Energy-saving lightbulb maker survived tough times thanks to keeping a close eye on cashflow.
The spark nearly went out for energy-saving lightbulb maker Energy Mad when the global financial crisis prompted its banker to demand a loan repayment.
"We had $1.7 million in the bank and $2.4 million drawn down. All of a sudden we were owing $3 million," says Chris Mardon, who founded
the Christchurch company with Tom Mackenzie in 2004.
In the face of intense pressure, and despite advice that they should let the business go, they decided to negotiate with the bank.
"We didn't want to [declare bankruptcy]. We went back to the bank and got a three-month extension for the debt using our houses as security," Mardon says.
Supermarket chain Foodstuffs also supported the company by not pulling out of a project with Energy Mad.
"That really made the difference for us, to have their support. Most owners would have just pulled out, considering the risks they were exposed to."
Energy Mad survived and sales are climbing. Revenue in the latest financial year doubled that of the year before, and it is on track to double again in the current year, says Mardon, to about $22 million.
He attributes the quick turnaround to "good old-fashioned execution" of deals and a close watch on cashflow.
"We realised how important cashflow was to the company every single day. We became obsessed with cash in versus cash out." Faced with the prospect of being wiped out, the company channelled its energy into chasing deals closer to home.
"Rather than chasing $10 million projects in India or China or Singapore, we turned our focus to Australia."
One of its big wins is a project with AGL Energy, Australia's largest electricity retailer with more 5 million customers.
"On our first day in the [Australian] market, we did $190,000 [worth of business]."
Another recent coup is its first project in the United States, where it will sell energy-saving bulbs in 250 Duane Reade drug and convenience stores in New York.
Energy Mad's strategic direction, since day one, has been to work closely with power companies to push for change in consumer behaviour.
"The key has been to show what's in it for the power companies - what's the return for them. We have been able to show them, in the New York case, based on its investment, what type of savings it could achieve.
"In places such as the US or Europe, they can't build any more coal plants or nuclear plants, so there is a need to start reducing energy usage and they are looking for solutions to do this."
The company has a large project in Germany, one in Spain and another in Ireland. In 2004, when Mardon and his friend Mackenzie - both of whom have engineering degrees - started their business, they wanted to not only sell lightbulbs but to green the earth in the process.
Their first goal was to get five Ecobulbs into half of New Zealand's homes. They say they achieved that target by late 2007.
More than 80 per cent of Kiwi homes have some energy-saving bulbs; of those, three-quarters have Ecobulbs.
The company has sold about 5 million of the bulbs in New Zealand, even though many people think they look ugly. In 2007, the firm's rapid growth made it the top-placed New Zealand firm in the Deloitte Technology Fast 500 list of fast-growing companies in the Asia-Pacific region.
When Mardon and Mackenzie first set out to make energy-saving lightbulbs, they obtained 100 different bulbs from various makers.
"Tom's Polish partner says, 'I will divorce you and go back to Poland' if he put them in their house. We had to figure out how to make them more attractive.
"We realise what we had was ugly but it was a lot uglier before."
Even when the pair had solved the technical issues they still needed to solve the problem of marketing.
"Energy-saving lightbulbs have been around for 30 years. What could we offer that was different?" says Mardon.
They realised that they couldn't compete head-on with multinationals such as GE, Philips or Osram, so they convinced power companies to be partners in the marketing campaign. "We needed the backing from power companies. Our business case to them was the alternative is better than building new power plants."
