'Turnover is vanity, profit is sanity'

AS the nation's 16-year-olds queue up for their exam results this summer with dread in the pits of their stomachs, they need look no further than Simon Pearson for reassurance.

For a man who left school at 16 with three O-Levels and stumbled his way through several roles before being ordered by his father to get a "proper job", Simon belied early expectations to build up a highly-respected business with turnover of £23m.

When asked about his O-levels, Simon quips: "I thought that was an achievement!"

And the string of jobs straight from school?

"I worked in Debenhams' carpet department. It had £1.75sq ft, I thought that was the price. I lasted three months and lost them huge amounts of money."

The jokes continue as he describes his views on his father's decision that he should get a proper job.

"I thought I could have a career in MI5 or MI6. I was very good at avoiding jobs and thought they would like my evasion tactics."

Underneath the jokes is a warm, personable character who has carved a remarkable business in a difficult industry which takes no prisoners.

Speaking to a room full of new businesses at the Bridge Club's popular monthly 'In Conversation With...' event, Simon admits he thought about trying the legal profession - his father was one of Teesside's finest lawyers. But that was until someone offered him a job in recruitment and marketing.

Simon started off delivering wooden mounted, metal advertising blocks to newspapers from Yorkshire to Newcastle for an established Leeds-based recruitment and marketing business.

He progressed through every aspect of the business and finally ended up running the Teesside operation.

The business was based in Leeds and its owner wanted to sell its North office.

With only a few takers and every influential person in the region advising the company that Simon knew the business inside and out, he found himself negotiating his first takeover at the age of 35.

And what began reasonably amicably soon turned nasty.

"The writs started flying," he says. Simon admits to a degree of self-doubt at the time: "Many a time I thought 'I can't do this'.

"If it wasn't for a very strong wife who said 'You haven't got a choice', or a very good solicitor who said 'You will win through', it wouldn't have happened.

"My wife said people who fail often don't realise how close they are to success."

After the deal went through, he wrote to the clients to say he'd taken over the Teesside operations. Half came with him.

Within a week, Simon had secured two loans - one from his grandmother, the other from his wife's grandmother - a friend lent him a car and he got an overdraft to pay staff for the first month.

Simon readily admits it was a frightening leap into the unknown: "It gets so close to the seat of your pants you almost block it out and get on and do it. I started the business by accident."

Pearsons relied on invoicing immediately when a job was done and chasing payment a fortnight later.

"A lot of businesses don't realise the importance of getting money in."

With the new company on its feet after a hairy start, things were going well for the first six months when a bombshell was dropped.

Cleveland County Council pulled its recruitment and marketing activity in-house - Pearsons lost a third of its business almost overnight.

To counter the blow, the company "sold like mad" to new business and took customer service in their industry to a new level.

"We went out of our way to position ourselves as service orientated," says Simon.

With yet another hurdle surmounted, Pearsons then faced its toughest test - the recession.

"Recruitment and marketing budgets were slashed," Simon explains.

"We had a rapid reduction in business and lost money for two to three years. We maintained strong cashflow and kept up close links with the bank.

Pearsons was the first recruitment specialist in the country to embrace the internet.

It started its first online jobs board in 1998, which started as a niche jobs board for the public and not-for-profit sectors, and in September 2000 was launched as www.sector1.net

The site now attracts three million visitors a month who view between 1,800 and 2,000 vacancies each week.

Simon explains: "We started it at the time when the dot com boom was going bust. But the only two things you need on a jobs board is content and traffic.

"We had the content because of the huge volumes of public and not-for-profit vacancies we were handling"

The website cost about £35,000 to build and it was one of the key elements that took turnover from £6m to £23m in six years.

"It was the best move we ever did because we actually entered the digital market way ahead of everyone else."

By 2005 to 2006, the company had entered the top ten recruitment marketing companies in the UK and was one of only seven approved suppliers with the NHS.

Despite the remarkable growth story, Pearsons wanted an independent body to take a critical look at the business. KPMG was called in and the feedback was painful.

"We needed to flip the business and to really make much more focus on our cutting edge digital capability."

The terrestrial side of the business had grown enormously but was high volume with large costs and low margins.

Simon is a mine of business tips. He says: "My accountant has a saying - turnover is vanity, profit is sanity and cash is reality. The only thing that doesn't change in business is the need for change."

Pearsons took the professional advice on board and has restructured, creating in the process a much leaner, meaner business that had no room for its founder as managing director.

Instead, the experts wanted Simon to be chairman - a verdict that hit him like a bullet. "I thought I was too young to be chairman," he says.

The restructuring process saw Pearsons' turnover tumble from £23m to £16m in two years.

To some that would be disastrous, but the gross profit margin has more than doubled and the business, post KPMG, concentrates its efforts in the right areas.

It now has a growing presence in Newcastle with new offices in Blaydon, where 20 staff from Middlesbrough have relocated to form a digital centre of excellence.

As a person who has based nearly four decades of his life in the field of talent attraction and marketing communications, Simon is heartened by the growth of the North-East as a region becoming proud of its economic ability.

He says: " We are really starting to make a name for ourselves."

SIMON'S TIPS

1)Cashflow - always bring in the money

2)Embrace change

3)Embrace technology

4)Track record - Integrity is everything

5)Have clear goals - where do you want to go?

Cash in on expert business advice

A DRAGONS' Den-style event is being held in the region next month to increase the commercial outlook for businesses by helping to improve their prospects of attracting finance for growth.

Small and medium-sized companies can attend a two-day course, at Middlesbrough Football Club and run by NStar Finance and Business, that will give an opportunity to put their business case for funding to real investors.

The course, which takes place on September 26 and 27, will explore different sources of investment and businesses will present their ideas to a team of experienced investors.

A panel of experts will give constructive feedback and practical advice on how to improve their chances of securing finance.

Caroline Hughes, manager of NStar Finance and Business, said: "Many businesses have great ideas, but attracting funding can be difficult.

"The advice and guidance we can offer will help to make them commercially more attractive to potential investors."

The course looks at issues connected with business growth, including why businesses need money, how much they need and valuing business.

To book a place on the course, which costs £175, visit www. nstarfinanceandbusiness.com or call 0191-230-6370 for more information.