The Idea
I came across the idea of voice over IP when I went to see another company They had a product that I thought would be interesting which included voice. Everybody thought the Internet was the business to be in so when I was discussing the issue with a colleague and he said that he could build a VoIP phone system easily it seemed this was an idea that must succeed. He went away and over the weekend produced a prototype system. This was obviously going to change the world a phone system that looked and tasted like an old fashioned phone system with real phone numbers and a real ability to transfer calls had to be a winner.
BT were charging of the order of £20 per month per phone and we could easily undercut that and still make a huge profit. We set about hiring some people developing the technology and getting going. We had within a week or two seven or eight people working away in the office. Half the people were working on developing the system and the other half were working on selling the system. We called the company Cloud Net.
Early Days
We got going in early 2009 and early sales started to come through. We had technical problems with the system we were selling. We also had to develop our marketing skills. Personnel issues came to plague us with the sales effort being curtailed by staff absences. The billing software was problematic. The management began to flag and by 2010 we were looking for new staff. A new IT director joined and we developed internal billing systems and controls.
Litigation And Name Change
By late 2010 we were spending significant sums with Google and we went to number 1 on the name Cloud Net. Sky then decided they owned the word “Cloud” and issued a cease and desist letter making it obvious that they would spend whatever it took to remove the name Cloud Net from us. After much soul searching and trying to agree an amicable resolution I had no alternative except to buckle under the pressure and change the name of the company. After much debate, I changed the name to Birchills Telecom which did us no favours in terms of marketing. I chose the name because I did not want to choose another catchy name and be attacked again.
The Product
Although we knew from day one that we intended to sell VoIP phone systems the actual nature of the product changed as time progressed. Initially, we set a monthly rental and sold the phones at a profit. I tried many different configurations and cost models but none seemed to get a lot of traction.
As time went on we simplified the offer to be a single brand of phone. The offer became basically free hardware, a £7.50 a month subscription plus call costs and VAT. We found that an unlimited call bundle also worked. We insisted that the price you saw was the price you paid and most importantly that you paid by direct debit. We also wouldn’t physically go out to sell to people.
At one point, before I decided that I wouldn’t visit, I spent an entire afternoon demonstrating the system only to be asked for a discount on the £3.50 subscription I proposed to charge them. I then decided not to visit and each time I broke my rule I just wasted my time.
The idea was once the subscription was agreed we didn’t touch it. We eventually landed one customer with over 100 phones which was great
The Cloud Based Exchange Platform
The cost of acquisition of new customers, the low profit margins and the high overhead were crippling us. I decided to subcontract the actual technology to another cloud based provider. The platform replaced the telephone exchange in the old fashioned world. Our original platform was based upon a program called Asterisk which was an open source program. This was then layered with a handling program.
The new provider was appalling and the lack of addressing the problems simply bounced the problems back onto us. If we did not move somewhere else then our customer base would disappear. However, we now had margin.
I moved the technology platform again to another company and now at last we had a robust platform. However, the marketing had fallen back. I hired a technical sales manager and set about trying to gain sales. By now we were in 2013 and the moment when VoIP was a hot topic had gone.
BIP The Billing Platform
I rewrote the billing platform using a PHP platform called Scriptcase and we now had a robust billing platform. The system worked reliably but the month end process was tortuous- we had to combine data from many databases over the web and if any process failed we had to be able to redo it. I produced a checklist that we used to plough through every month and every month we heaved a sigh of relief when the invoices were emailed out to the clients. We then had to run another process to email out the statements and a final process to collect the payment which we insisted we did by direct debit.
Despite the direct debit we did have to do some cash chasing, Routinely if the bill wasn’t paid we used to disconnect the user and that usually prompted some payment. It was amazing how many companies claimed they could’nt even pay £7.50.
We picked up one client who routinely used to demand loyalty discounts in long and detailed emails. I had to reply by saying no and inviting him to leave and stop bothering us. Eventually, he did leave – I think he expected us to come back begging – all for £7.50.
Delivering The Sale The Process
Once the sale was made we had to get the phones out to the customer. The process was:-
a) Order the phones from the wholesaler
b) Unbox them – go through a 6 or 7 step configuration with them connected via USB to a computer.
c) Repackage and wrap them
d) Arrange for the courier to collect
For a 20 phone order which we sometimes got – the process was long winded.
