Mike Welch launched his tyre business, BlackCircles.com, 12 years ago, but he still feels like he is just getting started, writes Erikka Askeland.
Welch, whose company has enjoyed an average 30 per cent compound growth in sales per year, refers to himself as “the perennial apprentice”. But then, having the likes of Kwik-Fit founder Sir Tom Farmer and former Tesco chief Sir Terry Leahy as masters probably does have the effect of making him think there is a lot yet to learn.
There is no doubting that the sturdy growth of the company has been a slog, but Welch has built BlackCircles into a pioneering “click-to-fit” tyre retailer and there is no sense that he is weary.
Instead, the company has everything to play for. Last year, the firm signed-up 200 tyre centres, bringing the total number of garages across the UK that fit the tyres they buy on BlackCircles.com to 1,750.
Perhaps more importantly, the group is in talks with Tesco, to grow its partnership. Three years ago, when Leahy was still at the helm of the supermarket, the pair joined forces to launch TescoTyres.com. The venture has evolved and now 45 per cent of BlackCircles customer collect Tesco Clubcard points with their purchases. But it is the next few weeks that is set to bring the “next phase” in the tie up.
Welch admits: “It feels like we are just getting started now. Strategically, we are working on how we can engage our customers in the Tesco environment. We are working on how that manifests itself. It is conceivable that some format could be developed and delivered. I’d quite like to see BlackCircles owning some format in a Tesco space.”
The genial Liverpudlian has not lost his Scouse accent, despite moving to Edinburgh as a 20-something, having been recruited by Farmer to develop a website for Kwik Fit.
Frustrated that he would not progress further in the company, he left a year later and launched his own business, becoming a bit of a start-up wunderkind at the time.
He remains a little obsessed with Kwik Fit, although the company’s current loss-making state saddens him more than it sees him licking his lips over the prospect of muscling in on its business. “I’m a big Kwik Fit fan – I have followed them all my days,” he says. “I was really sad to see the private equity effect on a business I love, which was just stripping the veneer off what was a really cool business.
“What I would like to build is a brand to the kind of customer recall they have – which is no mean feat. When you ask people about tyres, Kwik Fit rolls off the tongue, so we have a big job.”
BlackCircles is growing, but Welch has grown his company the hard way and he is proud of the fact that the business remains debt free. Accounts due out soon will show that sales last year grew 30 per cent to £23.2 million and that profits doubled to £600,000.
The company estimates that the UK tyre market contracted by 13 per cent during the same period – a decline that has continued for two years while consumers have kept their cars running on old tyres so they don’t have to splash out on new ones.
He recalls, in the run up to the banking crash, being approached by HBOS to take on debt. “We were really just banging away trying to build the business,” he recalls.
“We were making hardly any margin at the time and many people were scared of this internet thing. Even now, the industry still thinks it is some kind of voodoo.
“We were approached by HBOS, who were doing this interest-free money thing, as much as you want, fill your boots. It was like Supermarket Sweep but with no Dale Winton,” he jokes.
Graeme Bissett – who became BlackCircles’ chairman after leaving his role as Kwik Fit finance director – advised caution. “Graeme’s challenge to me was ‘what would you do with all this cash?’,” Welch explains. “And I didn’t have anything I would do with it. Our business has all its constituent parts – the supply chain, the garage network, the call centre. You can get your arms around it. And once you improve one bit, you can improve the next.
“There was no one thing we wanted to buy. To this day, we have no debt. If we can’t afford it, then we don’t buy it.”
He admits this strategy “isn’t great for the business” and “old school” but adds, “if we can’t justify it – we don’t do it”.
Yet, by increments, he has been adding further functional aspects to the business. Late last year, the company offered financing for the first time to lure people into buying winter tyres, which will be launched across a range of its products in this quarter.
“If customers are paying £10 a month on a £120 set of tyres – and you are about the same as the other guys on price and you have a good relationship with that customer – then it is simple stuff,” he says.
The other part of the company’s prospects is based on information – all its buyers are signed up and logged in, which gives the company a better understanding of its customers.
“We are heavily reliant on data in our business. We get tonnes of it. We did come to a stage where we had too much – we didn’t understand it.
“But now I get an e-mail that tells me key moving parts of the business – the visitors to the site, the conversion to sales, the margins, the mix. I can drill down. I get my main numbers and I can assess where we are.
“I can see in six or seven numbers what is happening. We all get that in the business. It is the heartbeat of the business.”
But nor was the technology some expensive piece of management software, instead it was seemingly cobbled together from “a few software packages here, a bit of outsourced development there”. Welch adds: “We’ve just got a really good head of IT.”
He insists that BlackCircles is a web-based business, not an e-commerce business, an important distinction when he discusses the network of garages where people have the tyres they buy from the website fitted.
He prefers bringing MOT centres – more regulated than the street-corner garage – into the network. The company has developed a franchise system comparable to that of internet florist Interflora.
“The business driven to the tyre fitters by BlackCircles – sometimes 40 per cent of the garage’s turnover – provides the MOT centre owner with a genuine “win-win”.
And Welch has big plans. “I am the perennial apprentice. Under Tom Farmer’s leadership, I got an education on the industry. Graeme Bissett coached me in a way that has been invaluable. And Terry [who is now a 25 per cent shareholder in the firm] has raised the game.
“We want sales of £100m in the next five years. There are things we are doing now organically that means will not be too far off that. But there will be things we will need to do to give the business a shot in the arm.
“The most important part of that is making sure customers know we exist.”
30 second CV
Education: Liverpool comprehensive
First job: Tyre fitter
Ambition while at school: To make people laugh
Favourite film: Wall Street
Kindle or book? Both
Music: Gerry and the Pacemakers, You’ll Never Walk Alone
Can’t live without: Victoria
Claim to fame: Used to be an amateur boxer
Favourite place: My kitchen
What makes you angry: Bad service and selfish business climbers
Best thing about your job: That I love what I do