Jonathan Straight: Playing it straight

Anyone can spot an opportunity, but it takes someone special to seize it. He speaks to Ernst & Young’s 2006 Entrepreneur of the Year, Jonathan Straight, about how he built a £28 million turnover company from a business that no-one wanted.

There aren’t many CEOs who sport a waxed moustache, ponytail and different pair of glasses every time you meet them. Without having done extensive research, I’d hazard a guess that Jonathan Straight is the only one.

Given Straight’s reputation for eccentricity – and it doesn’t end with his physical appearance – it is a little surprising to encounter someone so, well, straight. He is charming but says what he means, a trace of the Yorkshireman still audible in his accent.

‘I’ve made a point of always wearing different specs, and keeping my moustache and ponytail,’ says Straight, who has 168 pairs of glasses in his collection. ‘It doesn’t put off the shareholders. Sometimes it makes them blink a bit, but when you get talking that quickly goes away.’

Looking different has even been helpful. ‘Particularly these days, now AIM is a bit crowded. He who shouts loudest gets noticed. Although that’s not why I do it, of course.’

Glittering prizes
Last year, Straight was noticed for other reasons, notably winning Ernst and Young’s coveted Entrepreneur of the Year award. The judges were impressed by the single mindedness with which Straight focused on recycling, which he recognised early would be a growth sector.

Initially, he took unpaid work with an organisation called Save Waste and Prosper (SWAP), before starting Straight Recycling Services in 1993 on his own, specialising in containers for various types of waste. Having built up a customer base among local authorities, businesses and consumers, Straight now has turnover of £27.8 million, profits of £1.7 million and 61 employees.

It’s a notable success story, marred only by the AIM-listed company’s recent share price drop from a peak of 314p in June last year to 123p a year and a half later.
‘We’re victims of our own success,’ Straight muses. ‘We had the driest summer on record in 2006 and retail sales of water butts went through the roof. That gave our retail supply chain all sorts of problems.

‘We had to spend money to keep our customers happy, and brought in an outsourced logistics partner, committing a big chunk of fixed costs. Then this year we end up with the wettest summer on record.’

It’s an example of how unforgiving the public markets can be. ‘I think an element of what’s happened has been unfair,’ he says. ‘When granny sells 500 shares, our share price seems to go down 10p, but when someone buys 20,000, we don’t move. I still haven’t worked it out.’

Straight freely admits that using a fixed-costs model to outsource part of his distribution business was the ‘wrong decision’, as it doesn’t allow for variations in demand from year to year. But he is frustrated that the blunder has overshadowed a stream of good news.

‘Water butts are only part of what we do,’ he states, with a hint of exasperation. ‘Our interim figures show turnover up 11 per cent, and our trade business is strong, solid, predictable and profitable.’

Financial acumen
The episode is all the more galling for Straight because of the fiscal prudence with which he says he’s run his business for 14 years. Since he borrowed £10,000 from family members to fund his first deal (for 1,000 compost bins), the business has never been in debt. Until the float on AIM, he’s funded growth from cash flow and the credit extended by suppliers.

The conservative growth strategy is one of many things seemingly at odds with the more flamboyant elements of Straight’s personality. Few would guess from a glance at the man, who resembles a spruced-up Salvador Dali, that he was a leading light in the worthy but mundane world of recycling containers and water butts. But both his interest in green issues and tendency to run a tight ship can be traced back to his teenage years.

Straight split his adolescence between entrepreneurial schemes and more creative pursuits, including stints as a pub pianist. His working life ‘started in earnest’ as a consultant to a fitted bedroom company, where he ran the call centre.
‘When I got there, the business was in a sad state of affairs,’ he says. ‘Somebody would ring to ask for a brochure, about a week later it would be sent out and maybe a few weeks after that someone would follow it up.’

The 22-year-old Straight immediately set to work on the sleepy operation, improving response times and boosting sales.

‘I was very unpopular,’ he admits. ‘I was demonised, surrounded by northern, working-class folk who saw me as the emissary of the sales director, doing his dirty work. There were seven or eight people in the team and every week the worst one got the sack.’

Like many entrepreneurs, Straight wasn’t overly troubled by self-doubt. ‘I remember in one of my A-level lessons we learned about autocratic and democratic management. I thought to myself, if you’re running a business autocratic management has got to be the way to do it!’

