No Boats to China

No Boats to China

Paul Crossley, the man behind a most unusual British manufacturing success story, tells Peter Baber why he will never outsource – and why he likes to be right first time.

Oh, Sir Alan Sugar. You may be Gordon Brown’s latest business friend, you may have kept us glued to our screens every Wednesday night this spring to find out who you were next going to fire, but there is one Yorkshire entrepreneur, who was in the running this year to be an Ernst & Young Entrepreneur of the Year, who thinks you have it wrong. And this is someone who knows his stuff.

The company he runs grew by at least 35 per cent over a three-year period, made it into the Sunday Times Fast Track 100 (‘we were number 99, but I don’t care,’ he says) and even this year stands to make £2m on a £10m turnover; down from £3.8m on £13m at the height of the boom. It’s exporting too – to Ireland, Italy, Germany, and the Czech Republic. All this from a manufacturer that produces entirely in the UK, and sells pretty much a single product – shower trays.

Such companies were long thought to have gone to the wall. Paul Crossley and Just Trays shows that they haven’t. But what did he take exception to from the great ‘Surallan?’ It’s certainly worth hearing, because it informs much of the way Crossley runs his business. In the final episode of the latest Apprentice series, Sugar gave the coveted job to Yasmina Siadatan, despite the fact that everyone hated the chocolates she had produced. Sugar said actual product quality didn’t matter at a launch, because you could get it right later. What mattered, he said, was the research and presentation. This is an anathema to Crossley.

“I have seen so many disasters,” he says. “I have been handed products that were knee-jerk reactions, or something where even the producer thought, ‘It’s not right, but we’ll launch it anyway’. Why? One man I met had a philosophy that if you had six lumps of clay and threw them against the wall, if three slid down and three stayed up you would still have three successes. Yes you would, but how bad were the other three? And what would be the impact on your business? No – when you launch something, do it in a measured way, be entrepreneurial, be inventive, but just make sure you get it right first time.” Crossley is proud to say that Just Trays has never had to recall any product it has launched, which might explain why, in an industry not always known for product quality, it went from being fourth largest when Crossley joined nine years ago to market leader in four years, currently with a 28 per cent market share and making 70,000 more shower trays a year than its nearest rival.

He is fond of pronouncements – you get the feeling they are what motivates him. “Never launch anything that doesn’t solve someone else’s problem,” he says. “If you do, the only thing you have to work with is price. Two of my competitors to this day can’t work out how we’ve managed to become market leader because we’ve always been more expensive. I have always felt it is quite sad that one day I might have to explain it to them.” Certainly, the products Just Trays has most recently launched have been focused on finding solutions. Take the new lightweight Breeze range of shower trays, for example, designed to be lifted and carried by just one worker.

“Most building sites don’t have a YTS person any more, but when they need to get a conventional tray upstairs inside a house they need an extra resource because that’s what health and safety says,” he says. “This product overcomes that problem.” Apparently so, as within two weeks of launch, Breeze was specified by two national housebuilders. Another innovation brought in by Crossley, in consultation with Just Trays’ then-directors Nicholas Sharp and Andrew Hirst, really propelled the company into the big time.

“The way we made a shower tray then was quite traditional,” he says. “You had a mould, sprayed it with a gel coat, and then you filled it full of stone resin. But you never knew whether it was right until it came out of the mould, and then the full production cost was there. We had 15 per cent returns, so I thought, why not create an acrylic sheet where we can check the gel mould, and then put the stone in?” This attention to the detail of processes is something that marks Crossley out from many other Yorkshire entrepreneurs.

He is not a salesperson who stumbled into manufacturing almost by accident. Nor is he from Yorkshire. Now aged 43, he was born and brought up in Chipping Sodbury in Gloucestershire, and says he only got into engineering because, with big employers like BAE and Rolls Royce nearby, that was what everyone else at school wanted to do. He spent many years in the 1980s as engineering manager for an American-owned tool manufacturer and distributor and only got into selling when his boss asked him to do a presentation to the European board on why they should use up spare capacity at their UK factory by manufacturing a product they were then sourcing from a German manufacturer.

“I got a bug for selling,” he says. “I enjoyed the interaction and not covering people on night shifts. But my wife and mum and dad weren’t sure. ‘You have an engineering degree,’ they said. ‘What are you doing?’” Fortunately, three years of being salesperson of the year at his next company – Hunting Specialised Paint – convinced them otherwise. Crossley says he was lucky to be given Devon and Cornwall as a sales area, because everyone there wanted the Hammerite anti-corrosion paint he was selling. He was also lucky to be given a grounding in selling that he says was “almost like Rank Xerox” in its intensity. That stood him in good stead for his next venture – helping to establish the bathroom division of Bob Murray’s Spring Ram empire.

“I went from being area sales manager to key account manager and also helped build up selling by distribution,” he says. “That’s a real skill, because it’s back selling and motivating people to sell on your behalf. If you get it right it’s phenomenally successful because your overheads are lower. But you have to motivate people.” Sadly of course Spring Ram eventually – in Crossley’s words – “spontaneously combusted”. But even though he says his school careers adviser would have died if he knew he’d ended up selling bathrooms for a living, he got the bathroom bug.

After a short spell helping a friend build up sales in his flues and chimneys business, Crossley eventually found himself invited to a bathroom industry golf day, where on the ‘19th hole’ he met Sharp, who had never heard of him. “But he asked my advice on something and I said, ‘that’s what you need to do,’ and it worked,” he says. And so came a job offer.

