Paul Rose is chief executive of Rixonway Kitchens, a kitchen manufacturer supplying mostly to the social housing sector that, with 450 employees at its factory in Dewsbury, is one of the largest private sector employees in Kirklees.
He was also winner of the manufacturing category at this year Ernst & Young Entrepreneur of the Year Awards for the North and Midlands.
And when you see what he has done to the company it is not hard to see why.
Since he took over control in a £27m management buyout backed by August Equity, he has helped increase its turnover from £16m to £30m – even through a time when the continuing economic uncertainty and the threat of cuts in public sector funding have caused many competitors to stutter.
In fact, his old company Moores, which he left to join Rixonway as sales director in 1992, has seen its turnover more than halve in that time. Back in 2006 a number of people were shocked at the amount August was prepared to take on the company.
Even Rose himself admits it was a “frothy” time – a period that continued into the next year when his friend Terry Bramall’s social housing company Keepmoat was sold for just under £800m in one of the largest private equity deals the UK has seen. “We were quite extensively leveraged,” he says, “but the one thing this business is good at is generating cash.” So, while the wheels came off the Keepmoat deal pretty speedily following the demise of its backer HBOs – even if, as Rose himself says, it was “a good deal for Terry, and couldn’t have happened to a nicer guy” – Rixonway’s backers must surely remain contented.
And yet the secret to his success lies in no great technology, he says – except for the fact that by sticking to rigid construction, Rixonway has kept itself away from losing any potential competitors in the Far East, as they manufacture exclusively for flatpack distribution.
Nor is there any revolutionary material involved in the production. “This isn’t rocket science,” he says. “It’s fairly simplistic manufacturing. Unless someone comes up with a fantastic new material, we will be making our kitchens out of chipboard for ever and a day.” In fact, he clearly believes too much is made of how you can become successful at business.
“People tend to make business complicated, and it really isn’t that complicated,” he says. “It’s a case of looking at your cash coming in, looking that your suppliers are being paid going out, and generating sales. There’s nothing complicated about that.” In fact, his company’s success is probably down to three things. The first is incredibly lean manufacturing. The Dewsbury factory may be 177,000sq ft, but it is incredibly streamlined. It is essentially split into three sections – machine shop, assembly, and despatch, with finished cabinets taken straight off the shopfloor into backed-up lorries at the end.
But walking around the factory floor, what you notice, apart from the absence of sawdust (most of which is sucked out by ducts to be used later by Yorskhire Water) is the relative absence of stock left lying about. There is a reason for that; by the time the product has reached the assembly stage, it is already organised according to where it is going to be delivered to, and which route it will take to get to that destination. “We produce 1,000 kitchens a week, but we don’t store much here,” says Rose. “We order panels on a weekly basis and bring them in. As a result, hardly any of our capital is tied up in stock.” That clearly means that, for example, the factory can be insured for less than you would expect for such a sizeable establishment. But it keeps suppliers happy too. “We have a select number of suppliers that we use all the time,” says Rose.
“They like dealing with Rixonway because they like the consistency in volumes they get from us.” The second ingredient to success is that old adage of customer service. Rose says the way to get ahead in a fairly convetional industry like his is to “look constantly for differentiators in your business” and focusing on customer service is one sure way to do that. “Where can you add value?” he says.
“I bang on to people about no matter what you buy in life, you want a decent experience. You want to feel that you are a customer, and you want to get what you want delivered in the way you want and the price is right.
“Our market is complicated in that you have lots of people making decisions. There are often three or four different customers. In some cases it is the client and the resident you are dealing with, although discussions can include the contractor, sub-contractor and even the procurement consultant. But they all want the same thing essentially, which is for you to deliver a kitchen on time, in full.” This provides opportunities for a fast-moving company like Rixonway. “We are constantly looking for ways to improve service and take away the heat from customers,” he says.
