MY BIGGEST mistake was to think that founding a credit hire company would provide us with a cash cow. As it turned out, we got the right answer, but for the wrong reasons.
A friend from university, Alec Newsham, came to stay in 1992, when I was working as a GP in Bath. We went to the pub and he said: "Have you ever heard of something called credit hire?" I said no, and he told me about a company in Leeds. If you've had an accident in your car and it's not your fault, the company would supply you with a replacement and give you credit while it collects the money from the insurance company. I said, "What a brilliant idea - why doesn't everybody know about it?"
Alec and I started writing figures on the back of an envelope, trying to do a business plan. We came up with a brilliant concept, after I can't remember how many beers, that after a few months it would be producing huge amounts of cash. Alec decided to set up business in Leeds, and I got together a group of friends and investors to found Helphire, and the rest is history.
Of course, if you know anything about credit hire, you'd realise that you don't get any money back from insurance companies for anything up to a year. You buy your cars and put them out on hire, but you don't get paid. You behave like a bank - you loan people money. As soon as it stretches beyond three months, it goes cash-negative. But there was huge demand and little competition, and as long as our rates were reasonable, the insurance companies didn't have any option but to pay.
Luckily, we realised it wasn't going to be a cash cow for some while. We realised it was going to be a company that used up a lot of money. There were 16 private investors who capitalised it in such a way that it didn't need to use borrowed money for the first two years. This avoided a mistake that a lot of small businesses make: they have to please the banks rather than do what is commercially sensible. Rather than worrying about the bank we were able to get on and run the business.Reuse content