Tell us about your business.
OVO Energy is one of the leading independent suppliers in the UK energy retail market. My wife and I founded OVO around our kitchen table in 2009 with a simple idea – that we could do a better job of supplying energy to UK customers than existing energy companies. Despite little experience and being told “it couldn’t be done”, we’ve established OVO as a genuine alternative to the big suppliers that have dominated the market for so long. We’ve done it by keeping three core values at the heart of the business – simplicity, fairness and value for money.
Challenging the industry status quo on behalf of our customers has meant taking some fairly big risks along the way. But we’ve been rewarded by fantastic growth in customer numbers, league topping customer satisfaction scores and some important policy wins which we think have changed the industry for the better – like persuading the regulator to lift its ban on us giving customers 3% interest on their credit balances.
Looking ahead, our target is to have one million happy customers and to be a top 10 UK employer with a Net Promoter Score of +40. These objectives were initially set for 2020, but our rapid growth over the last 18 months has meant we’re now aiming for 2017.
Key stats: Since entering the market in 2009, we’ve grown to over 360,000 customers, and created over 500 jobs. In the last 12 months our customer base has grown by 240% whilst maintaining a NPS score of around +40.
How did you fund your business?
In 2003, I had a five-year plan: move to London, get a job in the City, and save the money to launch an energy supply company in 2008, which I calculated was likely to cost upwards of £350,000. I worked in the City for Société Générale and JP Morgan before quitting in 2008 to set up OVO with my wife, partly funded by the sale of our house. With a very small start-up budget, it was really important to work out a low cost operating model, and most importantly, to ensure that every single customer was cashflow and working capital neutral. It took a lot of thinking about how to structure the costs in the business, as well as the kind of customer proposition we could offer, but it seems we got it right. We haven’t really changed the model since launching and we now have sales of £500m. Every customer is still cash flow neutral.
What is the biggest challenge entrepreneurs are facing?
Every entrepreneur will face challenges that are unique to their industry, or to their business. For us, it was taking on powerful incumbents, a very sceptical customer audience and the complexities of a volatile international energy market. For others, their big challenges will be different.
However, anything an entrepreneur does is likely to involve doing something that others thought impossible. There will always be many more people that will believe it can’t be done than those that believe it can. Maintaining focus, confidence and passion through rejection, setbacks and failures is the biggest challenge I think all entrepreneurs face.
Can you give any advice to others starting up businesses?
Firstly, it isn’t good enough anymore to try to sound and look different, you have to be different. Customers are now so sceptical that they do not trust anything that companies say, only what they do. In the world of mass communications and social media that we live in, the lines between what is said and done inside a company and what is said to the outside world is more and more blurred. At OVO, we make every decision as if the end customer was in the room. If they wouldn’t like what we’re saying, we don’t do it. Taking this approach consistently has earned us some trust with customers and with regulators but we still have a lot more to prove.
Secondly, focus on the details. It is pretty easy to find and exploit a niche, but they are not often very scalable and if you succeed, larger competitors will find it easy to copy and outmanoeuvre you. Figure out ways to do hundreds of little things better. When you add them all up, they make a big difference that is incredibly difficult to emulate, delivering a long term competitive advantage.
Lastly, but it’s so important: keep your employees happy. Our focus has always been on developing a business that provides an excellent customer experience and we’ve done that by concentrating on being a great employer. Your staff need to be happy and believe in what they are doing, otherwise you can’t really ever deliver customer service excellence.
How do you think we can encourage entrepreneurialism in young people to create a generation of entrepreneurs?
The government is already doing a great deal to encourage risk taking amongst investors and entrepreneurs, including generous tax advantages under both Entrepreneurs relief and EIS schemes.
That said, I’d like to see better incentives for mature businesses to invest in start-ups. The pace and scale of change at large companies can be a barrier to innovation (start-ups by definition tend to be more nimble and efficient), but these businesses are often in a great position to nurture young talent and new ventures. Tax advantages for mature companies investing in entrepreneurs could be a real catalyst for accelerating innovation, whilst providing entrepreneurs with access to know-how, shared resource and an easier route to market.