Few teenagers have the gumption to take a small windfall and turn it into a million pound property business.
But that’s exactly what entrepreneur Andy Scott did when he inherited £5,000 from his grandmother at the tender age of 18 while working the door of nightclubs.
Taking advantage of his connections – many of the bouncers he was friends with worked in the building trade during the day – he was able to develop the first property he bought frugally.
He repeated the trick with more properties before buying a £1million hotel at just 22. But the deck of cards came crashing down in the financial crisis a decade ago.
Andy describes his 20s as ‘great’, where banks were ‘throwing money at you’. His fortunes weren’t set to last.
Having never experienced an economic downturn in his life, the financial crisis brought about a rude awakening as lenders called time on loans and his empire unravelled.
He admits that, like many of the business owners he currently bails out, he was overexposed to credit.
‘I had a massive overdraft personally for all the Ferraris and yachts – all the toys and everything stopped. The banks called in the loans. I lost everything – £6million. It was a really tough time.
‘People laugh as I had a super yacht which I couldn’t put fuel in and they were like “poor you”.
‘But it’s not ideal when you haven’t got crew and you’re anchored offshore and you don’t have any money.’
He hit rock bottom when he broke both legs in an accident. ‘It was a really tough time for two or three years. I broke my legs from getting run over by a cab and became depressed.
‘After getting run over, I had to go back to nothing and working on building sites. It taught me to be humble.’
Andy says the subsequent years forced him into thinking about how he could return to what he knew – making money out of property, but the lack of funds to kick-start such a venture again proved a challenge.
‘I’m a dealmaker and I always loved making deals. I noticed that lots of big buildings were closing – interesting buildings like hotels, cinemas and churches.
‘I found the owners of one cinema that was closing and said “look I will fit this thing out for you to look like a nightclub”.
‘I got the owners to invest in their own building. We opened thousand capacity nightclubs and they were doing £40,000-£50,000 a week when they opened and we repeated that over the south coast and that’s how I got back on my feet.’
But the nightclub industry is not one he wanted to stay in solely forever.
Now he specialises in rescuing distressed small-to-medium sized businesses mainly in the leisure, transport and recruitment sectors, which he conducts through his private investment business, REL Capital.
It appears his darker days of depression and bankruptcy are well behind him.
He says he’s learned lessons with debt and developed an expertise into getting people and their businesses back from the brink, which he’s keen to impart through is dealings (see below).
Headquartered in London’s Oxford Circus, REL Capital turned over £30million with 250 staff in 2018 and there’s now ambitions for £50million in turnover for 2019 as well as boosting staff numbers to 400.
Andy feels the sectors REL supports are sufficiently recession and Brexit proof.
However, he’s still spotting concerning trends, including the fact the property sector is experiencing a slowdown, which is impacting the speed at which he’s able to conduct deals.
This is because he typically uses the profits from his properties to fund the purchase of the businesses he wants to save.
‘It’s tough with Brexit. It’s slow. With any big ticket purchases people are sitting on their hands at the moment, waiting and watching. And it doesn’t look like it’s going to end any time soon, sadly.’
While the economic environment is not the most ideal he points out that: ‘It’s not the businesses that fail, but the people that do.’
Andy’s top four turnaround tips
When asked about his secret turnaround strategies, straight-talking Andy explains that business rescue is not rocket science and that it whittles down to the basics of stripping out costs and growing sales.
He says that when it comes to doing business, he works at the ‘four Bs’:
1. Buy in at a sensible level: He explains he buys if the company is not too distressed.
‘So we buy in at 2x profit because if they are doing well then that’s a 50 per cent return.’
2. Build a management and sales team straight away: He says this is so you can grow the business again.
‘People often take their eyes off the ball when they are struggling
3. Bolt these onto your other businesses: Andy says it’s vital to cut overheads by stripping out the unnecessary extras and sharing resources such as office space and accounting departments.
4. B****r off to the beach: Scott explains that it all boils down to knowing when to step away. ‘I work on the business not in the business.
‘It helps as someone looking into the numbers but then have someone competent running it.’
He advises business owners that land in trouble to think about being lean. ‘Don’t have the fancy company cars and look after our staff. You don’t need the other toys.
‘With failing business we often see the two new Range Rovers parked outside and I just smile and think “there’s your first problem”.’
