“Energy delivered by bright spark” from The Herald
Generating a profitable niche in a sector dominated by the ‘Big Six’ is more of a marathon than a sprint, Spark Energy CEO Chris Gauld tells Colin Cardwell of the The Herald, Scotland.
Chris Gauld Clearly knows a thing or two about resilience and pacing himself. When we speak, the chief executive of Spark Energy is about to depart for Lanzarote, not to take it easy in the sun but to put himself through the considerably more demanding undertaking of an Olympic-distance triathlon, his second of the year.
He admits that – for those of us whose idea of a salubrious late autumn break is assuredly not a 1.5km swim followed by a 42km cycle ride and a 10km run – “it doesn’t sound the ideal way to wind down and relax”.
There hasn’t been much opportunity for the 36-year-old to ease up recently. It has been, he says, a long and often difficult slog to bring spark, which entered the energy market as a small contender to its current, promising position.
Spark made its first profit in 2013, and Gauld became chief executive earlier this year. The company made an important deal with leading wholesaler trader Morgan Stanley and the company now, he believes, has the critical mass to make a major leap forward. With more than 100,000 customers, in the year to June spark turned over in excess of £80 million, compared to £40.7m in the previous 12 months, and he hopes to see a profit of some £1m. The company has had £855,000 of support from the Scottish Investment Bank, the latest tranche of £200,000 announced by the First Minister in June.
Gauld concedes that until relatively recently the company has not been able to invest as much as he would have liked, but this has significantly changed. “During the past 12 to 18 months we have put £2.5m into improving the customer experience, marketing and systems. We have a new phone system, a new computer system, doubled our call centre staff, doubled our IT team, built a new website and changed our processes and policies to reflect the change in the business from a cash-strapped start-up to fully funded, competing energy company delivering good service. And that’s quite a change.”
Entering an industry dominated by the ‘Big Six’ was always going to be a challenge – especially in 2007, on the brink of major recession. “For a while it was the whole entrepreneurial journey – one step forward and two steps back, having to focus and refocus, getting some great people on board and getting some things wrong – all the things about a start-up that you have to learn.”
Spark was founded by Canadian entrepreneur PJ darling (who has since left the company) not with the intention of going head to head with the majors but to provide a real alternative for the lettings market. Gauld himself entered the industry through a less than conventional route.
After studying for a business degree with hospitality in Edinburgh, he was first a chef, before moving into recruitment, then property management, before joining spark as sales director. There is, though, a logic to his career progression. “It makes more sense looking back at it than it did at the time,” he reflects.
“My jobs have always been in fast growing businesses which succeed or fail by the quality of their people and my skills have been in leadership and pointing people in the right direction.
“As a chef, I came to realise that hospitality is a high-pressure business that brings out the quality in people – and when you become a head chef it’s not really about cooking; it’s about managing a team.” it was, however, working for Edinburgh-based investment and property management company Grant Management that he saw the need for a new breed of energy company and experienced, as he puts it, “the pain and cost in administrating tenant utilities”.
Gauld explains: “When i was in property management, what we really wanted to do was solve a major problem: everyone in the rented property chain loses through utilities.
It’s very difficult to deal with the big energy companies regarding short-term leases and empty properties. The tenant may well be moving out after six or 12 months, and if the existing account isn’t closed properly, or they haven’t told the supplier they are moving, the landlord has to start dealing with debt in the wrong name, the letting agent loses because it’s an administration charge and the new tenant often inherits a higher price and poor service.
“We really wanted to solve that problem and that’s where spark came in. at least the tenant would inherit better prices and a better customer experience, and would be free to move – but probably wouldn’t – and we would build an energy company on the back of that. That’s what we’ve done and everybody wins.”
This year, Spark has expanded on that rationale by moving into telephony and broadband services. “Our strategy was first to offer our services to more clients, then to give our existing customers a better experience while increasing our margins, which in utilities are very, very small. So broadband was a no brainer. Clients who are only in the property for a relatively short time don’t want to wait two weeks for the service to begin – and get a 24-month contract. We know when they are arriving, get them online more quickly and offer a contract that is tailored to the length of their tenancy.”
Spark, which has specialised in private tenancies, is now extending its offering to social housing tenants. “We have a good service and prices, so we can now apply our model to different sections of the rented market, with the opportunity to access 4.5 million council and housing association properties that have the same needs regarding costs and efficiency,” Gauld adds.
This growth and consolidation is clearly a landmark period for Spark, which as a cold-start, new operator has prevailed in a hostile climate. “It’s been difficult – we didn’t start with £13 million in the bank to found an energy company, we didn’t have an IT team of 30 and a compliance team … you learn as you build the business.
“For the first five or six years any cash that we generated was going to fund losses. Now we are able to fund investment and improvement, and that really is the key.”
The company has established itself in Selkirk as one of the Borders’ biggest employers, with a workforce soon to rise to 250. “I have experienced positive business cultures in the past and I’m determined that we have that in this company,” says Gauld. “Partly because we work very hard and partly because I believe if you are going to embark on the difficult journey of starting a business – particularly an energy company – you may as well enjoy it, and we do.
“I am really passionate about the business: when you are inside it you know how good it is and you know that you have great people who are working very hard too. But that doesn’t always manifest itself externally – nobody likes an energy company or estate agent, and politicians like to grab headlines by beating up on energy companies. That makes me want to make sure that we continue to do a good job.”
And, doubtless, complete a few more triathlons.