A change of direction
But it wasn’t long before the idealistic side of his personality asserted itself. ‘I wanted to contribute something positive to society,’ he remembers. ‘I started to research the growing green agenda and I realised that when we bury materials that have a value, we are really paying for them twice. That was my eureka moment. I knew then that solving that problem was the direction I would take.’

The decision led Straight to an unpaid job at SWAP, where on his first day he found ‘half a dozen people in knitwear from Oxfam huddled round an old IBM.’ More significantly, he began working for Paxton, a manufacturer of waste containers, to help them develop a range of recycling-related products.

‘In 1993 Paxton said, “Enough is enough – we’re not selling anything.” I said, “Of course you’re not selling anything, that’s because the prices are too high and the products are wrong.” I persuaded them to continue making recycling containers for me.’

In addition to Paxton’s products, Straight scoured the US and Europe for merchandise to extend his range. He had soon built the foundations of an independent business, and Straight Recycling Services was born.

Taking on the big boys
It wasn’t always easy. Heavy-hitting competitors such as plastics manufacturer Linpac meant that Straight had to fight for his share of a growing market. Again, his distinctive personal style helped. ‘The big players had a huge arsenal of weapons at their disposal,’ he says, ‘but they couldn’t send a caricature of themselves out into the market.’

But Straight’s distinctive brand of eccentricity could only take the business so far, especially when competing against his fiercest rival, Blackwall. Originally based near the Blackwall Tunnel in London, the composter bin king set up in Leeds in 1994, a year after Straight got his business off the ground.

‘They entered the kerbside box market very aggressively, and quickly became number two in that market,’ Straight explains. ‘They were number one in composter bins and we were number two. So we ended up with two products that competed tooth and nail. It was like Manchester City and Manchester United – very difficult to get people to change sides.’

By 2000, Straight was employing four people, ‘rattling around in a nice big office that was just begging for more’. His turnover hit £2 million, but there was something lacking. Straight sent for his financial adviser Colin Glass, now a non-executive director of the quoted company, to discuss ways to grow the business.

‘Colin gave me two options: going to the bank, or getting a venture capitalist involved,’ says Straight. ‘I said, “No, I want to float.” He laughed at me, wary of the risks involved – as financial advisers do when you give them the best idea in the world.’

After protracted discussions, Glass agreed to take Straight to London and introduce him to some people. But Straight didn’t like what he found. ‘I was introduced to Ofex [now PLUS Markets]. The deal seemed to be: you give these people a lot of money, they put you on Ofex, where no-one can buy or sell your shares, and you can’t raise any money. I quickly gave up the idea.’

However, the idea of flotation lingered and a successful meeting with brokers Durlacher and Seymour Pierce led to an initial public offering (IPO) on AIM in November 2003 at 80p. It raised £1.5 million, giving the company a market capitalisation of £5.5 million.

The next year, negotiations with Blackwall began. ‘It was always in the back of my mind that we had to take them out,’ says Straight, who acquired the company for £6.75 million in January 2005.

Considering their long-standing enmity, the integration between the two companies was remarkably smooth. ‘It’s a funny thing how people who have demonised and hated you can suddenly become your best friends when seven million changes hands,’ Straight notes.

Building a group
A number of smaller acquisitions followed, most recently Gummy Bins, a disposal and recycling system for chewing gum. Straight is planning others – though he says the lacklustre share price may make it more efficient for him to use debt rather than equity to fund them. Not surprisingly, he is bullish about the company’s prospects.

‘We have formed ourselves as a recycling products and services group,’ he states. ‘There is considerable scope for expansion, both organic and through acquisition.’

Meanwhile, though Straight finds no space in his schedule to revisit his days rolling out the barrel as a pub pianist, he does make time to help other entrepreneurs ‘in whatever way I can’. And his autocratic tendencies have, apparently, mellowed with age.

‘I was very controlling in my early years,’ he says. ‘But now, with the board, it’s more democratic.’

Straight has no regrets about floating on AIM, and regards that, along with the acquisition of Blackwall, as among his proudest moments. He still reminisces about the day four years ago when he watched the net proceeds of his IPO, £1.2 million, drop into the company bank account.

‘I remember thinking: that was the easy bit – now we’ve got to do everything we said we were going to do,’ he says. ‘And I think that’s exactly what we’ve done.’

 

Marc Barber

Raven Connelly

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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