He says pride can also lead to downfall, especially if the entrepreneur is not willing to ask for help, which he points out can be sought from turn around specialists or even rivals that could be talked into a partnership.
He says: ‘You’ve got to ask yourself: ‘Don’t you want 50 per cent of something bigger or 100 per cent of something that will fail?’
Andy finds that debts commonly occur when entrepreneurs fall behind with their tax obligations with Her Majesty’s Revenue and Customs.
‘They get behind with VAT and they try and juggle, do payment plans for nine or 12 months but when they are juggling they are not sorting the root problem and then the HMRC has enough and does the winding up petition.’
Andy prides himself in rescuing jobs and often offering the distressed business owner a staggered exit from the business so that he or she can pass on their expertise.
He points out that this often provides the seller with an income through a part time consultancy role or simply the ability to ‘enjoy life’, before retirement or bowing out completely.
Scott explains that offers can be on the table as soon as 24 hours and deals conducted within 48 hours, thanks to his legal team.
However, the HMRC’s quick actions on insolvencies can mean he’s not always able to rescue jobs before the business goes bust.
‘Just before Christmas someone had a winding up petition on them and there were 30 jobs to save and we couldn’t get it done quickly enough. You have to separate it a bit but the [loss of] jobs do play on you a little.’
But most of the time he’s successful in striking a deal. His recent dealings include the Chelsea Lodge which he rescued and turned into a night club with après ski lodge theme.
It’s now a celebrity hangout generating between £40,000 – £50,000 a week compared to the £4,000 a week it was making before.
Another major purchase includes a Peterborough-based haulage business Bison Transport, which boasts a fleet of 50 trucks and now has contracts with Ikea and Amazon. It’s his tenth takeover in just two years.
While he has some more deals in the pipeline he admits his ambition is to become a Dragon on Dragon’s Den – but he points out that there are currently no seats available.
When asked what kind of a Dragon he’d be, Andy says he’d be more prepared to get his hands dirty.
‘I’m a deal maker, street-wise and the others are bit more corporate. So I think having someone younger means I’d be able to dedicate more time to people.
‘You’d have a partner that would be emailing you back within a minute to annoy you.’
No doubt his rags to riches (and back to rags) experience will likely create more empathy in the Den. It’s also unlikely that Scott will shy away from someone who has made similar mistakes.
‘I would rather deal with someone who had failed and learned lessons than someone who had not taken enough risks and was a bit reckless.’
That’s not to say he’ll accept anyone’s pitch. ‘People sometimes come here and say give us £100,000 for our start up and I say “you don’t have a business you have an idea”.
‘It just means I’m going to be running that business – why would I do that?’
REL Capital’s business rescue successes:
• Events sector: Andy bought Contraband Entertainments and Contraband Crew in autumn 2016.
Facing a plummeting turnover and an annual loss of £100,000, he invested heavily into the former’s online presence; then buying the latter, an event support business, out of administration and has doubled the combined turnover to £5million in just two years.
• Recruitment sector: Andy owns a group of temporary recruitment businesses, bought in the last year and turning over £7million including WestOne which is a leading provider of temporary and permanent chefs to London’s top restaurants.
Agentis is a provider of temporary staff to the building industry which was bought on the brink of going under last October and has been turned around with a completely new team.
Global Drivers is a driver recruitment business operating across the UK. He has two more recruitment businesses in the pipeline, a nationwide group of temporary recruitment is planned over the next 12 months.
• Transport sector: Andy recently bought Bison Transport which turns over £12million and he believes it is set to grow rapidly thanks to contracts with Ikea and Amazon.
Separately, he purchased Reliable Removals and Storage a business rapidly in decline.
He bolted on other removal depots including AG Cannon and brought in a new management team to ensure that this turnaround was a success.
Having now stabilised the ship, Scott is launching a London man and van service Cheap Removals.
• Pub sector: He is growing a portfolio of London pubs and bars including The Pig’s Ear, Chelsea, which is undergoing refurbishment, and the newly-opened The Chelsea Lodge which he bought over summer 2018.
Andy took over these two sites which were in decline and is set to double the turnover to £2million this year and with a new landmark Soho bar site planned, it will increase the combined turnover to more than £6million, he claims.