Small business: Martin Howard - fund raising

Martin Howard, owner of Espressoworkz. Photo / Supplied

Martin Howard, owner of Espressoworkz, which has operated since 2001 on his bid to raise finance for his business

Espressoworkz sells automatic espresso machines and coffee beans to offices. It owns NZ roasted coffee range Eden Coffee plus has strong wholesale and retail business lines to compliment its office business, which remains the core profit engine of the company.

Espressoworkz also imports and distributes SAECO automatic espresso machines and Caffitaly capsule machines and capsules. The business has been experiencing considerable growth, opening the Eden Espresso Bar which now adjoins the main showroom in Mt Eden.

Over the last 12 months the company has developed a management structure with the depth of experience to manage and grow the business enabling Howard to step back from the day to day business and focus more on strategy.

What are your plans?

With the systems and people in place the next step is to double turnover, take advantage of economies of scale and improve the company's worth.

The business could continue to grow organically at 10 -20 per cent per year using existing cash flows and strategy, but that takes a long time and is a hard slog.
With further investment it could scale a lot quicker.

Opportunities include buying or merging with a competitor and integrating the two operations, franchising part of the business, improving sourcing and importing additional coffee related brands to distribute and service

What would your ideal scenario be?

Like many privately owned businesses here, the real opportunity to make good return on your efforts is typically when you sell to one of the "big boys". There are lots of examples of this in our industry such as Café Direct, Laffaire, Atomic and Burton Hollis/Gravity Coffee.

Even in the last 18 months both Evolution Roasters (Roasted Addiction) and The Coffee Guy were bought by an Australian publicly listed company leaving their Kiwi owners with smiles on their faces.

For a big firm it's more cost effective for them to buy successful brands and market share than it is to grow it themselves.

How are you going about finding new capital?

New capital has the potential to come from various sources, a passive or active investor, or possibly even a bank. All debt to fund the company's growth thus far is personally guaranteed on our family home and my wife and I are keen to change that for the next period of company growth.

Like most things in life, success is often about timing, being ready to move when the right opportunity presents itself.

What will happen if you don't find new finance?

No change. We will keep reinvesting the company's cashflow to continue to fund its organic growth.

What attitude have you had from the bank?

A couple of years ago I asked my bank if they could loan the company money without a personal guarantee. They could not dispute the exceptional growth of the business but the answer was no. They were however keen to lend us money if we wanted to purchase our premises. This reinforces my belief that NZ banks spend millions in advertising trying to seduce business customers but when it comes down to the line they are fixated on bricks and mortar rather than investing in business growth.

Sometimes it takes a life change such as redundancy or the loss of a loved one which triggers the move to start up your own business. Tell us your stories. Email me, Gill South, at the link below.