and that pipe flushed with cleaner then I would soon have milk solidifying at room temperature in the pipe. Not good for the product or the consumer!
The coffee machine was really designed for use in a cafe and so had steam and water pipes (for frothing milk and boiling water for tea) that I didn’t need. Remarkably, dispensing simple items like stirrers and lids was a nightmare as they were fiddly and difficult to stack. Despite the challenges, I had a strong feeling that I was going in the right direction and nobody was ahead of me.
By September the four re-fitted espresso machine sites were all operating and we were selling up to 800 cups per month from each machine. This was great news, but of course the costs were now much higher. I started to increase the drink price, first to 75p and then up to 99p. I was far too timid and cautious with pricing but eventually the market did the talking for me; on the high street a cappuccino was now at £1.50 so I could afford to charge more.
There was no doubt I had the makings of a proven proposition for the consumer, but I had not quite reached true commercial viability. The cost of an installation was now £5000, versus the £1500 I had paid for each instant coffee machine.
I started to give serious consideration to the possibility that I now had the offer right but the wrong locations. Perhaps this concept really lived in much higher volume locations like busy petrol forecourts, motorway services and supermarkets?
A short summary I had prepared on the business had been sent out by Baker Tilly to a targeted collection of venture capitalists. The answers were consistent. They either thought my business was too early stage to invest in or questioned if it would be profitable enough to make a return for a VC. I was making progress but was it quick enough? Would I raise some proper investment for this business before the patience of Barclays ran out and they called in my overdraft?
The need to conserve cash whilst I figured out how to secure investment was severe. I had to let Lou go. I could now see I had employed him way too early, when I thought that success would simply be a question of following what I had written in my business plan. I didn’t need any employees – I just needed to run a small test market of my new gourmet coffee machines and find the right investor. He had been so loyal and believed in Coffee Nation and me without doubt. He took the decision well.
At about that time I reconnected with Tony, who I had met at an Institute of Directors networking event a couple of years earlier. He ran a small advisory firm, mostly focused on company turnarounds and distressed businesses and I asked his view. Simple, he said. I needed a new business plan and then had to secure some proper funding.
Rethinking the business plan
I had strong evidence that I now had something that worked and could be scaled up to a large number of locations. Sure, there were still considerable gaps and I was far from certain I was in the right locations, but no business is perfect.
Tony introduced me to his colleague Mark and the three of us set to work. Again, I faced the issue of not being able to pay them for their help. We agreed a deal whereby for funds raised they would take a percentage of the company, depending on the amount. I really had nothing to lose. I’d be happy for them to own a small part of the business (ordinary shares, non-voting) if we raised some proper money.
The new business plan was half the size of my original document. It talked more about what I had achieved. It actually read like a plan for a business:
“We are the UK’s first brand of fully self-service fresh ground coffee concessions.”
“There is a large unexploited market in the UK for coffee-to-go, sold anywhere that demand can be created.”
“Each unit offers a high net margin based on premium pricing and low cost of operation. Each concession requires no dedicated staff to operate them and occupies only 1sq.m. of floor space.”
There was a section on market focus and our unique selling points, broken down into consumer (e.g. fresh ground coffee, convenient in less than 30 seconds) and retailer features and benefits (e.g. additional revenue stream, minimal day-to-day servicing, no maintenance and minimal cost).
Evidence from my latest test sites that the new offer was actually bringing people into the stores as they could now get a fresh coffee to go with a pastry from the in-store bakery went into the plan.
I set out that each machine had a life of five years, although we would depreciate over three. Sales continued to climb month on month and in the preceding four weeks we had averaged over 900 cups per location.
The forecast showed we would be consistently profitable from month 18 and the gross margin was 60%. Importantly, it highlighted that the continued growth of the business could be funded from cash flow after that. If there truly were thousands of locations where a Coffee Nation concession could be located, the business would inevitably need further growth funding down the line, but this plan was written around a sensible investment for what had been achieved to date.
Presenting to investors
We now needed an audience. Tony suggested I contact a business angel network in the Cambridge area called the Great Eastern Investment Forum (GEIF). I’d put in a call but hadn’t heard back from them.
Meanwhile, we had a slot confirmed for me to present at a similar event run by an accountancy firm in Yorkshire. I enthusiastically prepared a presentation. Mark and I set off up north. It was the first time I had actually stood up and presented in front of a live audience armed with chequebooks.
I knew it was my big moment and I was certain I had prepared well. In ten minutes I was done and there was applause from the audience, but I knew immediately that although everything I’d said was fine it somehow hadn’t hit the spot.
After the talks there was a buffet laid on, with time for networking and the opportunity for the entrepreneurs who had pitched to meet the investors. I didn’t have the stomach to eat and I fumbled with a glass of wine. I had one or two enquiries but it was all a bit polite and I just felt I hadn’t gained any real traction.
As I was about to leave the event someone approached me and Mark. I didn’t even get his name. He said as an investment it wasn’t for him but he could see we were on to a winner.
This was another one of those moments of pure serendipity; we never saw that gentleman again but what he said had a profound impact: “You’ve got a great business but you’ve got to sell yourself, make them want you, make them believe they’ll lose out if they don’t invest. You sounded desperate.”
“Desperate, of course I’m fucking desperate,” ran through my mind at a million miles an hour but I kept my mouth shut and listened to this helpful stranger.
We both thanked him and almost ran with excitement back to the car. In the space of a minute I had gone from sheer despondency to a sense of deep elation because I now understood how to present to potential investors.
It was late and we had to get back to London. I didn’t waste a minute. Mark drove and I rewrote the entire presentation. I’d write a section, even a sentence or two, and read it out. I hardly slept and by the middle of the following morning had completely rewritten my presentation. Rather than now talking to each slide I had prepared an impactful speech that supported the presentation. It pressed all the buttons that investors would want to hear.
Presentation at the GEIF
The GEIF then called and asked if I could send them my business plan. A few days later they called me again and invited me to present at the next forum, which was in May 1999. “When!?” I bellowed down the phone. “I’ll be bust by then, surely you’re running an event before then?” They were, the following week, but it was already full.
Something in me had changed. I had the test market sites performing well and I felt confident, really confident, for the first time. “I don’t care, put me on in the coffee break, I don’t care, I’ll do anything,” I said. I really wasn’t going