“If you say, ‘I can deliver in three to four weeks’ but actually deliver in five, that is a problem. “On top of that, more and more of the sites we deal with at the moment have little storage, so if you can deliver in smaller batches but more quickly it stops everyone thinking about how to store it. So we focus on having a short lead-time, delivering on time, and being flexible. “For sites in London, for example, where there really is virtually no space for storage, we deliver every couple of days, although perhaps there is a price the customer has to pay for that.
"We will, after all, have introduced a lot of IT infrastructure to make such deliveries possible.” Which brings us onto the third point in Rixonway’s favour. By engaging with the customer in such a way, by including IT infrastructure in what they offer, the company can do more to ensure that the customer will find it harder to look elsewhere.
“We have programs that run for three, four or five years where people are locked in,” says Rose. At the same time, he says, he runs a very “structured” business where “everybody is on the bus going the same direction”, particularly when it comes to getting through the various hoops and hurdles that most public sector clients insist tendering companies need to jump through first before they are offered any work.
“Our staff understand that to put a good PQQ in place you have to have all these things in line,” he says. “You need the audit trail, the environmental stuff, and your policy on diversity. All that is already in place with us and is part of structure of business. But it is a big barrier to entry for others. Small business would find it difficult to get in on the market now, whereas in early 1990s the barriers weren’t as great. Now they are, there is much more process required.”
As someone who came into what was a relatively small business back then, does he not think this new situation is unfair? After all, just because the company has a diversity policy doesn’t necessarily mean it has a particularly diverse workforce. Rose says they are still having discussions about how to attract more ethnic minority workers when they advertise in the local Jobcentre.
All that matters for the client organisation is that such policies are in place.
But small companies would usually not have the resources to put such policies together.
“Is it unfair?” says Rose.
“If you look at it from the customer’s side, you are now getting more consistency of quality as a result of some of these new challenges. But I am not saying small businesses can’t do it. If they have a will they can, but they’ve got to put the finance in. I suppose that is unfair, but it is down to the individual company to show that they can achieve this objective or that they are working towards it. A lot of this is Government-fuelled anyway, and is out of our control.” Rose says the company hasn’t as yet been particularly affected by any cuts in public sector funding. Even so, and even though he says it is “better to do what you know and do that better”, he is looking to broaden out its customer base.
In recent years, the company has once again started selling to the private sector through independent merchants such as MKM.
“That business has gone from a soft standing to having a turnover of £5m in two-and-a-half years with independent merchants,” he says.
“We are providing the same product to a different market where independent merchants previously didn’t have a rigid construction offer. When I joined the company in 1992 it was split 50/50 between private and social housing. But as private development got more complicated, it became complicated for Rixonway to handle, so we focused on social housing, and that paid dividends through the recession of the early 1990s.
“One thing about social housing is that you do get paid. In the 1990s, payment was less secure in private development. At one point we were pretty much 99% into social housing, but after the buyout, it was clear you couldn’t do that forever. So I appointed a sales director whose background had been in the independent sector.”
That is perhaps one other aspect of Rose’s character which has served him well. He says he has an ability to weigh up people very quickly.
“The first year after a leveraged buyout is always very tough,” he says. “Once you are in with private equity, the requirements of reporting are much greater.”
A further sign of Rose’s toughness happened while the MBO deal itself was going through – his then eight-year-old daughter had a brain haemorrhage and while the lawyers were busy dotting the Is and crossing the Ts, Rose, in his words, was “living at the LGI”.
“We really didn’t know what would be left with our daughter, although thankfully now she is much better,” he says.
“One day during that time I met someone coming back on the train from London and they said: ‘I don’t know how you have done this.’ I said: ’I am not sure how I have done it.’ “In the end, she had a brain haemorrhage on April 19, and we completed deal on May 26. It was a really trying period, but I have always been a believer in dealing with whatever life throws at you.”
Given all that, it is surprising how modest he is about his and the company’s achievements. When you win the regional award at the Ernst & Young Awards you go on to a national final.
Rose didn’t win there, but he says he wasn’t expecting to. “We are not in a sophisticated sector,” he says. “But to make the final was fantastic.”
Sophistication, however, doesn’t always mean success, and that, at least, is something Rixonway certainly has achieved.