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Monday 25 August
2008, San José, Costa Rica
How I made it: Ricky Thomas,
founder of Petmeds
From The Sunday Times, Times
Online
After a couple of years heading
the IT department at the
spread-betting firm IG, Ricky
Thomas felt burnt out and
decided to quit. He was on
holiday when he spotted a
business opportunity.
“I had no plans and was sitting
on the beach in Costa Rica
reading the paper when I saw an
article about a change to the
law,” he said. “It forbade vets
from forcing customers to buy
pet medication from them. They
would have to give a
prescription that customers
could use anywhere.
“I had a dog and it was costing
me a small fortune in medication
and I thought it might be a good
market to get into.”
On his return to Britain, Thomas
decided to see if he could sell
prescription pet medicines
online. Things were not
straightforward, however. He
needed vets to help him but did
not get any replies from several
advertisements.
Finally he found two vets to
join him and he started the
business in June 2006. The first
months of trading did not go as
planned. Soon after launch he
came under fire from vets who
complained (to no avail) to
their regulatory body.
Anxious competitors were not his
only problem. Four months after
launch, Thomas feared he might
have to close the business.
Although sales were growing
rapidly, so were losses, and
cash flow soon became a problem.
Start-up capital of only £15,000
plus the fact that he was not
winning large-enough discounts
from suppliers stretched cash
flow. Competition from other
websites, which were also
cashing in on the change to the
law, meant he had to sell some
product lines at a loss to keep
attracting new business.
That summer Thomas got married
to his fiancée, Diane. On the
first day of the honeymoon
Thomas had to stay in their
hotel room using his laptop to
answer customer queries and keep
up with the work.
“It did not take much to
destabilise the business and we
had to cut the honeymoon short,
which did not go down very well
with my wife. We came back after
three days. I underestimated how
much money was needed to start
the business and I hadn’t
expected such strong competition
so soon.
“In the first four months we had
lost £80,000. I began thinking I
would have to fold the business
and the pressure was huge for
the whole of the first year.”
Thomas persevered. “I was
working from 8am to 11pm solid.
Even when we started taking on
more staff there were always new
problems to solve. I made a lot
of mistakes. Not getting good
accounting advice early on was a
big mistake. We did our
cash-flow forecasting badly, we
were owed money, we had not
registered for Vat, which meant
we had to go back and change all
the product transactions. I
could go on. We did so much
wrong.”
By January 2007 a focus on
making more profitable sales was
bearing fruit and the business
had made a profit of £17,000 on
sales of £480,000. “It wasn’t
much but it was a miracle all
the same. I had been obsessed
with growth and was too relaxed
about profits. The last three
months of that year made all the
difference.”
Better analysis of
sales-conversion rates and work
with online affiliates, such as
price-comparison sites, which
took a commission, quickly
improved growth rates, said
Thomas. “A lot of people out
there are prepared to sell your
product for you. It meant we
could stop acquiring new
customers by cost per click and
start paying by cost per
acquisition, which made a huge
difference.”
In its second year of trading,
sales climbed to £2.2m and this
year PetMeds is on target to
reach £4.4m – sales were
£400,000 in July. The firm
should turn over more than £8m
next year, said Thomas.
He plans to use the online
trading expertise he has
developed for a new venture,
called Thechemist.co.uk. It will
target the human prescribed
medicine market.
“Perhaps the biggest lesson I’ve
learnt is to get proper advice,”
said Thomas. “Getting the right
people with the right skills in
to free up your time is so
important. The temptation to do
everything yourself is strong
but it’s a false economy. Our
accountant paid for himself very
quickly in terms of finding
grants and the work he has done
with our suppliers.
“Get a third party to go over
your plans and criticise them,
too. Although I had written a
business plan, I did not look at
it and I did not have a system
developed. We are much more
automated these days. We can
grow by a huge amount now
without recruiting too many more
people.”
Thomas, who is 29, has had
offers to buy the business but
said he enjoyed the experience
of growing it too much.
“You can’t beat being at the top
of the tree, seeing the business
grow as a result of your actions
and getting feedback from happy
customers.”
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