Kevin O’Loughlin is bristling with both ambition and intent. Some of that ambition is directed to Nostra, his fast-expanding IT services company. The business has annual revenues of €18 million but, through a combination of acquisitions and organic growth, he wants to grow that number of €50 million over the coming years.

There is something else he wants to achieve also – he wants to help people. A decade ago, when he had made and lost a fortune, O’Loughlin sat down and tried to figure out what made him tick, and what brought him happiness. After a period of introspection, he realised that the answer lay in helping people, so he set himself a target – over the course of his lifetime, O’Loughlin wants to help one million people.

It is an ambition that has led to him opening a string of gyms (“an unmitigated disaster”) and buying a chiropractor’s clinic (“that business actually went well”). He acknowledges that the million figure is crude and unrealistic, but the underlying ambition is something that he says has helped shape his approach to building a successful business.

“I did not associate an IT business with being able to help people in that sense,” he says. “I don’t constitute fixing a computer as helping someone. But then I realised that lots of people here in the business have challenges, and we could help them with those personal challenges

“If someone needs to buy a house, can we help them achieve that? We try and help the team achieve their personal goals – be it courses that are not related to IT. If someone is in a challenging scenario, and with 130 people, that happens quite a bit, we will jump in behind them and try to help. We find out team have that philosophy as well”

Candid and down-to-earth, O’Loughlin only mentioned the ambition as an aside at the end of the interview. But clearly it is something that motivates him.

“I would love to start a property business again in a couple of years and actually provide affordable housing – even for our own team. I have a problem with the idea of driving rents up 4 per cent every year. Ten years ago, I was able to rent a house for €1,500. Now, we have people who are paying €2,000 a month to live in a two-bed apartment. We need to address this situation.

“My view is that any business I get involved in over the next number of years, I want them to be about helping people.”

*****

Sometimes, you give up on your dreams.

Kevin O’Loughlin always aspired to be an entrepreneur. But, after landing a job and securing a high salary, it nearly never happened.

From Carlow, he grew up in an entrepreneurial family – even if the phrase was unheard of back in the nineties in provincial Ireland. He father owned a pig slaughtering factory that employed 100 people and was one of the largest cattle farmers in the country.

The family owned a pub and an adjacent shop in Carlow town, which was run by their mother and also served as the family home.   

“A lot of our competitors talk to IT managers. We rarely do that. We are an IT company, but ultimately, we speak in plain English.”

He enrolled in DCU, but dropped out after a few weeks, and between 1999 and 2006, worked as a technology salesman.

“In 2006, I went through a personal challenge – I got divorced,” he says. “At times like that, you look at your choices, what is important to you and what is not important to you. What I realised was that I had almost given up on my dream of doing my own thing. I had built up a reasonable standard of living. I was only 26 and I decided to do my own thing. I boldly quit my job on March 1, 2006. I did not have a clue what I was going to do.”

Initially, he went to work with his brother at an estate agent in the midlands, before deciding to set up his own IT company (with his brother) based in Rathcoole in west Dublin. The business launched in 2007, and fuelled by the Celtic Tiger, instantly got both customers and traction.

The then, in 2008, the whole world changed.

*****

Kevin O’Loughlin is sitting in his office in Nostra’s headquarters in Lucan. In the background is a collection of model cars – more than 100 in total. The collection was a present from his wife and contains a model of each car he has ever owned. “It is a sad passion,” he tells me, adding hat he buys broken down cars and restores them as a hobby.

Thew interview was arranged on back of Nostra’s recent acquisition of Brandon Global IT, the third acquisition that his company has pulled off in recent years. He was advised on the deal by Duff & Phelps, and it was initiated and closed remotely due to Covid-19 restrictions. More deals are in the pipeline, he says, as the company continues to expand both its size and its client offer.

Over our lengthy interview, O’Loughlin talks about his decision to establish the business, as well as the occasions when it nearly collapsed. He also talks about the importance of company culture, and the future strategy for his business.

We begin by talking about the recent deal.

Ian Kehoe (IK): How did you get the deal over the line?

Kevin O’Loughlin (KOL): In simple terms, we decided in 2015 that we were going to go on a growth strategy. We were only about €2 million in revenue at the time. We started looking at acquisitions as a potential option – not particularly seriously. We said we were going to do acquisitions, but then you have to find the company and figure out how to pay for it.

The first one we did was a company called The Tech Department in 2015 and it was quite a small acquisition, and we were able to pay for it ourselves out of cashflow. What we realised very quickly was that there were huge synergies – including one that you do not expect. It was a transformational thing for our business – we got great people in overnight without paying a recruitment fee. Then you get extra customers, who like the fact that you are doing an acquisition.

