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DRIVING FORWARD
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Page 63
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Megadrive's MD founded the company with the express aim of building it up then selling it for enough to retire on. Tim Maughan studies this novel strategy.
Steve Davidson, MD of Pembroke Dock lirm Megadrive, readily admits he is no truck enthusiast; his dream vehicles run on petrol and have only two wheels. Davidson relishes the challenge of running a road haulage operation hut sees his trucks as business tools which will, if all goes to plan, make him rich enough to live in the Caribbean.
He believes he can generate cash while eschewing traditional business practices. For example, forgoing the corporate image. Davidson rides to work on his 1,550cc Harley Davidson (no relation), and wears a sweatshirt in the office rather than a suit."We do everything differently," he remarks.
Davidson first became involved with trucks in 1981 ,when he gained his C+F (Class 1) licence. He spent time in the construction industry but was drawn back to the world of road transport: "I missed haulage, I couldn't shake it off. It's like an itch you can't scratch."
Two years ago, he drew up a business plan with his brother-in-lawJarred Dunstan, a fellow Harley rider who is now operations director (see panel, below). Davidson describes many transport outfits as "horseand-cart companies", long-established firms where the retiring boss automatically hands the business on to the next generation. But he has no intention of passing his company on. He wants to build Megadrive up as much as possible, then sell it.
Many new operators rush headlong into the fray. Davidson believes, without bothering to plot their course. But he reckons a well thought-out business plan can make for a smooth ride."If you're driving your vehicle from here to Scotland, you take a map," he says, 'Sand it's the same with a business.To get a focus, you use the map, and you can also use it to get back on course."
Megadrive was launched in November 2005, when Davidson and Dunstan were joined by Jason Salter as freight forwarding manager. Today the firm turns over £1.2m.Davidson declines to reveal Megadrive's exact profit margin, but does say it's significantly higher than the national average.
The company base is remote: Pembroke Dock is situated at the south-westerly tip of Wales. Many operators in such locations choose to concentrate on local or regional work but Davidson refuses to restrict the company in this way.Instead he dispatches his vehicles far and wide. "The whole of Britain is our workplace," he says.
The Megadrive office is situated in the 200year-old Sunderland House which is owned by the Milford Haven Port Authority. Davidson and Dunstan hire it direct from the authority, which also rents them their operating centre.
Low rent more profit
Davidson explains that the authority is keen to help local businesses so its rents are kept low, which increases the firm's bottom line. And its links with the landlord go further.The authority fields a fleet of shunters to handle unaccompanied loads, and has its own workshops to maintain them; Megadrive's trucks are serviced in these workshops. "The rates are very reasonable," Davidson remarks.
Some new operators Like to spend their money (or the bank manager's money) on a IP. new truck This projects a good image, but can eat into profits. Davidson reminds us that his passion is for motorcycles, not trucks. He bought the first LOV, an N-reg FH12. from eBay for £4.000 (see panel, page 63). -The truck was in Norwich," he recalls, "Sot went up there in June 2005. did the deal, and drove it home. We used this truck to test the water."
The work is varied: "We take cheese from Pembroke Dock to regional distribution centres in northern England, five or six 28-tonne loads a week."The firm also moves pre-packed meat from Cross Hands in Carrnarthenshire to Liverpool and Hull, and bottled water from London to Wales and the West Country. Other common loads include timber. plasterboard, insulation materials and tissue paper. "A full load is less than two or three tonnes," says Davidson.Tissue is carried in one of the firm's four 4.7m-high curtainsiders:it also runs seven 4.4m-high curtainsiders.
Eddie Stobart livery
One of the trucks is subcontracted to Eddie Stobart, and carries that famous livery. "Jarred knew someone at the company and we did a one-off job for it," says Davidson."Stobart asked us if we wanted to subcontract, so we had a meeting in Daventry."The Stobart loads are mixed, and Megadrive is paid by the trip: Davidson reports that the rates arc decent.
Megadrive casts its net wide. For instance,a truck might leave Pembroke, head to Birming ham, then onto Newcastle upon Tyne, up to Edinburgh then south to Dover. Whatever the trip. Davidson knows he will be paid on time. Bad debt is not a problem because he uses the services of a debt factoring firm.This means Megadrive is paid 85% of the invoice value as soon as the job is completed. When the customer pays up, it receiVes the remaining 15%, minus the debt factor's fee of course.
This safeguards cash flow and Davidson says:"We couldn't have grown without it" The firm's business plan ends with a section headed "f uture challenges".This year Megadrive will offer a warehouse service in Pembroke; further down the line Davidson wants to spread eastwards into the South Wales valleys or the M4 corridor. He also plans to expand his fleet.
This will all cost money but that shouldn't be too much of a problem as profits are being ploughed back into the Megadrive war chest. "Empty running is kept to an absolute minimum," Davidson explains,"and we're making decent margins. We're a full-blown trunking operation... there are lots of challenges ahead, and we're looking forward to dealing with them." And with a Harley to look after and those Caribbean beaches to dream of, Davidson is not short of motivation.