Wake Up and Sell the Coffee!. Martyn Dawes

and I virtually lived at Clerkenwell Road; I spent an entire weekend there to witness customer behaviour. It was a great site to launch with. The legendary nightclub Turnmills was virtually opposite and the store traded around the clock so it was a real baptism of fire for our operating model. We sold quite a lot of coffee in the early hours to some pretty wasted customers, but it all worked. While there, Scott and I could never resist the temptation to go up and clean the shelf of sticky stirrers and napkins! One customer even told us what she thought:

      “I walked past, thought what the bloody hell is that – I’ve just got to have a coffee – beautiful coffee, beautiful machine!”

      Within a few weeks we had anecdotal evidence we were bringing more people into the store. I asked one customer why he hadn’t gone to the very contemporary Benugo cafe at the end of the road. He replied that he can’t get coffee, a newspaper and a sandwich there, but he could now at Texaco.

      A few weeks after opening in Texaco we launched our two Welcome Break locations. The results were just as strong. Versus the previous Kenco offer in the Oxford Services forecourt shop we increased Welcome Break’s profits by 15%, actually exceeding what they previously took in cash. At Warwick we were quickly generating some £900 per week in revenue where they hadn’t even sold coffee before. We were clocking up 2400 drinks sold per week from these three machines. Given the results we didn’t waste a minute in seeking to clarify the position of both retailers. We wanted a commitment to roll-out from both.

      In less than eight weeks from launch Texaco wrote to us confirming they would commit to a further 15 London locations for Coffee Nation. The retail director of Welcome Break wrote: “Following successful trials we intend to roll-out to as many sites in our network as commercially viable.” They believed they could identify 40 locations to start with. This gave us a combined commitment for 55 installations from two large companies.

      Seeking growth finance

      With success from our trials and commitments to add a substantial number of sites, now was the time to write a new business plan. We didn’t yet have commitment for trials with other customers, but Texaco and Welcome Break together would take us a long way. Our thinking was that we should be able to build an infrastructure that would support those 55 sites and achieve break-even. That way we wouldn’t be burning our cash reserves and it would then be a case of waiting to land the next major customer to grow the business to the next level, and so on.

      Of course, a business plan without any money wouldn’t get us far. We were working through the cash we had raised from our angels in Cambridge at a fair pace and so now was the time we finally did need to raise substantial roll-out funding. I’d written my first business plan back in 1996 but the only one that had mattered so far was the one I used to raise the seed capital in 1998. That had got me this far. We were now going to enter an even more competitive world of companies vying for growth capital; we would need to be at the top of our game.

      Corporate finance advisers were needed who could make the introductions to the appropriate sources of funding and help us develop our business plan and presentation. Derek had a good relationship with Deloitte and so introduced me to one of their partners. This was to become a long-standing relationship as they became our auditor.

      We also met with Ashurst, the City law firm. We had important contracts to get right with new customers and suppliers, as well as new shareholders agreements with an incoming investor. Neither of these firms routinely worked with start-up businesses but the combination of Derek’s previous business relationship with both firms, a compelling business proposition, Texaco and Welcome Break’s commitments to more locations and my passion brought them onboard.

      As 1999 drew to a close my priorities shifted from building a tranche of trial customers to ensuring all was working at Texaco and Welcome Break and developing a sensible business plan. Scott focused on operations with both customers. We had to deal with issues of wasted drinks and housekeeping standards. There would inevitably be teething issues with a new product like this being operated by a retailer’s own staff.

      In parallel with this we were on site a lot of the time, talking to customers and educating them that this wasn’t great coffee from a machine or great coffee for a petrol station. It was great coffee full stop. This always proved to be one of our constant challenges – getting people to recognise that our coffee was no different to that served in a coffee bar. We had put the same equipment into a different location and made it easy for people to use.

      This had been the year we had proved the product, the business and operating model all in the right locations. Next year – 2000 – would be when we’d see if we could actually start to grow a company.

      Scott had the last laugh as we ended the year. He called me on Boxing Day morning when I was driving to my father’s house, with Trudi and my daughter with me in the car.

      He told me that our machine at Warwick had caught fire and caused major damage to Welcome Break’s building. I turned white. Then he followed up with, “Only joking – Happy Christmas!”

      “You bastard,” I replied.

      Learning points

       Find low-cost methods of testing consumer demand. Not just once, but as your concept evolves through multiple trials.

       Invite someone who has been through the growth company experience to join you. They can add value by helping you plan what to do next. Identifying what the key milestones are and reaching them is vital. This sounds simple but it is surprisingly challenging for the first-time entrepreneur. The experienced, objective and dispassionate adviser/chairman/non-executive director can make for a powerful combination with the passionate and inexperienced entrepreneur, who is not always as objective as is necessary.

       I quickly learnt the value of monthly board meetings. It’s an opportunity to down tools, stand back from the day to day and discuss progress objectively, without distraction.

       If your market is other businesses, find out who you need to speak to and then phone them or send them a well crafted letter (email) setting out the clear commercial benefit you can bring to their organisation. Finish by saying exactly when you will call them. Call them when you said you would and keep calling back until they have taken your call.

       When you get the call, have prepared what you are going to say and say it with precision and confidence. I downplayed coffee and focused on new category. No one wants to miss out on the next big thing, least of all the PA that didn’t put your call through.

       Avoid buyers in big companies like the plague. Most are paid to buy at the lowest price and lack imagination. If you have something new they won’t know where to put you so you might as well start with the CEO. You never know, you might just get him/her onboard then things will move fast.

       Set the agenda and drive the pace with corporate customers. We had a letter of commitment to roll-out with Texaco within eight weeks of our trial going live – because we asked for it. If you don’t ask you won’t get.

       Starting salary should not be the reason anyone joins a young company of high-growth potential. Tell the story to attract great people.

       Recognise the transition you will need to make from entrepreneur to CEO/entrepreneur as your business starts to grow. Learn from others who have made this change.

       Accountants and corporate finance advisers become necessary and valuable partners. Establish that yours have the resources, capability and track record to deliver what you need today and as your business grows in the future.