Marketing The Early Days
Initially, we made contacts with people we knew and companies who may want systems. We formed a partnership with South Staffs Chamber of Commerce, but it turned out that no one was interested and that went nowhere.
We formed a partnership with Women In Business and Harper Adams College. They were to hold an open day and we were invited to give a lecture on VoIP and telephony. Alongside us, there was a company who wanted to talk about insurance. They had people sign up for their lecture – no one wanted to know ours.
Google Adwords
It seemed obvious from the start of the company that getting business via Google Adwords would be a great idea. There is a huge amount of literature available and a huge amount of information about how to do it. I read the information and watched videos and worked on creating the perfect advert and putting the correct amount of money behind it.
Google charges for adverts based on what it calls a quality score. The better the quality score the less price the advert is so you spend ages tweaking your adverts to get the best quality score to get the cost as low as possible. The problem with this approach is that the advert may not be very good and so you need to strike a balance between what you want to say and what Google wants you to say.
Initially, an advert advertising a white paper worked quite well. The person would see your advert give you their details and download the white paper Then you could phone them up and ask if they wanted to buy a phone system. Clearly, the problem with this approach was that it was at least 2 steps before you got into the selling situation. A more direct approach of a special offer for a phone system cut out the middle step and allowed you to sell directly.
In either instance, the economics were awful you paid per click on the advert and the advert then took the user to your website where they had to take another action. Let us say for example that a click would cost five pounds Maybe 1% of those clicks might lead to a sale on a good day. So that would mean you had got a sale for £500. The profit on a handset was generally around £2.50 per month or £30 a year. The average number of handsets in a sale was about four so you would make about £120.00 a year per sale Paying £500 to Google for that sale doesn’t sound like good business.
You can see from this example how tempting it is to say well if we could get the cost per click down to say a pound then it would be more economical. So you go and work with Google algorithms, and alternative algorithm providers choosing different keywords and different strategies. All the time Google would be suggesting that you only had to spend more money and you could then get more leads. I tried time and time and time again to make the equations work but they never did. Indeed at one point I was spending £1000 a day.
Yell
One day a couple of reps from Yell turned up and told us they could crack the Google enigma for us. We only had to trust them and our sales would boom. They initially asked for a few thousand pounds, some of which was upfront and some of which was later. They then unleashed their algorithms to compete with Google’s algorithms. We optimised the website (again) and we did other good stuff such as blogging and some sales were beginning to come through.
So now the reps returned and told us if we paid them more money, say £25,000, then we’d enter their premiere group of customers and we’d get even more business because they would be doing even better things with Google and it would go really well.
So now we had a new division of Yell that we were dealing with. They threw away all of the information that we had gathered and all of the work and started again. It was an utter disaster. We argued with them to change back to the original plan but they didn’t and they couldn’t. In the end it was obvious from everyone’s point of view that it was a waste of money, they then went away and left us to try and find other avenues to get sales.
Affiliate Launch
We found a guy who wanted to run a sales operation for us. He told us that the key to sales was finding affiliates who would then sell direct to customers on a commission only basis and he knew all about how to do this. We hired a marketing company called Cognition who would do the branding and set about getting the affiliates. We ran some ads in the Times and organised a launch day for the affiliates in Walsall.
It was on Wednesday 10 March 2010 that the launch was to take place. The marketing materials from Cognition failed to turn up, the presentation to the affiliates was terrible and by the end of the day, it was obvious that no affiliates actually wanted to get involved. The sales director left.
Other Affiliates
We tried to seek affiliates who were selling computer systems, who could then sell our systems alongside ours and we wrote to many companies. Although we did sell a few handsets this way there was the effort in looking after the affiliate and the fact that the customers remained owned by them.
On one occasion I had multiple calls from a guy who was desperate to become an affiliate. He wouldn’t come to see me so eventually he persuaded me to meet him on the Giordano services on the M5. We met and he talked about how enthusiastic he was about everything. He’d looked at all our marketing materials and liked them but he’d like to improve them. I said I was willing to listen to any suggestions. He said he would go away and rework the documents for his use. And after about an hour there came the kicker – we just had to agree with him the amount we were going to give him to do the redesign and then he would be right on to it. I pointed out that the idea was that he got business and we paid him. Getting business before being paid was key to the deal. So I got back in my car and drove back up the M5.
