expectation.”
Out of nine live sites I had six non-starters. The business plan was really a combination of asking people to see the potential and get the vision of what should happen based on the US experience and what UK retailers and food companies hoped would happen, combined with some unconvincing results from a pilot operation. It was a Hope Plan, not a Business Plan.
At this time, Alldays wanted me to commit to a full package of in-store promotional activity and materials. This included a full eight-week promotional cycle, external store signage, wobblers, ceiling-mounted signage, coffee cup mobiles on sandwich chillers, sales counter banners, swing signs on the pavement outside, plus caps, badges and balloons on launch day.
Some of this I put in place, but I had realised that all of this was simply noise. Chances were if none of it was there, the sales would be just the same. They had to understand I was a small company with big aspirations, but also a small purse that was being depleted by the day. If my “No” to more costly marketing activity meant I lost Alldays as a customer, so be it. I had to stay alive and I knew more of the same was not going to generate different results.
Insight from venture capital firm
I continued working hard to raise money and met with 3i (the leading international venture capital firm). My presentation to them sold hard on me and my background, the Coffee Nation vision, research, customer and supplier relationships, and current status. Trouble was, it was light on results.
The outcome of the meeting was predictable. They wanted to stay in contact but identified a lack of hard evidence in the form of compelling sales results from our pilot sites as a reason not to arrange a follow up meeting. They were also highly wary of our relationship with Nestlé.
I had also met with Venture Capital Report (VCR), based in Oxford. Interestingly, Coffee Republic, a start-up coffee bar chain had just months before been featured in the same report. VCR wrote up a four-page piece on my business, presenting various profit and loss scenarios. The base case was 100 stores doing 100 cups per week. At this level the business would break even, but at present out of my nine stores not one of them was averaging more than 100 cups per week.
I was pinning my hopes on my business being “a new concept at the very early stage of sales.” The problem was that I couldn’t be in enough stores quick enough for the concept to become part of everyday life; for that I’d need £millions.
I was offering 45% of the company in return for £250k investment. There were no takers. My enthusiasm remained undiminished as I strongly believed the concept would come good eventually. I still had almost 2500 people buying my coffee every month – but these numbers just weren’t enough.
Life away from Coffee Nation had also taken an unexpected twist in the road; my wife and I had separated in the summer. Trudi and I simply grew apart; we still loved each other but I was 29 and she was 37. I think we both realised we probably wanted different things at that time in our lives. We remained close and I saw her and my little girl Maia (who was born in 1995) at least twice every week. I moved into a house share in west London and maintained a small income from the consultancy.
The year drew to a close. It was certainly not how I had expected it to be 12 months earlier. The strengths and weaknesses table in the VCR article was chillingly accurate:
What a difference a year makes!
Learning points
If you are launching a consumer business, regardless of relationships or agreements with distribution partners, if you don’t win with the consumer you will fail.
3i was right about Nestlé. It added little of real value, wasn’t a real contract and merely diverted some existing marketing spend my way on a signage package and a small discount on coffee. This could have been withdrawn overnight. The Coffee Nation name would never be worth anything whilst I was selling Nescafé coffee.
I created my cash issue. I didn’t need a 30-store trial programme and certainly not all over the UK. Trials should have been close to home.
I tried to raise money for an unproven business. I was lucky to have failed in the fundraising at that time.
I was busy managing trials, writing and rewriting my business plan and chasing investors. All of this appeared sensible but it did not give me the answer of why I was not selling more coffee. Learn to recognise the busy fool syndrome; it’s a common ailment amongst start-ups.
If a product doesn’t sell (or in sufficient volumes to become profitable) it’s usually because not enough people want to buy it regardless of how much promotional activity is put behind it.
I was right to hold on to the fact that some people were buying – it gave me hope and energy to keep at it. Thank God I did. Many people give up just before victory is theirs. My mantra was I would never, ever give up.
Sell in at the highest level – if you get a meeting with the CEO you’ll actually be talking to someone who can make decisions.
My agreements with Spar and Alldays were warm, feel-good letters but not trial agreements with clear success criteria signed by both parties.
It was right – eventually – to call a halt to the expensive promotional plan with Alldays. Many small (and even bigger) companies go bust trying to please their customers. Tell the truth and chances are they’ll stick with you.
1998 – Breakthrough Year
As 1998 began I was focused on three things:
1 How do I sell more?
2 How do I raise money?
3 How do I stem the cash burn?
At the same time, I stayed close to my creditors. Where I couldn’t pay in full I agreed minimal regular payments and talked them through the position I was in with the business. In most cases people were understanding, wanted to see me succeed and asked how they could help.
Honesty normally brings out the best in people and creditors are no different. Nonetheless, I was in dire straits. I had expanded my estate of machines to 19 locations but was only generating £3000 per month in sales. I had to find the answer fast or it was game over.
Eureka moment
One of the business angels I had met recently had asked me a question and for some reason this had popped back into my mind: “How much time are you really spending on the business against just servicing something going nowhere?”
He was right; all I was doing was servicing a nationwide network of underperforming machines and had almost no time left to find that breakthrough I so badly needed.
I realised I needed to be out there at each site connecting with customers, including those buying and those that weren’t. Everything else was of little importance. I decided to go on a tour of our locations with no particular agenda. My spirits lifted a little.
One of the machines I visited was in a Spar convenience store on a petrol forecourt near to the Merry Hill shopping centre in the West Midlands. The location should have been a winner, but we weren’t even managing to sell 100 cups per week.
While I was at the store, someone approached me. He said he thought it was a great idea and explained he was a manager at a recently opened car showroom just the other side of the roundabout and often came into the shop for a sandwich. Then came the “But…” and in his next statement lay my eureka moment. He had bought a coffee, but only once. He said:
“Why should I buy a cup of instant coffee for 59p when I can put the kettle on in the office? If you want me to buy a coffee in here it’s got to be an amazing product – it has