Investing in Entrepreneurs

Case Study: HomeServe

Jeremy Middleton, Founder, Middleton Enterprises

Jeremy Middleton is a self-made businessman, angel investor and founder of Middleton Enterprises. After a career in brand management with Procter and Gamble, Jeremy spent a period in management consultancy with PWC before starting a series of businesses in partnership with Richard Harpin. One of these businesses was HomeServe, the largest emergency repairs company in the UK, which recently sold to Brookfield for $5million. This was one of the largest private takeovers in the London market this year.

We sit down with Jeremy to discuss his journey with HomeServe, how it became the best investment he ever made, and the challenges he faced along the way.

When did you meet Richard Harpin?

Richard and I first met over a bottle of mild green fairy liquid! We worked together marketing the brand at Procter and Gamble in the early 1980s, although I remember we individually had plenty of side hustles. I was starting in Buy to Let, and Richard had set up a national student magazine… and sold Christmas trees he imported from Norway!

And when did your friendship turn into a business partnership? 

I got sent to Egypt by P&G to work as a Marketing Manager, and I asked Richard to manage my property whilst I was away. When I came back, we realised we both wanted to go into business together. Soon after, we set up a property letting business as 50/50 partners. We agreed to share everything we made from whatever source. We were all in!

What inspired you to start an emergency plumbing business?

We were soon managing a lot of properties and dealing with a lot of property emergencies – mainly plumbing leaks. So, we set up Fast Fix plumbing and heating, guys in yellow vans offering call out within the hour, with 24-hour availability. We were marketing guys so got lots of turnover. Sadly, we knew less about operations or managing money, and we were soon losing plenty of it (money we didn’t have!).

What was the biggest challenge you faced in those early days? Did you ever want to give up? 

Cash was our biggest challenge. The banks wouldn’t lend to us, and VCs wouldn’t invest. We maxed out on our credit cards, we borrowed what we could from friends and family, and we even spent our tenants’ deposits! But it wasn’t long before the VAT men sent bailiffs to our door. We were staring into the financial abyss.

So, how did the HomeServe success grow out of this? 

Firstly, we found a business angel. He risked £15k on us. He said later he told his partner that we were either going to be millionaires or go to jail… I think he meant we came over pretty driven! 

Did it all go ok after that? 

No, we knew we needed bigger backers. 

Post privatisation we knew that all the water companies were looking at new revenue streams, so we pitched them all on the idea of looking at the potential for them to enter the plumbing market. They all said no except one and we secured a small one – South Staffs Water, based in Walsall, asked us to review their plans to set up a regional plumbing business. We told them we had a great idea, a franchised national emergency plumbing business. Better still we knew exactly where they could find one, and get it for free.

A few months later we formed a 50/50 joint venture with the water company and moved Fast Fix to the midlands, with Richard as CEO. 

Was it an overnight success?

Hardly. Over the next couple of years we grew our small loss making plumbing business into a big loss making business. We got bigger but our losses got bigger still! It looked once again as if we might fail. 

We struck gold when we turned the concept on its head and instead of selling plumbing to the 16% of people who had plumbing emergencies, we started selling policies to provide repairs in the event of an emergency to everyone – cash up front. We were selling peace of mind.

What happened then? 

With attractive economics, Richard and his team focussed on building a recurring revenue membership business. This was renamed HomeServe. The business grew and grew, became bigger than the water company, which was then sold, leaving HomeServe listed on the market. 

Where next for HomeServe? 

HomeServe has a great future whether it’s a public or private company. It offers services people want all over the world, and it’s underpinned with a proven subscription model. I see the business growing its offerings and opening in more countries. 

What was your overall role in all this? 

Richard is the operator who grew the business. He was and is utterly focussed and driven. I was the original investor who saw the potential of the idea and I saw Richard’s talent. But the business was always led by Richard. I like to find great ideas and back early-stage entrepreneurs, and that’s what I do now. 

And what exactly are you doing now? 

I have set up Middleton Enterprises. As a family office, we look to back entrepreneurs who have proven operating models but are looking for a partner to help them scale up their model. 

For example, we backed Simon Blunt, who has grown a property trading business called HBB Ltd. Last year they hit £100m sales. We also backed Andrew Jenkins and formed the Conviction group, a global network of business angels investing in b2b SAAS companies. So far, they have raised and invested over $100m into the sector. More recently we bought into One Gym, a low-cost gym chain in the northeast. 

What was the biggest challenge you have faced?

Survival. It’s difficult to start without any money, and hard to raise any when you don’t have a track record. We tried everything and if we hadn’t found a corporate partner, I’m not sure we would have survived, but we kept going. As Richard always says, every no is a yes eventually!

How do you define business success? 

Creating something that lasts. Something that creates jobs and pays taxes. That’s my aim with every investment we make. 

What book should every investor read? 

For investment I recommend Terry Smiths annual shareholder letters – brilliant guidance, honest and simple, and the ‘right ‘strategy for any long-term investor, whatever the stock market says! 

Read more here: https://www.ft.com/content/865ab7cd-97e0-4096-a145-8645420a680e