’s startling growth.
BeatThatQuote generates leads for financial services, such as mortgages, loans and bank accounts, finding consumers the “best deal” based on their individual profile and saving them time by comparing and applying for these services online.
The price comparison service is free, so revenue comes from introductory fees paid by the service providers for “high quality, permission-based leads”, or leads based on a consumer’s individual needs when they are actively seeking a product.
“Most of our data is sold on a ‘cost per lead’ basis, but around 20% of data sales are based on commission if the consumer buys the product”, says Paleomylites.
The runaway success of BeatThatQuote can be largely attributed to extensive market research from the founder, who, at 40, is no stranger to this entrepreneurial game. He set up his first business, a data-security firm called JCP TrustBase, in 1994. In January 2000, he sold it to global IT corporation Sun Microsystems, for £40m.
After closing the deal, Paleomylites took up a position at Sun as director of financial services software worldwide, where he remained until September 2001 when he left to “doss around for a while.” It was during this time spent ‘dossing around’ that the idea for BeatThatQuote came about.
“The idea first started to take shape during a conversation over a pint with my old colleague, Thomas Adalbert,” says Paleomylites. At the time Adalbert was running The Preference Service, which held the largest paper database in the country and used it to match advertisers with willing consumers.
“Thomas advised me that the data market was moving into the electronic arena and permission-based marketing,” he continues.
After receiving this tip-off, Paleomylites started doing some speculative research. He began looking into what sectors used the internet for marketing, and found that 27% of online searches focused around financial services. He also took inspiration from the Intuit model, an internet-based lead generator for mortgages in the USA.
The serial entrepreneur spent a year researching ideas from his dining room table, making sure his business model was sufficiently refined, before launching BeatThatQuote from his living room in February 2005.
“When I first launched the business I was using very little equipment other than a few PCs. The web servers were securely hosted on a rental basis and the initial software we used was built the year prior to launch by myself and a couple of friends.”
“To make the first sales I approached a couple of ‘friendly’ clients that I knew previously. They started us off with a couple of smallish orders from which we started off the business.”
Father-of-three Paleomylites insists that his company’s success is largely down to the thorough planning stage, which enabled him to identify the clearly defined market that it serves, and he advises other budding entrepreneurs to follow suit.
“If you have a new business model that is yet to be established, how you will make money is not clear cut. If you have a tech-based business you need sufficient time to refine your business model before you launch to ensure that it becomes profitable.”
The company was financed on a £40,000 limit on a credit card, which funded the marketing spend, and a £500,000 guarantee to the bank, to aid cashflow.
“The BeatThatQuote.com web site was built from the ground up to be ‘search engine friendly’, so we very quickly started to get some consumer leads from natural search. We quickly added paid search and email marketing as the business grew.”
In August 2005 Paleomylites moved the business to a small, serviced office in London’s Kentish Town, with three members of staff recruited through his network of contacts, and at the beginning of 2006 he appointed Adalbert as sales director. The company has remained in the same office ever since, but is taking up more and more space as the months go by.
So what does the future hold for BeatThatQuote? “In February 2007 we plan to expand our product base into what our research revealed to be the next biggest markets – utilities, travel, retail and telecommunications.”
At present, the company has 26 members of staff and deals with hundreds of thousands of consumer enquiries each month. It deals with around 60,000 mortgage enquiries alone each month and processes over 15,000 applications.
With so many consumers using the service and plans for sustainable growth, it’s no wonder that investors are falling over each other to get involved.
“We’re approached by venture capitalists about twice a week, but luckily we don’t need the money”, says Paleomylites, whose company has been cashflow positive since day one.
But it’s not all bad news for investors. “There will be a trade sale or IPO at some point”, Paleomylites reveals, “but there’s no time-scale for that”, he adds quickly.
Watch this space.