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How Bobby Kalar broke into the energy market
In founding Yü Energy, Bobby Kalar set out to do something about the poor service offered by energy companies to firms.
"If I'd listened to the logical side of my brain, I wouldn't have bothered," says Bobby Kalar, now 40, of his first business venture. Even while he was still a student at the University of Derby, Kalar knew that he was going to be an entrepreneur the only question was what sector he should choose. He'd already decided that it would have to be profitable, scalable and growing at a fast rate, and after some research he settled on the care sector.
It might not have seemed an obvious choice for a graduate in electrical engineering, but the business prospects were obviously attractive. An ageing population meant there was plenty of demand, but many care homes were badly run both as business and in terms of the service offered to residents. So in 2002, 18 months after he graduated, Kalar set up Redrose Care.
Funded by a combination of a £240,000 loan from Citibank and "the bank of Mum and Dad", Kalar was able to buy his first care home, becoming the youngest person to do so in the UK.
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Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
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Initially, he doubted whether he had made the right choice. Not only was he inexperienced and facing a "closed-shop" industry that viewed newcomers with suspicion, but he also knew that any change in regulation could destroy his profitability. Yet despite these early challenges, he persevered and managed to turn around the fortunes of the home that he had bought.
This gave him enough money to buy another, bigger, home for £1.5m a few years later. He followed this with further homes, always boosting revenue in those he acquired by renovating the property and adding extra capacity. By the time he sold the group in 2012, Redrose was a thriving company with a turnover of around £4.5m.
The sale made Kalar wealthy and left him in a position to embark on another challenge. His new venture was equally surprising, but was inspired by his time in the care industry. While working in it, he had become aware of the poor service that energy companies provided to firms. So in 2013 Kalar founded Y Energy, a company that focuses on selling gas and energy to small- and medium-sized enterprises (SMEs), rather than individual homes. Kalar quickly found that the electricity sector was even more "antiquated and inefficient" than the care industry.
One big problem was the high degree of fragmentation, with different companies responsible for metering, transmission and generation. Another, even more formidable, barrier was the challenge of "cutting through the bureaucracy that prevents new entrants coming to market". Simply to be allowed to operate he had first to demonstrate to the regulator that he could buy and sell energy while keeping accurate records.
Last year, Y Energy posted a turnover of £3.9m, which is expected to more than double this year. In March it raised around £10m from listing on the London Stock Exchange's Aim small companies board, where it now has a market capitalisation of more than £30m. Over the medium term, Kalar aims to grow the business further by diversifying into new sectors.
While Y Energy will still exclusively target SMEs, he intends to broaden the number of related services it offers, including metering and energy management. Kalar says he is confident that there is pent-up demand among smaller firms for a supplier that hasn't got the "tarnished reputation" of the "big six" energy companies.
Setting up your own business can be tough, says Kalar, and he warns about the risk of losing interest. It's easy to get enthusiastic about an idea when it is just a "great story", he says, but being your own boss can be "bl**dy lonely" and "unforgiving". Those doing it for praise and adulation should reconsider. "You don't get a pat on the back from anybody."
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