‘A conman helped our business’ ·

By Andrew Bounds Published: May 2009

As state funds are ploughed into the economy in the recession, civil servants are making more and more business decisions - if not picking winners, at least avoiding losers. The taxpayer can only hope they have the same entrepreneurial streak and business judgment as Martin Doxey (pictured), now managing director of Claro Precision Engineering.

He joined a management buy-out of the company five years ago from the Department of Trade and Industry, as it was then. While the company's main business remains producing components for famous customers to put their names on, Mr Doxey has also given it what he long craved: a brand.

The story involves a conman, a potential five-figure loss and a leap into an unknown market - for elite turntables.

Mr Doxey is a proud Yorkshireman with a ready smile. He was an unusual civil servant, joining the DTI in Leeds in 1994 after his engineering degree at Sheffield University led him to manage a bauxite mine and run the machinery operation of the Forestry Commission.

Apart from "butlering" ministers on trips to Yorkshire, he visited companies to spread best practice. One was Claro, on the outskirts of the North Yorkshire market town of Knaresborough.

"I was really impressed by it," he recalls. "I told the owners: 'If you ever want to sell this company, let me know.'" It took 10 years until the owners let him in, when they were ready to retire.

He took a seat on Claro's board for a year in 2003 before joining a management buy-out with Mike Lewis, sales director, and Richard Wilson, product director. They lined up HSBC for finance, while founders Howard Chadwick and Tim Godolphin also helped the purchase with a long-term loan.

Claro's main line in the 1990s was beer pumps for the Angram brand, based nearby, many of which are still in use today. As Mr Doxey says: "The problem is you make them and they never wear out." It has since diversified but always focused on quality. It was the first company in Yorkshire to win Investors in People, in 1992.

"We got into that quality approach and we kept it going. It keeps us on our toes," he says.

While the company has many longstanding customers, it is always on the lookout for more. Its range includes stents and heart valves, orthopaedic instruments and parts for high definition cameras. About a fifth of the work involves lasers and Claro is willing to take on challenges to create fresh products.

"A lot of what we do is 25-50 units. Once a company accounts for a quarter of our output, we stop taking orders from them. We would get overdependent," Mr Doxey says.

That was why, when a local businessman turned up and asked them to make 50 turntables, they decided to give it a go.

"He said: 'The basic idea is you make 50. I will market them on the internet and pay you for the work.' When we first heard people would pay £2,500 just for the turntable, we could not believe it - but these are real aficionados. They will then spend more on the needle, arm and amplifier," says Mr Doxey.

Peter Curran, the company's full-time designer, spent months perfecting the design with the client. The biggest problem with existing models, which cost up to £20,000, is motor noise. "The motor units sit on the outside and make a slight noise," Mr Doxey says.

He found a silent motor but it was not powerful enough to turn the platter. "Then I thought: two times silence is still silence. We put two together in the base out of sight with a pulley between them." That required skilful machining to keep the unit balanced and solid.

"We got the first one made and he came and gave me a cheque for £33,000. It bounced," recalls Mr Doxey. The next cheque bounced too.

The client then told them by phone that he was out of the country but Mr Doxey heard he had been seen at home. "We went to see him and banged on his door. It was a third-floor flat and we saw a curtain move. We just kept banging ... Somebody's face appeared. He came down and I got another cheque from a different account. He explained that he didn't have sufficient funds to clear the full amount so paid a third."

That, too, failed to clear. They finally realised they had been stung.

A web search revealed the man was serving a suspended prison sentence for fraud and had previous convictions. "I learnt a lesson," says Mr Doxey. "I still don't really see what was in it for him unless he was selling them in advance and pocketing the money."

Claro, which last year made £1.2m ($1.9m) gross profit and £365,000 net profit on a £4m turnover, found itself with 50 turntables and a £30,000-plus development cost.

But Mr Doxey refused to admit defeat. He contacted the editor of What Hi-Fi, who suggested he spoke to John Jeffries. Under the Lumley brand, Mr Jeffries manufactures top-of-the-range turntables, including the Stratosphere, which retails for £14,000. "I called him and said: 'I have got 50 turntables here, any idea what I should do with them?'" says Mr Doxey.

Intrigued, Mr Jeffries visited Claro with his own amp and speakers to check the quality. With a few modifications, he said, they would sell. He agreed to sell 13 a year, under the name Lumley Stratosphere, for £2,495 each. He also agreed that Claro could market its own model. The Clarity Audio 09 was born.

"The company has wanted a product that does not compete with its customers in any way. None of our customers would object to us making it," says Mr Doxey. "To turn somebody ripping us off into a viable product is the best form of revenge. There is no damage, it is a win. You have turned a disaster into a triumph."

It has also helped Claro stand out among its peers at big trade shows. "People see this thing turning on our stall and come and have a look." Mr Doxey has even sold one to a trade show customer, while Lumley has sold 11.

"A lot of what we do is very competitive and you have to be the best. If you are the best in the world at cutting a piece of medical equipment, you make a lot of money. If you are second best, you lose it. We can make things other people can't make."

He has no regrets about leaving government, pointing to a fire alarm kit made for a French company on his desk. "We are adding value to materials. It is creating something solid. A civil servant allocates resources and money. Here it is immensely satisfying to send one of these out - it makes a difference to somebody."

Copyright The Financial Times Limited 2009

Mr Doxey, a working day of making coffee, trading currency and planning

7.30am Mr Doxey arrives at work. The first job is to check e-mails and any problems from the night shift.

"A number of people arrive at 8am and I make the first round of coffee and leave it on their desk. That is my round done, and they can't say the boss doesn't pull his weight.

8.30am He converts the foreign export takings into pounds. "The bank was just giving us the tourist rate so I asked to be able to make the trades myself. It's nerve racking because the value is changing all the time and you have to just dive in at the right moment. Once I clicked twice and had to buy a load of dollars back again."

The rest of the morning is taken up with planning meetings, ensuring that processes are up to scratch.

1pm Lunch is a sandwich from the shop on the industrial estate. If the weather is fine, Mr Doxey will eat in the garden at the back of the factory, planted by local schoolchildren.

The afternoon brings more meetings, or perhaps a visit from a customer or a school party.

6pm He leaves for home. Some evenings Mr Doxey attends networking events, or is involved with local skills councils and university groups.