Big Red Book owner Marc O’Dwyer (pictured) is battle-scarred, but the Iron Man triathlete’s bruises are mostly of the figurative kind, writes Darren O'Loughlin. In 2014 O’Dwyer planned to float his accounting software firm on the Alternative Investment Market in London, with hopes of raising €5m from the IPO.

After a frantic six months of preparation and investor pledges, Big Red Book fell short of the finishing line, when skittish backers bolted and left the firm in pre-IPO limbo. O’Dwyer shelved his floatation plans and was left cursing the bad timing.

“I’m still pretty cynical about it – it was very demoralising,” says O’Dwyer. “We were naïve going into it, not knowing what the procedures were and not having a plan B. I’m a lot wiser now.” O’Dwyer is still trying to tie down investors for Big Red Book, but his approach now is less of a sprint and more a long-distance run. “We’re a little more guarded about who we’ll talk to,” O’Dwyer adds.

In the meantime, O’Dwyer’s company continues to expand its customer base. Big Red Book originally focused solely on on-premise accounting software. O’Dwyer added Big Red Cloud to the mix in 2012, a separate division selling accounting software accessed through the internet.

The expansion of the firm required a significant investment in R&D, marketing and other costs, in the region of €670,000. Big Red Cloud Ltd’s accounts filing for the year to January 2015 reflect the cost of the business investment, with the company booking a loss of €70,000 and a year-end net deficit of €221,000.

In Association with

The more established side of O’Dwyer’s business, The Big Red Book Company Ltd, booked a loss of €78,000 in the year to January 2015. That company closed out its financial year with accumulated profits of €641,000, a debtor book worth €2m and net worth of €2.2m, including €1.25m in intangibles. O’Dwyer says the Big Red Book group grew by 15% last year and had revenue of around €1.7m.

Strategic Partners

O’Dwyer’s to-do list for 2016 is predicated on continued growth. Finding some backers to come along for the run is high on the list. “I want to see increased activity in the Irish and UK markets, added functionality to our existing on-premise and cloud products, and the addition of some more strategic partners.”

O’Dwyer’s path to Big Red Book was facilitated by a series of unfortunate events. His first love was the sporting life and O’Dwyer harboured youthful intentions of working in sports management. He planned to do so by studying at Loughborough University in England, and the college said that they’d take him if he made it onto the Ireland Schools rugby team.

“I woke up with a temperature of 104 on the morning of the Leinster trials and couldn’t make it. That ended my rugby and sports management career,” he recalls. A subsequent opportunity to land a full-time job with AIB, if he got picked for the All-Ireland AIB rugby team, was also scotched when O’Dwyer pulled a hamstring.

Primarily through happenstance, O’Dwyer found himself studying marketing in the College of Marketing, earning his degree in 1987. Afterwards, he landed a job with Pitney Bowes, selling franking machines.

O’Dwyer went on to work with Orchard Computers, which was owned by Bernie Donnelly. The company sold accountancy software and that immediately interested O’Dwyer. “I liked accounting in school and in college. I’m not an accountant but I was able to sell to accountants, and if you can sell to an accountant you can sell to anyone.”

O’Dwyer went out on his own in 1992, helping to establish a company called Irish International Sales, which sold office equipment and supplies. The company had a shaky start and almost fell by the wayside after two years. However, it was subsequently reorganised and O’Dwyer assumed full ownership.

Take 5

IIS became a reseller of Take 5 accounting software and O’Dwyer acquired several other resellers in the years that followed, eventually becoming the largest reseller of the software in Ireland. Big Red Book first came onto O’Dwyer’s radar around 2000.

“Sage were then in discussions to buy Take 5. Bernie Donnelly, who had sold out to Sage, suggested that I needed to own my own software, as the Sage takeover of Take 5 could put me out of business. Bernie set up a meeting for me with the guys in Big Red Book.”

The Big Red Book Company was founded in 1992 by accountancy firm Bryan Phelan Associates and developed an eponymous on-premise accounting software solution. Initially profitable, Big Red Book Company was ailing when O’Dwyer met with the company principals.

“At the end of the meeting I suggested three choices: they either sell out to Sage, they hire someone like me to market the company, or I buy the majority share in the firm and drive the business forward.” Big Red Book’s owners opted for the latter option and O’Dwyer took a 74% stake in the business.

“Big Red Book was a really good product,” says O’Dwyer. “But there were things that weren’t being done right. It was run by a firm of accountants; they weren’t sales and marketing people, while the marketing director was the developer of the software.”

O’Dwyer set about recalibrating the business, merging its 3,500 customers with IIS to create a new iteration of the Big Red Book Company. “It was a significant investment at the time. I had to stump up money and remortgage a property to do it. I had three kids under the age of ten, and although it was a gamble I saw enough in the business and in my abilities to turn it around to justify it,” he maintains.

O’Dwyer tweaked the pricing setup for Big Red Book and instituted more active customer engagement. For example, charging Big Red Customers for a euro conversion package – which was originally intended to be distributed for free – earned the company an extra €250,000.