“He wanted someone to run the sales side,” says Crossley. “They had built the company up to having a £4m turnover, but it was only growing gradually. There was no proper national distribution network, and no route to the market.” Negotiations over him joining took six months, and he realised that this time, unlike when he worked for Spring Ram, he would have to make the move to Yorkshire.

“Having driven for seven to eight years from Gloucestershire to Yorkshire,” he says, “I understood that to come in as sales and marketing director you would have to be here at least two days a week, to understand people and look at new products.” He has certainly been understanding.

Along with devising the revolutionary new method for manufacturing the trays themselves, in the intervening nine years Crossley has also reshaped the customer base – and the way Just Trays delivered.

“I had worked out that if you send a tray to Aberdeen and the next day need one in Redruth, normally it isn’t a good idea for the manufacturer to be involved in distributing that,” he says. “A distributor can do it, and he can add greater value to the product.

He can sell Armitage Shanks with my tray, and a whole set of tiles. It’s a lot more cost effective. So we went into every account and said, we’re changing things. It was a fine balance, because you don’t want to alienate the people who get you to where you are.

“We also had seven lorries going up and down the motorways. That’s a great bit of PR, but what’s that worth? So we outsourced and we don’t now have trucks coming back from Inverness with nothing on them.

Let’s concentrate on what we’re good at.” When Nicholas Sharp and then Andrew Hirst and his wife Val opted to move on, Crossley didn’t have much trouble getting private equity firm Gresham to back him in a management buyout in 2006. Especially when the company managed to achieve in its first year with private equity what it had originally agreed to achieve in three.

Crossley is now asked down to London to present to Gresham’s own investors, as an example of what good use their money is being put to. Some of them might be surprised to discover that Just Trays products, even today, are entirely manufactured out of its factory in Farnley, near Leeds, but Crossley himself is committed to it.

His reasons for not following the route of so many other UK manufacturers and outsourcing to India or China boil down to three things: cost, cashflow, and the small matter of security.

“I have been to China - twice,” he says. “I managed to get into one factory and took a picture of what was going on with my mobile phone and sent it to the chief executive of a rival company I know who uses that factory. He texted me back, ‘What are you doing in my plant?’ That’s the problem with China and India: do you show them how they can make things to ISO standards, knowing that they can really bite you on the backside, or do you just outsource, buy it cheap, stack it up, make hay while the sun shines? I know one company that spent £500,000 introducing a complex product into a Chinese factory and found that they were making it Monday, Tuesday and Wednesday for them under licence, and then on Thursday and Friday they were still making it, but putting in a blank box and selling it to others.

To overcome that, you need to send someone out to be based there, but that costs a huge amount of money.” Crossley says the cashflow problem is also quite straightforward. “You tend to pay for everything at the dockside,” he says.

“It takes 12 weeks to come, then most people like 30-day payment terms, then they quibble, so you’re not going to get paid for several months.” And that’s even before you start to worry about currency fluctuations, of course. “One company went out when it was $1.90 to a pound,” he says, “and the finance director said you had to prepare for the worst, so they prepared for $1.48. It went down to $1.32. That is totally outside their control. With outsourcing, what you end up being is just an agent or a distributor.” But what puts him off most of all is the basic cost. Many people, he says, don’t realise just what this will be in the long run.

“It costs £9 to get a tray here from China in shipping,” he says, “and in transportation when it gets to the UK. People mistakenly think Felixstowe is the end of the journey.

“Then it turns up, and where it was loaded labour is cheap, so it’s all been handballed. So I’ve got three guys unloading it, and that’s another cost.” Instead, having found out how much cheaper his trays might actually be produced in China, Crossley tries to produce them for that cost in the UK, largely by investing significantly in more efficient machinery.

Some £3.5m has been invested in the plant since Gresham came on board. The production line for the new Breeze tray cost £500,000.

“But for £500,000, one guy and a robot we can make 30,000 of these a year,” he says. He admits such efficiency doesn’t help in the current recession, because it becomes so much harder to find ways of getting leaner still. Crossley had to cut 20 per cent of the workforce and cancel the nightshift – something that was particularly galling for him because he himself had threatened Sharp with his own resignation if they didn’t introduce the shift to make the company grow faster. But then this recession, he says, is like no other.

“Not only is housebuilding down,” he says, “but for the first time ever, home improvements are down. In the last two recessions people didn’t move, but they did spend on what they had.” Nor does he think it’s all over yet. He believes there are still at least two similar businesses out there which will go bust before the worst is over. But Just Trays itself, he says, is resilient. Crossley says his chairman, Ian Stuart from Aqualisa – recommended to him by Gresham, but not foisted on him - was candid about his performance.

“He said, ‘Paul you were two weeks later than everyone else spotting that there was a problem, but you dealt with it in four months less time than anyone else’,” says Crossley. “We did the whole consultancy over redundancy in three weeks.

You never want death by a thousand cuts.” He is also glad that his insistence on his whole operation staying UK-based is now paying off. “With other companies,” he says, “you might have had one guy sitting in central Europe ordering a container every week. 80 per cent of that container was the same order, and the remaining 20 per cent was his job – the lower volume but the higher value. He can now no longer fill that container with that 80 per cent. So how does he get the 20 per cent? That costs him a huge amount more.” UK-based, then, but not UK-bound. As a container from the Czech Republic arrives at the factory for a pick-up, Crossley tells me about his latest export venture to the United Arab Emirates. It’s great to hear that all this is being achieved from right here in Leeds.