The Business Owner: Jay Dias, Leela Capital
On the hunt for strong businesses that are looking for an exit, Jay Dias talks to is4profit about alternative forms of acquiring enterprises
Founder: Jay Dias
Company: Leela Capital
Proposition: Leela Capital is a search fund investment firm that provides business owners with an alternative exit strategy outside traditional strategies
Describe your business model:
I’m currently the founder and managing director of Leela Capital, a search fund investment firm.
This is an alternative form of acquiring a business and, since the concept was first introduced in the 1980s, I am the fifth person in the UK who is qualified to run one. The search fund model is generally another way for business owners to exit their business outside of traditional exit strategies.
How is your business different from what’s already out there?
The search fund model essentially allows me to acquire a business after which I am then appointed as the CEO to continue running and growing the company. My main criteria is to find a strong business which is looking for an exit as a result of retirement; an extraordinary circumstance or a management team needing a strong leader to complete an MBO.
I then have the benefit of having a longer investment horizon of 10 years, rather than the typical three to five years, to manage growth in the business. This allows me the opportunity to learn the specifics of the industry I will enter.
How did you finance your business?
My business is fully funded through equity investment. I previously spent six months raising funds from investors, whom are a mixture of individuals and institutional investors.
What is the most important thing to keep track of in business and why?
I believe that it is essential to identify the areas where internal controls can be put into place to keep track of your business. Whether these controls need to be implemented in operational aspects of the company such as sales pipelines or implemented in financial metrics such as product profitability.
It goes without saying that it is also key to look at ROI as a fundamental metric in all your decision making whatever stage of business you may be in. It will typically ensure that you are making rational decisions that will generate value for your business. However, of course each decision made, needs to be assessed on its merits.
What is the biggest day-to-day challenge you face?
As this is an alternative way for business owners to exit, many are surprised at our methodology of providing continuity across all parts of the company. Especially when compared to other investment vehicles which typically look for a predefined financial strategy such as multiple acquisitions based on synergies.
Understandably this can create confusion and possibly some skepticism. However, once we explain how we work, many see the value in this particular model.
Furthermore, the UK M&A market is extremely efficient and, being a small fund, it has been a challenge finding our place within the sector.
What marketing techniques do you use to attract new customers?
A large portion of my time is spent researching and locating potential businesses who are looking to sell. As part of this I utilise email campaigns to target brokers and intermediaries and use PR to raise my profile amongst the business community.
It’s also essential that I place myself directly in front of the right people and try to spend as much time as possible meeting other leaders across various industries and sharing our story.
Do you think it’s important for small businesses to export, any tips?
Whilst I can see the apparent benefits for a small business to export, I believe it depends on the product or service your business provides and how exporting fits into your overall growth plan. For a business which is service led and doesn’t require its staff on the ground to deliver products to a customer then exporting your service can be a great form of growth as you would typically not incur higher costs to do so.
However, if there is a physical product or a service more dependent on location then this can create more logistical problems for the business which may be overwhelming for smaller companies. In this instance I would recommend focusing on the domestic market whilst you stabilise your business model and then look to enter new markets through exporting.
What’s the business app you couldn’t do without?
Due to my schedule and meeting potential investment prospects, I can never guarantee when I will be in the office. Therefore, using Microsoft’s OneNote is perfect for working remotely, collaborating with others and keeping everything in one place.
Describe your company’s culture in three words:
Innovative, participative and longevity.
What would you like the government to do for small business?
I believe the government has a lot of responsibility in promoting and helping British enterprise. There should be greater tax incentives for new businesses which are independently owned such as lower Employer NIC rate rather than operational schemes.
Also, I think the government needs to play an integral part in closing the skills gap and identify areas in which skills are transferable previously used in industries which are in decline. Not only would this strengthen the UK workforce but would also enable business owners to identify industries in which they can launch, expand and thrive in.
Who’s your biggest small and medium enterprise hero?
I admire Sukhpal Singh who founded Euro Car Parts in 1979. As a refugee from Idi Amin’s Uganda, he became one of Britain’s richest Asian entrepreneurs before exiting his business for £225 million.
Where do you want the business to be in three years?
Within three years I anticipate that Leela Capital would have completed at least one transaction and taken over the operation of the business. By this point I also expect that we would be in a strong position to grow the business.
What’s your top tip for keeping it lean and making profit?
Listening to your customers is essential to making sure your business remains profitable.
Don’t focus on what your competitors are doing and don’t worry if they’re doing things differently to you. The only thing that matters is that you continue to meet your customers’ needs and continue to look to them for feedback. This is unless you are a budding Steve Jobs and have the vision of things we don’t even know we wanted.