Monday, October 29, 2007

Heaven Fresh UK: The Beginning

I will be dedicating the next few posts to the UK experience as it relates to a micro-multinational distribution company. It has been over a year that we started Heaven Fresh UK and  the UK web site (http://www.heavenfresh.co.uk) was launched in the last week of November 06. 

Given that the Heaven Fresh branch was already doing quite well in Germany,  UK was a natural choice for us to further expand our operation in Europe.  I contacted the UK Trade Commission in Toronto with our intentions to open an office in London in early 2006. UK consulate put us in touch with London based organization called Think London (http://www.thinklondon.com). Think London helps foreign companies get started and settled in London UK.  Before I flew to London, Think London's staff had already laid out a week long schedule for me to meet solicitors and bankers as well as had the appointments setup with real estate agents to see commercial properties in North, South, East and West London. While I was in London, they took me around to get me oriented with the city to be able to chose a proper location for business. My initial experience of the business environment in the UK was extremely positive mainly due to the professionalism of  the Think London's staff.

I was well aware that London was an expensive place to live and operate a business and that we needed to allocate sufficient working capital to compensate for London's expensiveness.  Our target was to break even in first 3 months but just to be on the safe side we allocated funds for 6 months, or so we believed.  With Think London's help I found an office/warehouse that I liked but when it came to signing the lease I came to know that the landlords in the UK wanted a deposit equal to 3 month's rent along with 3 month rent in advance. To top it all off, property taxes are tenant's responsibility in the UK that have to be paid to the government directly by the tenant above and beyond the rent payment to the landlord. I had only allocated rent for two months in the plan and paying six month rent in advance along with "counsel taxes" meant being left with  no working capital.

Seeking more capital from the investors before making even a single sale in the UK meant sending a message that I did not know what I was doing.  Therefore, I decided to activate the plan B to store the products in a public storage and had one and only company employee, Shahzad, operate the business from home.  As expected, we got our first online order within first 48 hours of launching the UK web site. Christmas season turned out to be a perfect time to start the online sales in the UK. In the very first month, we did about £7,000 in online sales. This figure tremendously boosted my confidence. By looking at the first month sales, I knew that the UK was going to be a goldmine for us, given that we overcame all the "UK surprises" and carried out the business as we had planned.

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Saturday, October 27, 2007

Two busy weeks at Heaven Fresh

It has been more than two weeks that I wrote my last post. I do not ever remember myself being so busy as it was for last couple of weeks.   Besides entering the high season for the sales activity,  Kamal was out of the office because of his new born baby boy. It was a stark reminder that Heaven Fresh is not a typical MNC but a micro-multinational, where the absence of even one key person can stretch the entire organization across the globe. We also had a blurb published in Globe & Mail about the new Heaven Fresh Personal Air Purifier. These few lines by the Globe editor made the phone ring off the hook for almost one week. This write-up in Globe & Mail was a result of the PR campaign by Celia Love for Heaven Fresh.  I wrote a post about our successful trial PR campaigns in August. We finally came to an agreement with Blessington Love PR where Heaven Fresh will pay them a monthly minimum retainer for writing one press release every month along with 1% of the PR value generated from those releases. Our formula for calculating the PR value is as follows:

PR Value = Advertisement rates in the print media for the space allocated to Heaven Fresh stories multiplied by 3

The reason for giving three times the weight of the equivalent advertisement space in the same media is that the editorial stories get more attention by the readers and have a greater impact.  We are planning to expand our PR activities in other countries as well as on the Internet.

There has also been quite a bit of activity in the UK office for last couple of months. I will be dedicating this coming week writing about our experiences of starting the Heaven Fresh office in London, UK.

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Sunday, October 7, 2007

Outsourcing and Micro Multinationals

There are two main reasons for ANY small business in the industrialized world to go multi-national. The first and the most obvious one is to expand the market reach.  The 2nd one, less obvious but more important, in my opinion, is to increase efficiency and drastically reduce business overheads.

The former is more realistic for businesses like Heaven Fresh that heavily rely on the Internet to promote their products and services, but is not necessarily feasible for small businesses that need a brick and mortar presence e.g.  a restaurant, a grocery store, a barber shop or a clothing store.  The later, i.e. increasing efficiency, reducing overheads and maximizing profits by hiring overseas employees,  is something that even a home based business can take advantage of. To give a few examples, the daily bookkeeping and accounting is a mandatory chore for every business. Most of the small business owners end up spending a large chunk of their time on the bookkeeping .  This is a task that can be easily carried out by an overseas employees for the fraction of the cost. Certain routine marketing functions can also be outsourced, for example, creative writing, graphics design, coupon creation, distribution of the coupons using online tools, PR and sales analysis etc.  Other more complex functions that can be performed remotely may include e-mail/ telephone customer service, virtual inventory management, security monitoring, data entry and business consulting etc.

