Rubber soul

Entrepreneur Mike Welch has worked hard for ten years building a successful, online tyre company. Now the input of Tesco’s former boss has given him a fresh outlook on the firm.

The biography of Steve Jobs by Walter Isaacson is the must-read business book for 2011 – and will surely be in the Christmas stocking of a few Scottish business folks. So, when tyre entrepreneur Mike Welch opened up his hardback copy to learn more about the Apple genius, he discovered something deeply personal in the opening chapter: Jobs was adopted.

This was a revelation to Welch, the dynamic and approachable thirtysomething boss of Blackcircles.com, born and raised in Liverpool, and who has made something of an informal study of what makes successful business figures tick.
Jobs’ story touched on an issue that Welch has spent a few years seeking to resolve about his own upbringing.

“It was amazing when I opened the cover of the book and saw that the title of the first section was ‘Adoption’,” he says. “It was nice to see someone, whom I respected – but who was not necessarily a likeable figure – in my field of business, had similar sentiments to me.”

Ten years ago, Mike Welch emerged as one of the most exciting entrepreneurs in Scotland with his idea of taking on the tyre and exhaust giants with Blackcircles.com, his internet-based ordering and delivery company based in Peebles in the Borders.

The idea helped empower hundreds of independent garage operators across the UK using the Blackcircles.com sales engine. While some might have predicted that Welch was being “over-hyped” and lauded as “too-much-too young”, he has fastidiously stuck to his business idea. Today Blackcircles.com is emerging as a major UK brand offering low-cost, no-frills tyres to an increasing number of converts.

Welch’s own dogged determination and focus has paid off and he has attracted personal investment from no less than Sir Terry Leahy, the former head of Tesco, who is viewed as the most significant business figure of the 1990s and 2000s.

While the investment is an important feather in Welch’s cap, what is worth even more is the direct access to Leahy’s retailing brain and his network of high-level contacts.
The fact that they both are Scousers and have a soft spot for Liverpool and Kenny Dalglish, also creates a bond.

Mike Welch has been consistent in building Blackcircles.com, taking on people with the requisite commercial nous and allowing the firm to mature organically. But as Welch’s own sense of self-awareness has grown the revelations from Jobs’ biography re-enforced thoughts about what makes him tick – and drives him forward as a business man.

“Over the last 10 years I have been trying to understand what my motivation is for becoming a business person,” he says, with some seriousness.

“Why is it that I gave up everything else in my life to set up and then run a business?” Welch discovered that a key motivation has been his upbringing and background – as someone who was adopted.

“The fact that I was adopted very early on was always a bit of stigma for me,” he says. “But I never acknowledged it properly. I felt a lot of guilt. And because I didn’t acknowledge it, I didn’t appreciate it. I remember early days when I was a kid and my younger brother, who was also adopted and never had a problem or an issue with it, was talking about it on a bus to school. When this all emerged, I felt devastated. It was a big issue for me at the time.

“When I was a kid I didn’t want to be different. I didn’t understand. I was always over-analysing things even as a young boy. I rebelled against it a bit. It was a problem for me and I didn’t want to acknowledge it because I thought it devalued in some ways my parents and family, whom I loved so much.

“A big driver for me is that I wanted to prove that I was worthy. It’s bizarre looking back that such a complex set of thoughts and concepts can come out of a young person’s brain.” Mike Welch, still only 33, was born in post-Beatles Liverpool.

But the power of the Fab Four’s music was a soundtrack for his early life. He was adopted by Arthur and Brenda district and moved across the Mersey to Prenton on the Wirral, south of Birkenhead and near Tranmere. He says: “I value my relationship with my parents so much. I love them dearly. The great thing about my folks was that when I was seven they told me about my adoption. And they have been hugely supportive of the agency.

My mum and dad are educated and well-rounded people, absolutely brilliant people in that they appreciate the adoption system in the UK. Myself and my brother David, there is not so much debt due – but a debt of gratitude. They are proud that I’ve decide to help as an adoption ambassador, as opposed to going into another commercial venture.

“I’ve always been comfortable with who I am and what I do – but I’m a lot more complete as an adult and a business person dealing with my feelings about being an adopted kid. There’s no gap in my life but I’ve been fortunate in having double the amount of support and affection from my folks.” This spurred Welch to look into the good work that is done by the adoption agencies and he found he could offer help.

“I started to see there was a big gap in the funding and commercial skills, yet the job they do is so crucial. I got in touch with the agency that placed me called Adoption Matters in Liverpool and I started doing some voluntary fund-raising work for them.

“My ‘real’ mum and dad are the folks who are my mum and dad today.
I think Steve Jobs says that in the first chapter of his book.” Recently he was asked to join the British Association for Adoption and Fostering Association on its board and as a business envoy.

“I will be at the coalface, helping the association push through change and make sure that kids have future generations of people who will adopt,” he says, sitting in his Edinburgh flat.

“The landscape has changed so much. Thirty years ago it was three- to six-month-old Caucasian kids with Middle England Caucasian parents looking to adopt them and there was no end of matches, so there was no problem. Now the average child is adopted at three years old, and you are looking at a multi-ethnic Britain, which is more challenging, because there are kids from various background involved with alcohol, drugs and physical abuse.

The formative years for a child are one to three and you have a lot of work to do to rehabilitate those children. The travesty of all this is that the funding mechanism for adoption hasn’t changed since my day. So when it was easier to place kids – and more straight-forward – it was the same formula of commercial financing as it is today.

However, there is ten times more effort going into finding the right people and helping the kids today.” He says working with the adoption agency has opened his eyes.

