Two in One

Young entrepreneurs in the bus industry seem to be rare, but one that stands out is Geoff Cross of CEN Group, the Birmingham-based company he founded 14 years ago when he was still in his teens. What motivates Geoff is developing new opportunities and what he has created is a multifaceted business with two distinct profit centres as he explained to Andy Izatt

Although it’s one company, Birmingham-based CEN Group is actually two quite separate, but complementary businesses. Central Buses operates routes across the West Midlands and beyond while Centrad supplies vehicle monitoring and safety systems. Founder and Managing Director is Geoff Cross who is one of the bus industry’s few young entrepreneurs.

“I’m 31 years old now, but was just 16 when I started putting my plans together for operating buses,” explained Geoff. “September 15, 2003 was the go live day for Central Buses. I remember it well.

“I’d always been interested in transport. I don’t know if it’s in the blood, but my great grandfather had been an inspector with PMT (Potteries Motor Traction). My grandmother on the other side of the family didn’t drive so we would be out riding on buses virtually every weekend. It was a competition to see how many we could travel on in a day. I was fascinated by them and how the deregulated market worked.

“I didn’t like being told what to do when I was at school. However, I took my exams and could have gone on to sixth form, but that would have been just ticking a box. I’d been working part-time on Saturdays at Birmingham-based Pete’s Travel so went there full-time after leaving school in the summer of 2002.

“Working for Pete’s was possibly one of the best decisions I’ve ever made as it almost taught me how not to run a bus operation.[wlm_nonmember][…]

[/wlm_nonmember][wlm_ismember]Additional depots had been opened in Redditch, Coventry and Telford and the business seemed to be thriving. There was a lot of innovation, but no attention to detail and the cracks were starting to appear. I knew I could do a better job, but because of my age and position, saying that wasn’t an option. I became frustrated very quickly.

“By early 2003 I was looking at what else I could do including starting my own bus company, something I’d been thinking about for a while. My father, Steve is an entrepreneur and with his encouragement I decided to give it a go. At the time I was still living at home and had no commitments. I’d been able to save some money and I also borrowed some from him. The capital outlay was quite low.

“The bank needed a business plan so I projected that I would be running 50 buses within two or three years. We’re still not there yet. There was a lot of naivety then and I underestimated just how difficult it would be, but equally I never expected a quick win. What I wanted was to do something that gave me satisfaction and I enjoyed.

“If I was in the same position now, I definitely wouldn’t start a bus company because the operating climate has changed so much.

“My first route registration involved running ahead of TWM (Travel West Midlands) on route 7 in Birmingham. TWM, (now National Express West Midlands or NXWM), was providing a 10-minute frequency. I operated one bus an hour with a friendly driver who gave passengers change – very much a Pete’s Travel type approach. The service was a good opportunity and money went into the bank straightaway. Within a few weeks I’d introduced a second bus.

“Business growth from there has been almost entirely organic although two Dennis Darts and a route operated by Valley Travel were taken over in 2012. Over the years I know I made mistakes with some of the routes I introduced. There was not enough due diligence and I didn’t have KPIs (Key Performance Indicators) in place. It can take six months to build a service and another two to take it off so a lot of money can be lost along the way. The important thing was to treat these mistakes as lessons and learn from the experience.

“What I initially bought to operate with were step-entrance Dennis Darts and Optare MetroRiders. Saying that they were midlife would probably be flattering them. It was a case of anything that was available and cheap. It included a Marshall Minibus, but I quickly realised that was a mistake and managed to sell it for a profit. What I learned was there’s no such thing as mistakes. Just lessons learnt.

“Today Central Buses operates 32 vehicles with an average age of just 5.6 years on 19 routes, three of them school services. It is one of two profit centres within CEN Group, which is my own business equally owned by me and my father. The other profit centre is Centrad of which more later, and we employ around 60 staff including part-timers. We trade on our quality of service rather than just price.”