It would cost Heaven Fresh at least $10,000 / month (possibly more) in salaries to execute certain accounting, customer service web site development and  marketing functions if the employees are to be hired in Canada, UK or the USA.  But having qualified employees half way across the globe to perform the same functions has reduces the salary cost to only about $2500/month.  Not only that going "multi-national" increased efficiency and reduced overheads but it also freed the time of the local company employees to be spent on business expansion and growth activities.

Although large multi-national companies have been taking advantage of overseas outsourcing for almost two decades now, this trend has not caught up with small businesses. Even though, in my opinion,  small businesses are in a more desperate need of help due to limited resources and financing.

So, why is it that vast majority of the small businesses is not benefiting from this new trend?  Two of the biggest reasons that I see are as follows:

  1. The lack of global networking ability on the part of small business owners to find qualified and reliable people.
  2. Not having the resources to put a software infrastructure in place for collaboration among the geographically scattered team.

Providing both of the above is a monstrous opportunity for any software company. The introduction of low-cost software tools for remote collaboration combined with the "business social networking" can potentially turn every small business into a micro-multinational.

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Thursday, October 4, 2007

A potential new Micro Multi-National

I got an e-mail from Celia Love, who is managing the PR campaigns for Heaven Fresh in Canada, asking me about the company that was distributing Heaven Fresh products in the UK. She was wondering if one of her other client, Colour Revolution, could also use the same distributor to expand in to the UK.

So, out of curiosity, I spent a few minutes browsing their web site http://www.colour-revolution.com.  Apparently, Colour Revolution is a young Canadian company that is trying to make its mark in the North American market. It is natural for them to think about expanding into the UK to broaden their market reach.  By looking at their web site, I can tell that Colour-Revolution is trying to do EXACTLY what we are doing for Heaven Fresh. The only difference is that the products of the two companies are different. Also, probably our approach is somewhat different from them but the end goal is the same.

Although I have never met the two ladies who started Colour Revolution (http://www.colour-revolution.com/about-us.php) , but having been through the Heaven Fresh experience, I can guess to a very high degree that what they are going through to expand the business and also their thoughts behind finding a distributor instead of opening their own office in the UK.  Here is my quick hypothetical analysis of their business based on my 15 minutes review of their web site:

  • The products are really good and they are passionate about their products and their baby - the business.
  • They are getting a very positive response about the products from the consumers and other retailers.
  • They are up to their neck with the routine work just running the North American operation. 
  • Sales are not coming in as fast as they would like.
  • Cash flow is very tight so they have to cut down on expenses and prioritize where to spend the limited cash.
  •  Attracting more capital is difficult because the financiers (banks, angels etc.) want to know the sales figures.
  • Retailers are taking too long to make a decision to place orders and also have too many demands.
  • Service providers such as web site developer, book keeper, online marketing expert etc. do not want to stick around for long without getting paid "market compensation".
  • They are wishing that they knew how to do all these things by themselves and that there were 48 hours in a day.
  • They are hoping to find a magic wand that can be waved in front of potential customer to get them to move their @$$ for buying the product on the spot.
  • It feels like catch 22. Whether to increase the sales first to be able to get some financing or get the financing first to help increase the sales.

Well, getting financing first is probably the obvious choice but the investors' response is forcing them to go for sales first. This is the exact spot in the business cycle where an entrepreneur's creative juices start flowing.  So, exploring the UK market is a natural call induced by the "creative juices" :). But guess what, setting up an office there is going to cost quite a bit of the money that they do not have. So finding a distributor seems like an obvious choice. However they are going to find it the hard way that a distributor cares less about Colour Revolution.  I am not an expert in fashion industry but my guess is that this is not the only such product on the market.  It's not the product that makes a business successful but rather the PASSION of the entrepreneurs for that product moves the business forward. Miracles do happen in life but my bet is that they are not going to find a distributor in the UK with their level of enthusiasm for Colour Revolution. Hence, the UK sales will be proportional to that level.

If anyone in this situation was seeking my FREE and sincere advice then I would tell them to put their web site to a better use. Connect with the consumer directly. Make more believers. Keep small but constantly revenues  coming in. Start the business in the UK by themselves instead of looking for a distributor. Perform the main functions of the business on their own and  outsource only what they cannot handle by themselves.

Perhaps I should not give any more free advice because "free" does not have much value. Probably I should charge my "market  consulting fee" for "developing a plan" to expand Colour Revolution into the UK market.  And this how the Micro-Multinationals are born.

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