We have been a partner of Brandon for four or five years in the credit union space – they provide IT security services and we provide outsourced IT to credit unions, and we work with a lot of the same customers.

They put the business up for sale at the end of last year. The owner was retiring. I knew him, we had a couple of conversations, and we decided to proceed. We did the deal in the first week of April remotely. We had been talking since mid-February. It was all done over the phone, video calls, and we met all of the team over video calls. We could not even visit the office.

It employs 25 people. We will take them all on. The only one stepping away is the owner, Tom O’Neill. The Galway office is in Athenry, a lovely new office, and in Smithfield. We will keep both offices.

IK: So it is part of the strategy of bolt-on acquisitions?

KOL: Two thirds of the business is identical to what we do. That will integrate in nicely. The other third is something we don’t do much at all, and that will become a separate division with Nostra doing IT security.

IK: How did you finance the deal in the current climate?

KOL: We found it surprisingly easy. Out of five approaches, one came back saying they were not open for new business and we had four positive interactions. That came down to three offers. Both banks and alternative lenders. We financed it through Bank of Ireland. We had followed the Maximum Media story, and that happened in the middle of it all – so looking at the alternative lending market, that made us nervous of it. So we took a decision to go mainstream banking.

We are probably different to most companies. We are not building to sell. We are building to build. Our current plan is a 20-year plan and it started in 2015. In twenty years, we will think again.

We have gone from €2 million to €18 million in five years, and we will get to €50 million in the next three or four years. If I was building to sell, that alternative debt market makes a bit of sense. But if you are building to keep, we will have the debt paid off in five years. Nostra was debt-free before we did this acquisition and we will pay it down in a couple of years and be in good shape.

I never want to be in a position where there is a gun put to my head and we are told to sell or find alternative money. It is a slightly different strategy.

IK: Have you more acquisitions in mind?

KOL: So were a long way down the path and one deal fell apart last October. We have been working on another two or three. Over the last number of years, we have put in place a really good management team in here. I have stepped back from day-to-day management, and we have a full senior management team that have run the business since the start of 2019. My role is effectively working with customers, designing solutions and looking at acquisitions. That is where my time is going.

We are in talks with two at the moment, which we would expect to get a deal done by the end of the year. They will be a similar-sized, €3.5/€4 million type deal.

“I was a silly optimist. I did not take the corrective action for six months until after I should have and as a result, we lost €300,000 that year, which we did not have.”

IK: You had revenues of €2.5 million in 2015. You are now talking about getting it up to €80 million. How do you do that?

KOL: We are €18 million today, and then we will get it to €50 million. Nostra is growing organically at 15 to 20 per cent per annum. If we add the security product in, a lot of our customers will need that. The next deal will most likely be in either the print space or the telecoms space – they are the two areas we are focused on. If it is the print, we have 300 customers now who we do not supply print to, so that will be another element to service. That is managed print – you supply the printer.

On the comms side, we will provide internet connections to corporates. If we can get 20 per cent of our own clients, it will be a significant business. We are looking at widening our product set and moving forward.

The other thing which is very useful from a growth perspective is that our client retention is 97 per cent. If we add 25 or 30 decent-sized customers every year and you only lose one or two each year, your growth comes from that. Most of our business comes from referrals.

A lot of our competitors talk to IT managers. We rarely do that. We are an IT company, but ultimately, we speak in plain English, and our customers are nearly always referred from CEO to CEO or CEO to CFO. We get called in when the company had a massive outage, or where communications have broken down between IT and management and we go into those scenarios. We build it out, fix the problems and maintain the relationships. We have done that for 14 years, and probably lost 10 customers in our history.

We have a very good staff programme to make sure everyone is looked after – both professionally and personally. We have a great culture in the business and we rarely lose people. In 2015, we had 20 people in Nostra and there are 130 in it today. Of the 20, 18 of them are probably still here.

Stepping back to drive the business forward

IK: That decision that you took to step back from the day-to-day running of the business. Did you find it tough to cede responsibility?

KOL: It was very much moving back into a strategic role. Also, you have to recognise what you are good at and what you are not good at. I am good in customer meetings and good with the team. I was good at building the company to a point where we had 50 or 60 people. But when you get beyond that – it is a process-orientated business and we would have a fleet of 75 cars – there is a huge amount of day-to-day work. And there is a lot of people to manage. Our senior management team is probably six people and the middle management is ten or 12. There is a huge number of meetings. I recognised what I am good at and what I am not good at and I stepped back from what I am not good at.