Business approach

“Central Buses and Centrad are based at the same site on Tamebridge Industrial Estate in Perry Barr, Birmingham,” Geoff continued. “That means overheads can be shared. Central Buses also has satellite depots at Kidderminster and Tamworth. Location is so important and our three sites are well mapped out. We’ve been in Perry Barr since 2010, the site is 15,000 sq. ft. and there are three maintenance bays.

“We operate buses across the West Midlands from Coventry in the east to the Black Country and Stourbridge in the west as well as in Staffordshire, Warwickshire, Shropshire and Worcestershire. Around 1.3m passengers were carried last year.

“Fleet investment is all about striking the right balance to ensure reliability is maintained across such a spread out operation. We started accelerating our investment well in advance of DDA (Disability Discrimination Act) deadlines. It can cost thousands of pounds to bring a second-hand vehicle up to our standards so we’ve maintained a regular intake of new vehicles, mostly Enviro200s, in recent years. What’s nice is when we do sell buses they tend to attract a premium because our standards have become well recognised within the industry.

“I don’t like to put all my eggs in one basket. Two thirds of the fleet is Alexander Dennis, the rest Optare. We expect a vehicle to last 15 years and depreciate accordingly. Our 06-registered Darts have still got plenty of life left in them and if we want them to go on they will, but a concern is how lightweight build quality seems to have become.

“I’m not sure vehicles are always constructed to the same standards as when I first started operating.

“We bought second-hand Optare Solos and Versas because we had short notice route requirements and needed vehicles quickly. There are a limited number of places we can buy from under those circumstances. A consideration with a Solo is getting the door up to the pavement on certain routes.

“Our new Metrocitys for Kidderminster-based route 125 (Stourbridge-Bridgnorth) were acquired after very careful consideration. It’s quite a demanding route and those buses have six-cylinder engines and a better seating specification.

“I talked to a couple of operators that were already running them and thought they would fit our fleet profile. Optare has come a long way in recent years and the buses represented good value.

“I bought my first Routemaster in 2012 really just as a toy. I saw it as a good investment and set up a website to hire it out. We very quickly got very good enquiries partly because there aren’t many providers locally and if you want to move a large group of guests at a wedding, what else are you going to use? I bought a second bus because I thought we could amplify the business, but that didn’t prove to be the case so it was sold. When I did that I put the prices up for the first and that means we’re basically getting the same amount of money for doing less work.

“As a business we have only grown around 10% each year and one of the reasons for that is the challenge of finding the right staff. It’s important not to lose sight of our values. Finding drivers is fairly easy because we pay a good rate and offer sociable hours, but it’s all about finding the right people. The competition for labour isn’t just from other operators. It’s from other sectors as well and we as an industry demand a lot.

“I remember years ago when the business was much smaller, removing the drivers’ drinks machine because it wasn’t being used enough. It was one of the stupidest things I ever did. Drivers are in charge of vehicles that could be worth more than their houses so we make sure that they’re looked after and we give them facilities.

“It’s important for everyone involved in this business that they want to come to work. I want our drivers to feel the same way as I do otherwise they won’t treat our customers how I would like them treated. Our induction process is thorough. New recruits receive a handbook which has guidelines which they know they must follow. It’s not optional. It’s there in black and white.

“We’re ok for drivers at the moment, but inevitably it goes in peaks and troughs. Today we have a waiting list, but six weeks ago we were a bit short. It’s important to have a buffer because if we are short staffed we end up demanding even more from those that are left.”

Core market

Said Geoff: “The split between commercial and tendered work across Central Buses is broadly 60% in favour of commercial although some of that might also receive a small amount of subsidy. I secured my first tendered route fairly early on in April 2004 because it fitted well with what else I was doing at the time. What appealed was the regular income and it provided a foundation around which to build other routes. At peak times I would be competing with TWM, but it meant I had other commitments during the day.