“They are really charitable people. Really beautiful people – selfless, brilliant individuals, but because they are so selfless and charitable, they are not potentially as commercially wise and as experienced as they need to be in this climate. It is a battle to get funding.

Charities are fighting week-in, week-out. It’s the big guys such as the Barnados and the Red Cross who have the huge funds to stick an advert on the television.

“My board and my shareholders are all very supportive of what I have been doing on this.” In 1994, aged 16, Welch began as a tyre-fitter in Liverpool. He quickly understood the margin on each tyre and, in 1996, launched his own mail-order tyre business with a £500 grant from The Prince’s Trust. He was headhunted to become Kwik-Fit’s head of e-commerce, but stayed only a short time before setting up Blackcircles.com in 2001.

“I’ve spent the last ten years of Blackcircles – and the three or four years before that – running the tyre business on my own,” he explains.

“Now I have a team with great experience and diversity.” He says that even a couple of days a month out of the daily grind to look at the world from a different perspective is healthy.

“I’m passionate about this. I’ve been offered four or five non executive directorships with big companies and corporations, but it’s not something I want to do at this stage. My investment in commercial business is one business; it is Blackcircles. This is my investment and it’s my life. I’ve worked so hard for it, so I don’t want to go giving the value to somebody else.”

But working for the British Association for Adoption and Fostering gives him an outlet that is close to his heart. “Hopefully, I can bring different skills to the people,” he says. So how is business today – and what does the future hold? 2011 has been a big year for Blackcircles. “It’s a longer-term play, still. I said that way back and we are trying to build a brand.

One thing about Terry Leahy is that it’s not just about having a ‘cool guy’ in the shareholder group, it’s having the best retail guy you can possibly have involved in our business.”

Shortly after setting up his business, Welch drew up a ‘fantasy list’ of people he would like to help him grow the business and Sir Terry Leahy’s name was on the top. He was European Businessman of the Year in the Fortune magazine and, in 2006, Mike wrote to Leahy saying he was someone who might help him learn more about business.

“I met Terry and we got on well and from that point onwards he made himself accessible to me as a mentor.

“If you look at our marketplace there had been no real innovation for many years until Blackcircles came along and we are starting to get ‘traction’ and to grab market share.
Customers are sticking with us and we’re looking after them. We will make money again this year. Our sales line is now north of £20m and I’ve got no reason to believe that we couldn’t be a £100m sales business within the next five years.”

At the start of 2011, Blackcircles brought in Charlie Dixon as director of franchise and network development. “Charlie had a blank canvas and we were working tighter on a concept to franchise key garages,” says Welch.

“At the moment they have 1,300 garage partners – but we thought, let’s bring them in as part of the business and bring them some value and generate us some income.
That has been a resounding success.” MIke Welch says Charlie Dixon has been able to convert the “best of the best” into branded Blackcircles.com outlets, which generated better income.

“We started with a preferred list of 1,000 independent garages that had no branding other than the name of the mechanic or owner above the door. This year there will be 250 that are fully branded with the local names above the door – and next to that will be a large sign saying ‘Powered by Blackcircles’ and generating an income. In 2012, we want to double this to 500 across the UK.

We do things for them that they can’t do for themselves.” This means that within three years Black Circles will have a bigger branded network of garages and stores than Kwik-Fit. “I think it’s an outstanding feat,” says Welch.

“It’s gone beyond any of our expectations this year and shows that in 10 years of awareness in the market we have built up a great deal of goodwill with the garage network. We are going to keep driving this as hard as we can.”

Welch says it is like the Interflora model of florists who all operate under the same umbrella brand – and the recent move by Blackcircles.com to spend serious money on a concerted advertising campaign on television in 2012 to raise awareness will give the business a massive footprint.

Blackcircles has more than 600,000 customers who are returning to buy their tyres, plus a deal with Tesco to deliver cut-price tyres.

“There are many more elements to the proposition. It’s almost a culmination of two or three years’ work and it’s all come together. The garages are appreciating this, especially in this economic climate.

We are accounting for a half and, in some cases three-quarters, of the volume of income of our garage network.” Mike Welch says the independents were there serving the UK motorist 30 years before Kwik-Fit, and he hopes they will be there in 30 years’ time. Apart from Sir Terry Leahy, Welch also says chairman Graeme Bissett has been a great adviser since joining in 2004.

He is also a non-executive of Belhaven Group and a director of Macfarlane Group.
Welch keeps asking him to stay on with the promise that “next year will be the big one, and why would he do a runner now?” They have a great working relationship and work well together, which bodes well for the shareholder group and the rest of Blackcircles’s executive team in Peebles.

Blackcircles.com has a network of eight warehouses across the UK, so that the tyres can be delivered within a couple of hours to the chosen garages.

“We have just about every brand and every size of tyre for every car,” he says.
“We’ve 6,000 more parts than the leading high street retailer. It’s a price-based proposition but there is no retention unless you’ve got the service element. We are having to cover all the bases.”

So what does Sir Terry make of his involved in Blackcircles? “One of the challenges for Blackcircles is that it’s a fast-growing business but it is still quite small,” says Leahy. “Its number of customer contacts is not huge. However, the broader principles of how you create loyalty with customers apply directly to Blackcircles – making sure you identify who your good customers are and look after them.”

He says that if Welch and his team listen to the customers carefully and continue to improve and innovate, Blackcircles has the chance to take on the established brands in a major way. It might be a long and winding road for the two Scousers, but it will be worth it to build the Blackcircles brand.