How does a company with the mission statement: "Improving
people's lives" become an international, £250m-turnover powerhouse?
Step forward, Andrew Dutton. He's masterminded A4e's growth,
diversified into a multitude of revenue streams and cracked the
complex govenment tender process. Find out how a social purpose
company, subject to the vicissitudes of government legislation and
operating under a target-led revenue model, has conquered the
globe.
What is A4e?
We are a social purpose company. In layman's terms, we get
people off welfare and back into work, and we provide the training
and skills they need to stay employed.
What's your revenue model?
It's complex. Around 60% of our global revenue is based on
taking people on welfare benefits - the long-term unemployed - and
supporting them back into work. More importantly, we have to
sustain them in that work when they've found it.
Our revenue model is risky. The government pays us a small
amount for working with the customer, we get a further payment when
we place them in the job, but the majority of our fee comes in when
we have sustained them in that job for a minimum of six months.
It's not for the faint-hearted. You can do as much as you can
with an individual. You can even get them to interview but if the
culture's not right or if the personality doesn't fit, there's
nothing we can do.
Sounds risky. Have you got a safety net in
place?
Our business has diversified over past four years. There are a
lot of barriers for the long-term unemployed. Many of our customers
have significant debt issues or legal issues stopping them from
moving forward in their lives. We are the largest provider of
independent debt advice in the UK. Over 850,000 people will get
advice from us on how to approach their debt and use our money
advice service over next five years.
We also have a large skills business in the UK. We deliver the
government's 'Train to Gain' initiative and their nationwide
apprenticeship scheme. There's our legal services business too. We
have a telephone service delivering community legal advice on
behalf of a number of local authorities and the Legal Services
Commission. A4e also does a lot of work with prisons, helping
inmates learn a trade in prison so they can come out and go
straight into work.
Lastly, we have an outplacement business that works with the
private sector, making redundancies and helping the redundant
parties to find new work. There are even more revenue streams on
the horizon. We're looking to diversify the skills business to
cater to the private sector, for example. Our commercial model is
definitely getting more aggressive.
Was the recession a friend or a foe?
Bizarrely. we grew over that period. We're in the welfare
business and during the downturn there were more people being made
redundant. In good times, we do less welfare work but much more
skills trading because that becomes a priority for the government
and the private sector.
You have a unique insight into our welfare system. Is
Britain a nation of benefit trolls and layabouts?
Over 90 % of the people we come across want to work and have a
job. They see it as part of what gives them identity. There is a
tiny minority of people that sees being on benefits as a lifestyle.
They are few and far between. But it's also part of our job to
persuade those people that working has more benefits to staying at
home. I do not subscribe to the view that a large proportion of our
society is happy to sit on benefits.
Tendering for government contracts is notoriously
tricky. What are your tips?
There's a real art to responding to tenders for government
contracts. You need to be very precise when answering questions,
relate all your material to the government's needs and priorities.
We spend a lot of time on this. One tip is to admit that you can't
always do everything on your own. We partner with the third sector
and private sector to deliver some of our services. You must also
present a strong financial model. Make sure you know how you're
going to get paid. You need to drive results while still
maintaining a profit.
How competitive are these tenders?
We've just won a new contract under the Coalition
administration. Over 100 companies submitted expressions of
interest for these contracts.
To give you an idea of the cash at stake, here's an eye-opener:
the contracts currently under tender are worth £3-4bn collectively.
Two years ago, competition was stiff but there was a multitude of
relatively small players. We now turn over a quarter of billion
pounds a year. We're competing with the big boys and plcs , people
like Serco. Contracts are valuable and the long-term deals are
competitively fought.
Tell me about your international operations
We have a presence in France, Germany, Poland, Australia and we
just entered India. A key territory for expansion is France. We're
in the process of negotiating a few big contracts there. We've been
in Australia for three years now and we just bought a skills
business to bolster our welfare business out there. It's an
interesting contract. We help indigenous people in prison to
integrate back into society when they've served their sentence.
Without a doubt, India is the biggest opportunity for long-term
growth. The Indian government is trying to train half a billion
people by 2020. It wants India to be the net exporter of human
resources.
How do you manage growth? Is there an exit strategy in
place?
We are a large organisation and we are hugely ambitious.
Cashflow and the need for ready cash to drive acquisitions and
support growth are really important. We do have revenue streams
that are very cash generative but our contracts in the UK are based
on outcomes more than ever before. If we can't drive performance to
generate the cash we need, growth will be limited. At the moment we
are privately owned. We're always on the look-out for investment
and private equity but I have a strong desire to fuel our growth
organically. I value our ability to be masters of our own
destiny.
Different vehicles for growth have their own rewards and
challenges. When you float, financial quarterlies become extremely
important. You have to convince investors to believe in you.
The ultimate plan is to be a half-a-billion-turnover business by
2014, and generate revenues of £1bn by 2020. Being privately owned,
we can take a long-term view. How we do that in terms of equity
structure is still up for debate. I do know we'll have to open up
the company to enable that level of growth, so we'll never rule out
the option for an IPO.
Find out
more about A4e