Rainbow Telecom chief, Dave Corgat, sold his first business to a company whose shares were £3.30 each and bought them back for 4p. His Midas touch continues unabated, with Rainbow hot on the acquisition trail and showing profitable growth. Here’s how Corgat made it big in comms...

Corgat started in telecoms with Powerhouse in Ashford and subsequently joined DVH Communications in south London. “Simon Price of DVH and Bahman Rahimi of BDR inspired me to go it alone and have been unstinting with support and advice ever since. You must acknowledge the contribution of your friends, and two that I want to mention particularly are Heather Dunn, our marketing director, and Steve Cope, technical director. They had been with me at Compass and took a chance on Rainbow being successful. It was only right to recognise that and give them shares in the business. The people who worked with me at Compass and who are with me now all share in Rainbow’s profits. I’m a great believer in profit sharing and those who see this adventure through will enjoy the benefits.”

Although little more than a year old, Rainbow is hot on the takeover trail. “We are in the final stages of acquiring an engineering company, well known in the industry, which is based in London. I can’t say any more at the moment because we are negotiating with a quoted plc. This will bring five more engineers into the company to add to the five that we already have. Currently, we have seven sales people and three in telesales supported by an admin staff.”

Profits are certainly on the horizon. In its first year, Rainbow had revenues of £900k. For its second, Corgat will be disappointed if Rainbow doesn’t break £1.4 million. The company opened for business on Valentine’s day last year but its origins go back much further to Compass Communications Group, a company in which Corgat was a major shareholder. In October 2000 Compass Telecom and Compass Technical were sold to 365plc – better known in the industry as Symphony Telecom. You could say that it was an acquisition too far at the height of the technology boom. Corgat stayed with the group and led an MBO to create Rainbow. He re-acquired his former customer base and set up anew with his old staff, and in the process paid around one per cent of the initial sale price.

Partners

On the systems side, Corgat’s links with Crane go back 12 years. “I’ve been a Crane dealer during that time, one of the largest in fact, and have excellent relationships with David George and many of the current and former directors. We handle the LG range as well as IP Office and INDeX. We also sell Samsung and InterTel. I have to say, however, that I am slightly wary about the almost explosive promotion of interest in IP Office. I am not burying my head in the sand but customers need to be nurtured. Eventually they will come on board but 99 per cent of our base is used to traditional systems and we must be careful not to be seen as hard nosed salesman bullying them into new technology. These customers must take the lead in defining exactly what they want.”

It’s not surprising to find that Corgat is a big fan of leasing. “I started in the photocopier business 21 years ago in south London. I learned a lot about leasing in an environment that taught me not only about business but also about being streetwise. That’s essential in these rather nervous times. It was character building and character is as important as brains. Rainbow now has its own finance operation run in conjunction with Alliance and Leicester. It’s called Angel Asset Finance. In the last 18 months the tide has turned in favour of finance: Rates are low and people can see the advantages of managing cashflow by having a fixed regular overhead rather than taking a big hit to capital. It has affected my private life, too. I used to think only of ownership but now I am increasingly open to the finance option.”

When Rainbow was launched, Corgat acquired about 600 Goldstar and a number of Rhapsody and Avaya maintenance customers. “Running a maintenance organisation successfully is much more demanding than many people realise. We have prime contracts with the National Gallery, where we sold a 2000 extension system, and the Royal Free Hospital. We take pains to look after them.

“I have seen at first hand how customers are treated. It’s no good if your only contact is an invoice dumped on their desks to renew a contract they had almost forgotten existed. Even if they don’t call us out, we keep in touch and, at renewal time, they are given a completely new contract to sign with their eyes open. Five years ago maintenance was highly valued. In the last three years the contracts have been devalued. At Rainbow we look for profit, not turnover and if maintenance is properly handled it is profitable.”

Corgat has a live interest in network sales but has no ambition to become a switchless reseller. “When we agreed the MBO we contracted to sell for Symphony as an LCR dealer. It’s a hugely competitive market and I’m perfectly happy with the arrangement. Symphony has a competitive service range. In fact, that was what it was really good at before it got involved with selling telephone systems. It’s been my good fortune to have bought back a business three times larger than the one I sold.”

When he turns to what’s lacking in the industry, Corgat has strong and perhaps unconventional views. “As an industry we are gripped by a crippling shyness. There is a fear of opening up and sharing information. We work in damaging secrecy. That means that when big issues arise, we raise solitary bleats when we should be roaring from a united front. I wasn’t born yesterday and, as I’ve said, was brought up in the copier business so I know all about competition. But I believe that, as dealer principals, we should let the sales guys fight it out on the ground. We should be able to take a much broader view and really should act in concert much more. If there was one thing that I would urge everyone in the industry to do, it would be to take that on board and think outside the box.”