“The problem with the tendered market is there’s no real weighting for quality, which we now take very seriously. The work goes to the lowest bidder which isn’t going to be Central Buses the majority of the time unless there are some synergies with our commercial network or an opportunity to develop something else.

“The geographical spread we have in our operating area reflects how the West Midlands market has changed. The dominant operator in the area tightened its grip by increasing cash fares so there was an incentive for passengers to switch to its travelcard. It’s very difficult to compete against that.

“What has been good is that TfWM (Transport for West Midlands), Centro as was, has always been keen to push multi operator ticketing. While it used to offer a travelcard for the whole area, there is now a selection that mirrors what’s available from NXWM although that can be rather confusing for passengers new to travelling.

“NXWM does a very good job and our strategy now is to only compete with operators in situations where we can add value through the fares we offer, driver presentation and friendliness, timetable coverage and quality of vehicles. If we can’t do a better job, what’s the point? It all comes down to delivering on customer satisfaction.

“Parkeon ticket machines are what we use at the moment with the back office managed by TfWM, but we’re keen to go forward with contactless. At the moment we’re waiting for the green light in terms of fare capping because the provider we would like to use can’t currently guarantee that. Things don’t always move as quickly as we would like. It’s the same with delivering real-time information on an app. We have been working on that for three years with the local authority, but it has proved to be difficult so we’re looking to roll out our own facility as part of our new ticketing solution.

“All our passengers can go ‘smart’ and pay for their fares using the Swift card. It’s something we encourage and we offer lower cost fares to incentivise them to do it. We’ll be pushing it more this year because it’s so convenient, but have been holding back because we wanted to offer contactless. Cash will never disappear, but people are catching our bus to the coffee shop now and buying their drink using contactless. We want that convenience as well, and the data so we know more about them. A passenger could be spending £2,000 in cash with us each year, but we don’t know who they are whereas if I go on Amazon and buy something for £10 they will constantly keep in contact with me.

“We have gained some new services over the years when dominant operators disposed of some of their more marginal services. However, for us they fitted well into our network. This includes a number of routes that were started in Spring this year as a result of the East Birmingham and North Solihull network review. We still bid for tendered work, but won’t compromise on quality.

“What might make a difference in the future is having a mayor for the West Midlands. While that creates some uncertainties, I wouldn’t be surprised if there aren’t new opportunities probably through partnership working. We’re ready and able to react to whatever comes up.”

Wider operation

“What I want to do is mirror what we have in the West Midlands elsewhere,” said Geoff. “In terms of vehicle allocation, Perry Barr is just over 50% of what we do so our commitments outside the West Midlands are now a big part of the business. The advantage of having bases in Kidderminster and Tamworth is that we can serve either side of Birmingham as well as react to opportunities more locally.

“It’s about being in the right position to respond and the demise of GHA last year was a classic example of that. We secured route 101 (Bridgnorth town circular) as a result which is operated from Kidderminster. If an operator is looking to shrink its network or withdraws from the market for whatever reason, we’re ready to respond. Kidderminster was set up in the first place because Whittle’s pulled out of local bus operation and as well as route 125, we also operate the 142 (Stourbridge-Halesowen) from there.

“Satellite bases work if they’re managed properly and the right systems are in place. We have three supervisors at Perry Barr and lead drivers at both Kidderminster and Tamworth. Overheads are kept low and no maintenance is carried out at the satellites. Operating a modern fleet helps as vehicles usually only require periodic maintenance. This is a lean operation that’s cost efficient, not cost cutting. Having satellites means there are savings in terms of dead mileage and labour costs and having those bases makes driver recruitment easier as well.

“We already worked in Staffordshire, but establishing a depot in Tamworth allowed us to amplify what we were doing. Competition is important and every operator has the right to fight its own patch. I live near Tamworth and it was clear to me that Arriva fares locally were much higher than in the West Midlands. There was also a market for a faster link between Tamworth and Lichfield. That’s why I introduced the xpre55 at the beginning of 2014. It was to build the market and I think we did that. We were adding value, but I expected a reaction. Arriva introduced several fare promotions before registering a competing service, but our route is still running well and we’re planning to enhance it.