In 2004, O’Dwyer and his fellow IIS shareholders – Bernie Donnelly and Paraic Nolan – acquired the remaining shareholding in Big Red Book. Donnelly exited in 2007, leaving O’Dwyer with 90% of the business and his business partner Nolan with a 10% stake.

O’Dwyer had turned around Big Red Book’s fortunes by 2004, when the company booked a profit of €109,000 and had cash reserves of €913,000. The previous year, Big Red Book had become a reseller of SAP software and O’Dwyer says he took a sabbatical away from his main business to grow the SAP division. He says that by 2006 Big Red Book was the largest SAP reseller in the EMEA region.

New Direction

In 2008 the SAP activity was spun-off in an MBO lead by sales manager Morgan Browne. According to O’Dwyer, the divestment gave him the resources to look at taking Big Red Book in another direction. “At that stage, Big Red Book had become a bit stale. We went to an Enterprise Ireland seminar on cloud technology and that was a tipping point. The following year we commenced development of Big Red Cloud.”

In November 2009, Big Red Book secured €685,000 in BES finding from Davy, repayable five years later with a 15% premium. O’Dwyer outsourced the cloud software development to a company in Belarus and, using the Microsoft Azure platform, Big Red Cloud was launched in 2012.

“Big Red Cloud hit the ground running as many customers were ready for a cloud product by then,” O’Dwyer says. “We had a 30% conversion rate from free trial to paying customer shortly after launching. That has since grown to a 55% conversion rate.”

O’Dwyer’s next significant play was to go for a stock exchange listing. His thinking was that bringing investors on board would help his company offset the investment in Big Red Cloud, as well as fast-track expansion into the UK market.

“We were looking to raise €2.5m initially. We were introduced to Charles Stanley Securities, a nominated advisor in London. They have 40 offices around the UK, with lots of high net worth individuals, and they did a heavy sales job on us.”

Between January and May 2014, O’Dwyer and his colleagues undertook an exhaustive stint of presentations, roadshows and negotiations. “Charles Stanley convinced us to raise our funding target to €5m. Two weeks after announcing our intention to list, we were up to €4m in fund offers.

“Then Bagir Group, an Israeli company that manufactures men’s suits, issued a profit warning after listing on AIM four weeks previously. Several of the top small-cap investors had invested in Bagir and the share price plummeted by two-thirds in one day. Everything came to a grinding halt and we had to
park the IPO plan.”

O’Dwyer tried to list again in October 2014, but again his plan was scuppered, this time by the tanking of global stock markets. “You’re over there in the UK and the feedback is very positive, and for it to all fall apart was devastating,” says O’Dwyer.

Between Two Stools

Chastened but wiser, O’Dwyer is still seeking investors for his business, which employs 26 people in Dublin. The problem he’s finding is that his company sits uneasily between typical investment categories, particularly in Ireland. “We are in a ‘follow-on funding’ position,” he explains. “That means we’re not in a seed investment category and we are also not considered by Enterprise Ireland as eligible for its ‘high-potential startup’ category.

“The market in Ireland doesn’t cater for follow-on funding for companies like ourselves that are mature and are producing recurring revenues. Cloud technology investors are often looking for ‘disruptive technology’. We’re not disruptive - we’re the most boring thing on the cloud that you’ll get.

“However, the truth of the matter is that everyone needs a banker and a bookkeeper. Companies like ourselves will keep on churning out the money because businesses need to run an accountancy system.”

O’Dwyer is confident that Big Red Cloud will be the engine that drives his business forward. “The small business owner and the startup are expecting to use applications are in the cloud. They’ve grown up with Facebook and electronic banking and they expect to have their information at hand wherever they have an internet connection.

“We sell more cloud on a monthly basis than our on-premise solutions and that is going to increase. At the moment, our sales are 60/40 in favour of cloud.” Recurring revenues increased to 85% last year, says O’Dwyer, and because nearly two-thirds of his customers pay up a year in advance, cashflow is healthy.

O’Dwyer still maintains an office in London for his business, which is more a legacy of his pre-IPO optimism than a reflection of how much business Big Red Book/Cloud does in the UK. “We only do a small amount of business there because we don’t have the capital to invest in customer acquisition. A number of bookkeepers sell our software in the UK, and when we have the investment in, the UK will be a stronger focus.”

As well as keeping his business as fit as possible, O’Dwyer (51) keeps himself in similar fettle. He runs, swims or cycles twice daily, six days a week, and is a fan of Iron Man and other triathlon competitions (picture below). “When you’re fit, you are on top of your game,” he says. “Business and exercise complement each other and I use the time while exercising to think about my business.”

O’Dwyer also thinks about how investors might gel with his managerial style, and insists that he is happy to accommodate other heads around the boardroom table. “I’m more mature now. I understand that you’re better off having a smaller piece of a bigger pie, so I have no problem giving away equity and bringing investors along for the ride.”