It was during their time together at university that Chirin Gill and a friend decided they would buy a business.
Entrepreneurship is deeply ingrained in both of them, it seems. “I’ve always been interested in business,” says Chirin. “When I was at school I bought bags of sweets and sold them off individually to my friends. When I was 13 or 14 I found a supplier of Sony Walkmans and sold them too.
Not only could we carry on with our day jobs, but the product was so simple
“My business partner was always big into reading about business people, from Richard Branson to Philip Green. In terms of business management and leadership, reading those kinds of things taught him how to run a business.”
Once the duo left university, they embarked on their careers, and a couple of years later they began their search for a business to buy. “We spent a few years browsing BusinessesForSale.com,” says Chirin.
“It’s so simple and there are so many businesses on there. When we got a bit more serious I signed up with a few agents.”
High Google ranking
They found a website selling mobile phones and accessories that they were keen on, but they couldn’t agree on a suitable price and gave up. But they didn’t forget about the site, especially when, because of its high Google ranking, Chirin’s business partner repeatedly came across it when looking for mobile phone accessories.
“I decided to speak to the guys again, and about six months ago we reopened negotiations,” explains Chirin. “It seemed the two people who had been running it for 10 years had had enough and wanted to get out.
“One of them had other businesses and this website was not allowing him to focus on them. The other owner was going to university as a mature student, and he didn’t want to have to mess around with this site now that he had other things on his plate.”
Chirin and his business partner knew they’d found the right business. “This was perfect for us,” says Chirin. “Not only could we carry on with our day jobs, but the product was so simple.
“Essentially, we know all about mobiles because we’ve all got one. And the profit margins are great — margins are higher on £2 or £3 mobile accessories than on the actual phones. Not only this, but the business proved it was making a profit, and we could see the expansion potential.
“We knew we’d be able to start selling other products, adding new accessories, changing the contracts and so on. For example, when we took over we had 100 mobile accessories; now there are over 700.”
The pair renegotiated the price and their patient approach paid dividends: they eventually paid around £70k, less than half the asking price first time around. Chirin had become an entrepreneur at the age of just 26.
Before finalising the deal they looked closely at the business’s potential, calculating what they could earn with the existing stock, and projecting what they could earn if they went ahead with their expansion plans. With a background in finance, Chirin was well qualified to assess the business’s performance over the previous decade.
“We looked at the price to earnings ratio, which is vital in these situations. We also used it to value the company the first time. Back then, it was ridiculously high; we thought it was overvalued, and consequently didn’t go ahead with the purchase.”
Although they saw a company in decline, Chirin concluded that this could be arrested. “The second time around, we could tell the guys’ will to run the business after 10 years was gone.
“As a result of that, the earnings had slipped quite a lot. Simple things were letting the company down, like keeping old unfashionable phones and uncompetitive contracts rather than offering brand new ones, and this was affecting profits. We could see these things could be rectified immediately.”
The drop in earnings proved to be “a great bargaining tool”, says Chirin. “We argued that they couldn’t ask for as much money. They weren’t making as much profit now and that needed to be reflected in the price.”