“Different fares apply in different parts of our operation and that’s challenging when it comes to generic marketing such as the website. Marketing is so important – making sure that timetables are not a secret, for example. I would day that 80% of our web traffic is now on a mobile phone or tablet so we have to make sure that our website is easy to use for those devices and make sure our timetables are easy to find on Google. One of the main reasons Uber has been so successful and is a real threat to our industry is because it is so easy to use.

“We are quite active on social media. What we do needs to mirror our operating hours so if someone sends us a message they will get a reply the same day, even if it’s at the weekend.

“I have dedicated time on Facebook to get and keep customers because there isn’t anything more important. We’re using that medium more and more to promote ridership because paid for traffic gives us exact customer demographics. For example, we can use it to promote a young persons’ ticket to people in a certain age range in and around Tamworth. We can build up the Avatar profile of our ideal customer and then target accordingly.

“Facebook creates huge opportunities. Ten years ago the only way to reach people was by placing an advert in the local paper or putting an advert in Yellow Pages. Now we can build relationships with our customers and send tailored adverts and sales messages to certain demographics. We have to embrace technology like this as does the industry as a whole.”

On a journey

“What we offer our passengers on-board our vehicles is equally important,” explained Geoff. “We have WiFi on just over half our buses – a Centrad product – and the plan is to upgrade the whole fleet. Innovations like WiFi, CCTV, wood-effect flooring and leather seats are increasingly seen as the norm. What the industry must not do is stagnate and I think it’s all about attention to detail. Going forward I can see double-glazing so windows don’t steam up and the absence of contravision so people can see out as being important. Legroom is another one. It’s looking at the customer journey outside in.

“We know how important cleanliness is to passengers so we’re determined to maintain a high standard. Three cleaners are employed which is quite a lot for a small company like ours and our lead drivers get involved as well. In winter we’ll float resources to make sure that we have the coverage.

“I spend a lot of time travelling on buses and I want my team to do the same. Understanding the importance of trying the service, particularly my own routes, was a real game changer for me. It’s my product after all and every time I do it I come back with a list of four or five things that I’m not happy with and want sorted. It’s essential to keep looking at the journey from the passenger perspective. We have to provide an experience that is comparable with a car and that includes journey speeds.

“Our ridership levels are sustainable, but the number of passenger journeys in the West Midlands has been on a downward trajectory for over 10 years. Patronage in the area was 263m last year and I recall it being in the region of 322m in 2007. Congestion is the main cause and it just gets worse with additional challenges to be incurred in the future when HS2 construction starts. We have our own Centrad tracking so we can see the impact and on certain routes we have had to introduce additional resource just to maintain existing frequencies. That ensures we’re operating reliably, but it ultimately means slower journey speeds for our passengers.

“Bus operators should be the first to be consulted before roadworks take place, but a lot of the time we don’t know about works until the day the road closes. Roadworks are often carried out during peak times rather than overnight, but the question is why? Without doubt it is because it is too expensive for the utility company to do this, but at what cost is this to bus operators and the local economy?

“Journey times have got to deliver results and this is a key objective of the West Midlands Bus Alliance to assist in growing patronage – to deliver a better network. It’s made up of key stakeholders such as the local authority and the majority of bus operators. Three operators are on the board representing all bus operators – NXWM, Stagecoach and ourselves. It was as a result of an Alliance ambition that all new TfWM contracts are based on Euro 5 or better vehicles.

“With the technology that’s available now, we can very quickly find out what passengers think. I encourage them to complain about our services which might seem bizarre. I want them to do it because it gives me the opportunity to do something about it.”

