Doing it the hard way
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The story of Lebara’s CEO Ratheesan Yoganathan provides proof you really can build a business from nothing – but you’ll need guts and charm in abundance to pull it off. GrowthBusiness finds out how the Sri Lankan-born entrepreneur cracked the international telecoms market.
As for many entrepreneurs, the vision for Ratheesan Yoganathan’s future business came from admiring the work of others.
Back in 2001, he gazed up at the Telenor building in Norway and, with the encouragement of his friends, decided he wanted to build an empire equally impressive.
Fast forward 11 years and pay as you go mobile SIM card business Lebara now boasts revenues of €648 million (£511 million) and profits of €20 million, quick work for a man who openly admits that he hadn’t got the faintest idea of how to start a business when he set out and has never taken out a bank loan or brought in an external investor.
After drafting a quintessential back-of-a-napkin business plan on the way home from Norway, Yoganathan and his business partners, Leon Rasiah and Baskaran Kandiah, quit their jobs working for a calling card organisation and formed Lebara in London. The idea behind the company, then as now, was to help immigrants in the EU to phone home more cheaply – ‘home’ being anywhere from Afghanistan to Zimbabwe.
Yoganathan still has the one-page business plan and looks back with embarrassment at how raw the three men were when it came to running a business. He recently won Ernst & Young’s Entrepreneur of the Year for London and the South, but says that he had some naive views on how he would structure the new business.
‘We looked at all the big stuff like how much we would save, ‘ he explains. ‘We said we would pay salaries out of 25 per cent of the profits, another 50 per cent we would reinvest, and the last 25 per cent we would save.’
When the trio set out even registering the company was a bridge too far, and Yoganathan ended up paying for a lawyer, with his brother’s credit card, to do it for them.
Walking into the offices of calling card operators was a bit of a baptism of fire for the newcomer, with many refusing even to talk to him. Eventually Yoganathan’s charm won over one operator which agreed to provide product to the tune of €55,000, on credit, for 14 days. The three ran around selling all of the cards in three days, and then took the cash they garnered back to the operators that had initially turned them down in the hope that hard cash would encourage them to think differently.
Quizzed on whether this high-risk strategy could have seen the downfall of Lebara before it had even started, Yoganathan seems genuinely surprised: he had never thought about it like that.
He adds, ‘To me I don’t look at both sides of the coin, only the one side which means once you have decided to do something and you have a goal, you just run with it.’
Trust and integrity
In the early stages of the company’s development Yoganathan worked hard to instil a clear sense of legality and accountability. He compares this to parenting: if you wouldn’t teach your child to do something then you really shouldn’t be doing it yourself.
‘When expanding, if you don’t keep your books right and have that kind of ethos in the business from day one then people can play around. If you really want to expand there is no way you’d be able to control the business,’ he adds.
The fact that Yoganathan has never gone to the bank for cash or sold a stake in his business is partly due to sheer ignorance about how to do those things, he says. But he also has a sense that investors don’t generally understand the market Lebara operates in.
‘In hindsight the luxury of decision-making is enormous [with no investors]. If we believe in it and we understand the market then we take the risk,’ he explains.
According to Yoganathan, Lebara is characterised by a ‘never give up’ approach. This is demonstrated by the repeated efforts the company made to break into the Spanish market. After trying five times to crack it, selling units for €1, and losing €18 million in the process, he finally made it stick on the sixth occasion.
The same approach is illustrated by Lebara’s ambitious target to be brand of choice for 1 billion immigrants by 2020.
Backing the future
Now that he has achieved the successes that he has, Yoganathan is keen to help others achieve their desire to build the businesses they believe in.
For those within Lebara with a business idea, the company now has a system whereby interested pitchers can gain access to advice on how to build a business plan and pitch it to management. If Yoganathan and the rest of his team like the idea then Lebara provides the growth capital that the fledgling business needs to get off the ground.
One such venture which has received the Lebara seal of approval is The Infusion Store. Founded by Lebara employee Devender Singh Kharb, the business identifies itself as a ‘luxury brand’ for Europe and offers fashion that fuses Indian and Western style.
The company took part in London Fashion Week in September 2011 and is launching its online store this month. Plans are now in place to open a flagship store in West London by 2013.
Another business to be given leg-up by Lebara is Remote Goat, a social network for the creative industry. Emeline Wraith set up the service to allow designers and prospective clients to work remotely using features such as chat rooms, blogs, technical tips and tricks and ‘brainstorm centres’.
Both companies have received a six-figure investment from Lebara, in return for a 50 per cent stake in the company, and will now be able to utilise the infrastructure and network that the telecoms firm has spent a decade building.
Yoganathan admits that not every investment that he and Lebara have made has been a success but believes that the framework that the business can provide for budding entrepreneurs reduces the risk element.
‘I have failed many times but at the same time we have good people at Lebara who can help individuals starting out. That is something I never had.’