I am very lucky that my brother Barry joined us in 2015. Barry was an original founder in the business, but when the recession took over in 2009, he actually went to work for a client of ours for five or six years. Then I got him back. Barry and I are polar opposites. He sits in the back office and churns away, getting the day-to-day stuff done – and that gives me the freedom to go out and meet customers. We are very different but very respectful of each other.

IK: You have 130 staff and you hope that will increase to about 300?

KOL: Every year, we have added 20 people to our team over the last five years and that is only going to grow more. We have eight open positions in the company across engineering and administration. Every three weeks, someone seems to start in the business, but the list of vacancies does not fall.

IK: Is it tough to compete against the multinationals for talent?

KOL: In the middle of last year, we brought recruitment back in house. When we recruited through our own team, we find they stay for a long time. When we recruit through an agency – and I am not slagging them – but we found that we did not retain people as long and it was not as good a fit. So, we took on a dedicated recruiter and it has been relatively straightforward.

We are based out in Lucan and it suits a lot of people not to go into town. We are very flexible; we have remote working for some time. We have a guy working from a beach in Malta. We find we don’t compete with multinationals because we are offering something different. People who want to work there would not necessarily want to work here and vice versa.

*****

Past, present and future

IK: You established the business in 2007. And then the world collapses economically. How did that impact the business?

KOL: We had a great year the first year. The crisis had not started. We did €1 million from a standing start in the first year and we were profitable month by month by September. In the first three months of 2008, we did €300,000 a month. It was phenomenal. We were selling big server solutions to big companies.

On March 28, 2008, Bank of Ireland and Bank of Scotland both announced they were not doing technology leasing anymore due to the high rate of defaults. All of our solutions were sold on the back of bank leases.

For the rest of the year, we did €500,000. The opportunities never went away. Our prospect list was growing. But I missed what was going on. No one was signing on the bottom line and I did not realise until December that no one was going to buy. I was a silly optimist. I did not take the corrective action for six months until after I should have and as a result, we lost €300,000 that year, which we did not have. That put us in a spiral that took us three or four years to recover from. So, we stayed at that €1 million revenue a year for three or four.

But we did convert the business. In 2008, we went into cloud technology. We were launching a hosted exchange, which is now known as Office 365. We launched that in Ireland, and then Microsoft announced shortly after that they were doing it. We had spent a quarter of a million on it, and they were spending 17 billion. They were cheaper than our cost price. We shut our system down and moved to them and grew from there.

IK: Was there a turning point for you when you felt you were getting somewhere?

KOL: For me, 2010 was a year where I felt we had something a little bit special. The team had stuck by me through very tough times, through late payments of salaries and all that. Our suppliers and our customers had stuck by us. Because we were so early in the cloud, it offered huge value from a stability point of view. If you had your technology in the cloud, you don’t have to go to bed worrying if your server is backed up and you are not running a risk of someone making a mistake and ruining all your data. There was huge peace of mind, and a massive cost reduction. From a support point of view, it went wrong less often.

We were telling people in 2010 to put in a cloud-based email server for 500 quid a month. Our competitors were going in and saying it does not work, that they needed a server. We were losing 50 per cent of the deals. I remember losing a deal that was €1,000 a month on the cloud or €300,000 to put in their own infrastructure. They put in their own infrastructure. They did not trust what we were doing because we were not big enough at the time to give that level of credibility.

An early adopted to the cloud was Dawn Farm Foods. That was a huge turning point to get a big brand on board. It was great for us and great for them – it solved a lot of their problems overnight. Avolon went cloud early and it gave them flexibility.

IK: How many clients do you have?

KOL: Including the acquisition, we have 270.

IK: What is the pitch?

KOL: In a lot of places we start with one or two services and move on. We are fairly reactive. You will not have seen much about Nostra in the last five years – we tend not to advertise or do marketing, and we don’t even have an outbound sales team and we don’t spend money on Google AdWords. For the last couple of years, we have been growing purely by word of mouth. A company has a crisis – it could be a ransomware attack, or the system falls over and they are down. The owner gets frustrated, goes to his circles of friends and then we get a phone call. We talk to them in plain English about what went wrong, we speak to the IT team and we figure out the solution. In a lot of cases, they don’t have to spend a lot of money, rather, it is how it is configured.

In most cases, we find IT departments overspend on IT. Often, we end up being cheaper than internal IT in terms of what the initial solution is. There is often a communication breakdown between the IT department and management and that is ultimately where we step in.