Building Centrad

“In the early days of Central Buses I wanted to pay myself a salary,” recalled Geoff about how Centrad came about. “I used to go to the Belle Vue auctions in Manchester and typically buy something like a Mercedes-Benz 709D minibus that I would then sell on eBay for a profit. In 2006 I bought one that was better than normal and because I had a requirement, slotted it in the fleet. However, it had electronic destination equipment that didn’t work and the cost of replacing it was going to be about the same as what I’d paid for the vehicle.

“I couldn’t understand why it was over £2,000 for what were essentially some LEDs enclosed in metal and saw a potential opportunity. I’m not interested in circuit boards or the specification criteria, but as well as being an entrepreneur, my father has a technical engineering background and is a software engineer so we complement each other quite well.

“We developed a UK specification initially just for that minibus and tested equipment we sourced from the Far East that was about a third of the price of anything else then available. It was LED signage front, side and rear, and it worked well so we converted the rest of the Central Buses fleet and then brought the product to market.

“We always knew that the product we were introducing was going to be for retro fit as electronic destination equipment was becoming the norm in new vehicles, but it has served us very well. The mark two version introduced in 2009 was a vast improvement and we’re still selling them today. Our LED signage is now white LEDs as standard and we have received many compliments about it on our own fleet. It’s definitely a step up from the standard amber LED.

“Our CCTV product was initially developed after one of our buses was involved in a ‘crash for cash’ incident during 2007. We looked at what was already available and knew what we wanted to pay. Nothing fitted our requirement so we developed our own range of products. The system was completely overhauled in Quarter Four, 2014 and the quality of the product is now unbeatable in my view. It’s backed with a two year warranty and unlimited customer support. Technology is always advancing and what we’re selling now compared to four years ago is completely different.

“Our vehicle CCTV business has grown to a point where we’re now one of the UK’s leading suppliers of equipment. The growth has been significant over the last two years in particular and now 75% of my time is spent within Centrad.

“We have a team of engineers both full-time and subcontracted that are installing CCTV in over 2,000 vehicles this year. Industry names using Centrad systems include Birmingham Airport, Park’s of Hamilton, Southdown PSV and Stephensons of Essex.

“Typically customers require four to 16 camera systems although around half of our sales are for eight cameras. This year has been particularly busy and we have recently had to increase our manufacturing production considerably. That has resulted in some cost savings that will be passed on to all our customers through lower prices from August 1. It’s all about delivering value.

“There’s no doubt in my own mind that without CCTV, Central Buses would be out of business because of the number of false claims we’ve received. Others are in the same situation and the advantage we have as a fleet operator is we really understand the problem. We care and value our customer relationships. We also offer audio-visual next stop announcement systems, but that’s a slow burner and would probably depend on it becoming mandatory as a result of the Bus Services Act. Entertainment and information systems are another, but all operators including Central Buses are prudent with how they spend their money. They’ll only do it if they get value and a return on investment.

“Everything we bring to market is tested in our own vehicles first and I can assure you there have been plenty of products we’ve tried that have not been introduced because they didn’t meet the criteria.

“Over the years I’ve spotted a lot of what I thought would be good opportunities for both sides of the business that didn’t work out. Probably for every 10, eight don’t, but the other two are really good and that’s what makes it all worthwhile. I try and surround myself with people that are better than me and know the industry – people who have been there, seen it and done it. I thrive off that. Having good mentors is so important.

“I would class myself as an entrepreneur and because of that I don’t normally take time to take stock, but last year the business was recognised in a number of ways through awards, which is nice. It’s all about hard work. I’m always looking for the next opportunity. I want to do what I’m doing better.

“When I set up Central Buses I always thought that I would exit after five years. We’ve turned down opportunities to sell and we’re now in year 14 and still here. If you’re enjoying what you’re doing and it’s working, why change it? I want to continue on the journey and there are still places to go with the bus operation as well as Centrad.”[/wlm_ismember]