Wake Up and Sell the Coffee!

The story of Coffee Nation and how to start, build and sell a high-growth business

Martyn Dawes

• Publisher: Harriman House
• Year: 2014
• ISBN:
  9780857193605
• Edition: 1
• Topic: Commerce
• Subtopic: Biographies d'entreprises

A high-growth success storyMartyn Dawes set out to build a high-growth business with a simple idea and the will to do whatever was required to make it a success. Twelve years later he sold this business - Coffee Nation - for £23m.Along the way, among many highs and lows, there was the thrill of seeing an idea come to life, costly failed trials and false starts, countless business plans, learning how and when to raise funding, the personal journey of surviving when success seemed so distant and securing contracts with some of the biggest retailers in the world. This is the story of how a great British business was built - from a blank sheet of paper - and how it came to be one of the nation's favourite consumer brands. It's also a guide to help any aspiring entrepreneur put their business on the path to high growth.Through the course of an exciting narrative, Martyn shares his experiences of growing a business and his knowledge of what you should and shouldn't do. Mistakes to avoid are revealed just as honestly as the good decisions, making this is an unusually frank and valuable account for anyone looking to build their own business.All areas from start-up to exit are covered, including:- How to come up with an idea and know if it's any good- Researching and testing your business model- When you should not write a business plan and why not- The process of pitching to investors and raising funding- Negotiating contracts and controlling your finances- A special final chapter on how to set up a business for high-growth from the outsetCoffee Nation was based on the reliable principles of a simple idea, a compelling vision, a high-quality product and relentless enterprise. If you have the desire and vision to build your own high-growth business - or you want to read a fascinating story of how it has been done - look no further. It's time to wake up and sell the coffee.

Designing A High Growth Business What you should do before you start – and at each stage – when designing your business for high growth

My aim in this in this final chapter is to give you a head start on what it has taken many before you – including me – a long time to work out. I have distilled my experience into a set of guidelines that, if followed, may increase your chance of success in building a high-growth business.

Let’s define what success will look like:

• You are fit for the journey.
• You start with an idea that is worth pursuing.
• Research, test and market trials ignite the emotions of your early customers.
• You craft a compelling vision of the future that gets your juices going.
• Your initial vision excites those who join your business and those you need to fund your business.
• This vision is carried through birth, early expansion, growth, navigating the perils along the way to ultimately become a mid-market British success that is poised for the next level of growth.

I am not saying that if you follow these principles you will definitely succeed, but virtually all successful entrepreneurs will have addressed these factors in some way. Most entrepreneurs start from the same place, but over time some pull ahead whilst others fall behind. That’s down to many factors including sense of yourself, your idea, the size of your market and whether you hit it at the right time. If you fail to consider the above then one of the following may await you:

• The business fails, now or in the future.
• The business survives, maybe grows, but never really takes off in a big way.
• At some point you circle back and see what is missing and are able to plug the gap and complete the picture before you run out of funds, equity or both.

In this section I have focused on seven key criteria that I believe go into positioning a business for high-growth. These are:

1. You
2. Idea
3. Business model
4. Vision
5. Research and testing
6. People
7. Business plans and fundraising

I then discuss early expansion and growth or staying the course.

1. You

Why start a business? What ambition does this fulfil? What are your personal goals? Are these goals aligned with what you are willing to risk and with the type of business you are looking to start?

If you are attracted to the excitement of starting a high-growth business and the personal sense of achievement that comes from leading a company that one day may no longer need you at its helm – that one day may net you a fortune – then this will require your willingness to constantly adapt and grow, as well as risk taking over a sustained period of time. Your work will become your purpose and you’ll need an obsessive attention to detail and passion to get it right.

You should start a high-growth business because you absolutely have to bring some positive change to people’s lives. If this is your motivation then your staying power will not be in question when you are tested. Don’t embark on this path if you want to make a quick fortune. Out of 221,000 new businesses that launched in 1998 only 83,000 were still trading a decade later. Out of those, 8600 had managed to grow to employ ten people or more and just under 6000 of these had achieved high growth (defined as growth in employment of 20% or greater) in at least one year during the preceding decade. ^[4] High growth is hard to achieve.

Be honest with yourself before you commit. If your thinking doesn’t go beyond “I want to start my own business,” then beware. If what you start eventually requires more money than you have available personally to see it safely beyond survival then you may be confronted with the need to seek investors – are you prepared for that? There may be a trade-off between the business remaining in your control and the demands of incoming investors.

Behind a successful entrepreneur there’s often a partner who’s a strong character, offering support through the difficult times and being there to listen. Is your partner 100% supportive? They’ll lift your spirits when your confidence is low and provide a sounding board when you are faced with difficult decisions. What about time with your family? Successful entrepreneurs who feel guilty for not having seen their children grow up are almost a cliché. If stability, routine and certainty are important in your life then entrepreneurship is not for you.

If you want to launch a high-growth business then you must be prepared to listen to advice from those that have been where you hope to tread. You will need to develop a fine sense of judgement of what advice to take and in which direction to go on an almost daily basis. When it gets really tough you’ll simply see this as part of the process.