Marketing The Channel
Just after we started in business as Cloudnet we went to a Channel Telecoms exhibition in Manchester. There were quite a few stands with people selling telecom and computer services. It turned out that they were selling to the Channel, a phrase I’d never heard before. The Channel were independent companies that would buy the service and then resell it on to their customers. The phrase white label was everywhere – that meant that you could relabel the service as your own and the customer thought you were providing it.
There were a couple of handset wholesalers present as well. They pretty much had the market sewn up between them. This was a world on its own, with unusual rules .
Marketing PR
I have always been a fan of using PR agencies. You get a lot of bang for your buck, if they are any good. When we looked around we found that all of the tech PR agencies were in London. So I arranged to meet three of them who were clustered around Leicester Square. None of them could see the glory of what we were doing and we left London in the teeth of a blizzard.
We found a more local company and they were as good as they could be. But they too couldn’t get the glory of our offering. We could not get any good stories to spin and so after a while we let this drop as well.
Marketing The Website
The website was pretty stable for a while using a platform called Hubspot but as time moved on a responsive website was needed. I hired a company to produce a new website who claimed total integrity. They delivered on nothing, having subcontracted the project to some far flung foreign company. It was a disaster. We tried several other platforms and eventually settled on Webx5 which eventually delivered a good web site. The time and effort spent in getting there was huge, especially with trying to ensure responsiveness.
Marketing Youtube and Videos
We began to explore Youtube as a sales avenue and made many sales videos, which was great fun but didn’t actually lead to many sales.
We travelled up to our Yorkshire wholesalers and videoed the new VoIP phones. I hit on the idea of doing life story interviews and after a couple of not very good efforts we gave up on that one as well. We hired a few actors and put some straight adverts and some funny videos together – you can see some of them on these pages,
We made over 300 videos during the period – most of which were straight “how this works” or “how to do that” videos. Some we paid to promote and some we didn’t. A few actually resulted in some sales.
There is a page here of a few of my videos – DBH Videos
We had an actor called David working with us for some time – you can see some of David’s videos here
We also had an actor called Claire working with us for a while – you can see some of her best here
On balance I think we probably had more fun than actual sales success.
Onwards and Upwards?
Eventually, I reduced the staff to the technical manager and myself. At long last we had stemmed the losses and began to make a slight profit.
The sales manager began to experience periods of ill health and much to my sorrow he died. This was not only a business blow, but a profound personal one. I still deeply regret this turn of events.
I hired another manager and we carried on. It was clear that were never going to achieve real sales growth and despite our best efforts, I decided that I should sell the business.
Exhibition
I decided that we couldn’t fail to give away our phone systems at a business to business exhibition. What luck then when we discovered that just such an exhibition was happening in Birmingham on September the 21st 2017 – “The Business Growth Show”. So we booked our place – a gold stand for us – nothing less would do. So, by the time we had booked it and chosen to have a table (luxury) and “leccy” for the lights we had blown a grand.
Then we needed a pop up stand – so we had to design one and then get it made. Cue lots of work to get the design right. It came and the graphic was wrong so it had to be done again. Then we needed flyers to hand out which meant more work designing and proofreading and of course more money. We debated how to take deposits and decided PayPal was the way to go. So we bought a machine to take payments and downloaded the app and learnt how to use it.
Then we need the phones to give away – so we ordered 16, opened 16 accounts, got 16 phone numbers, printed 16 instruction sheet, programmed the 16 phones and put stickers on the phones. So we had 16 phones ready to use and plug in.
Then when all was ready we went to Edgbaston Cricket ground where the exhibition was to be held the night before the grand opening. We set up the stand and the light had broken. So at 9.00pm we sourced a new tungsten halogen bulb from Asda and went home.
The day of the 21st was miserable overcast and wet. We drove through Birmingham and pitched up all excited. We had a pep talk from the organisers and then the doors opened and ….nothing happened. Sometimes the odd punter would wander past and I would pounce,
“Can I give you a phone system?”, I would almost scream.
I may have managed to do this 10 times during the day – but the answer was no each time.
So the day dragged on – the café had no coffee and I went outside and got soaked. The highlight of the day was the chicken Caesar wrap from Aldi – I even delayed eating that in case the excitement overcame me.
Mercifully the organisers decided to call it a day at 2.30 pm and we came home. We had spent the best part of two and a half grand and achieved diddly squat.
The End
In 2018 I agreed on an amicable sales deal and that was the start of a new chapter in the life of Birchills Telecom – but with no involvement from myself.