As the game gets bigger and more complex you will relish the challenge of growing as an entrepreneur and leader. You will in time develop an inner voice that will guide you – you’ll learn to know what feels right. You will know the difference between being right and being successful.

Businesses can’t be created by committee so you need the strength of conviction to make up your own mind. If you believe (and even better have evidence to prove) you are on to something then don’t let naysayers put you off. This can be difficult if it’s loved ones and close friends who will tell you they only want what’s best for you. Don’t be talked out of a winner – follow your heart and have the mettle to go for it. Remember that not everyone will want to see you succeed.

If successful, you will be able to look back and realise how little you really knew in the early days about yourself, your idea and what would make your business succeed. Ignorance is one of your vital strengths, don’t over analyse and talk yourself out of a great opportunity. Remember, it’s 20% the idea and 80% your drive and self-belief that counts.

I regularly reminded myself of this little checklist on my entrepreneurial journey:

effort (1) + excellence (2) + determination (3) + detachment (4) = the reward

1. I am putting my all into this: 150%, nothing less.
2. I strive for excellence at all times.
3. I will let nothing stop me.
4. I stand back and see the inevitable failures along the way as merely stages on the journey.

Be clear on who you are, what you want and what you are willing to sacrifice along the way. Then begin and never doubt for a moment, no matter how uncertain you may feel.

2. Idea

Solving a problem/meeting a need

What issue or problem does your idea solve? How can you test this without spending any money? It may not even be a problem people are aware they have until you offer them a solution. It may not be an existing problem – it’s just as likely you are offering a new way of doing things. How does your idea add real value – what does it mean to your customers? Why will people keep coming back? Don’t start a business, start a revolution!

Entrepreneurs are optimists by nature so many over estimate demand for their product – a lot of ventures fail simply through lack of demand. To build a high-growth business means demand has to be high and sustained over a long period, and for this the right idea is crucial.

High-growth opportunities are not easy to come by. Don’t be afraid to fish where others aren’t just because these ideas appear unfashionable or old school. Don’t look for what is easy – look for what is hard. If it is a problem that is hard to solve, but it is big enough for enough people in our society and you make it your mission to crack it, you might just succeed. Successful entrepreneurs are able to articulate how their idea makes a real difference and the need it fulfils, or impact it can have. They are able to objectively stand back from themselves and articulate why their idea has the makings of a winner.

You absolutely have to hit people with something that will jerk them off their daily autopilot. It took four years before someone sent Coffee Nation that little email that just said, “Thank you – you make my life better.” We had just focused on getting the coffee right, but that lady spelt it out for us.

You have to be utterly dispassionate to effectively assess numerous business ideas. Be rigorous in your approach – if this was someone else’s idea and they were pitching it to you, would you invest? Ask yourself whether it is really worth inventing if it does not exist already.

Aim to reach a deep level granular understanding of your model and your market. The more you know your space, the more confident you can be that the change you are bringing will resonate with the consumer. Others can offer valuable insight, but it’s your understanding and mastery of your market and model that can be so powerful. If you get this right then absolutely everything else flows from it.

If your idea isn’t working then there’s no point hanging on because you love the concept and it should work. Be ruthless, ditch it and start over, or make a big change. Don’t settle for starting something mediocre. Avoid tinkering around the edges hoping that the breakthrough is just around the corner. More often, drastic surgery is required. The moment you become emotionally attached to the idea is the moment you stop listening to useful feedback and may start down a dangerous path of attempting to justify why it will work. Don’t be afraid of critical feedback from others – it may take you closer to what will actually work.

Once you have been able to test and prove that you are on to something and the feedback loop starts to confirm it, then you can start to let your passion surface. So, be dispassionate first – objectively assess ideas and ruthlessly reject those that fall short. Passion comes later. If you allow yourself to get attached too early, there’s a big danger you’ve not done your homework and you’re backing a dud.

Be a part of a growth market and/or create a new category

If your business is part of a growth market then you will have natural forward momentum. If you demonstrate a strong idea in a growth market then people will listen to you.

The idea itself does not have to be unique; entering an existing market where there’s room for multiple players can be a great strategy. Most new businesses set out trying to change for the better something that already exists – perhaps based on the personal experience of the entrepreneur. In this case demand may be more predictable and the opportunity lower risk, but on the other hand the market you are entering may already be crowded.

There’s more than one successful coffee shop brand in the UK and more than one successful low-cost airline. They offer the same fundamental product but each is distinctive in some way from the other. Likewise, finding an idea in another country that will translate well to the UK is a sound strategy. Pet superstores are a good example that made the leap from the US to the UK successfully.

In 1997 the coffee bar market in the UK was worth a tiny £50m. Coffee culture was taking off and it was hard to see what would bring this high street revolution to a halt. The talk was of hundreds of branded coffee bars across the UK. Seattle Coffee Co. had started with one store in London in 1995. It grew to 65 locations before Starbucks acquired it in 1998, then a year later they had 97 locations. Coffee Nation was launching into a market that already existed and it was reasonable to expect it to keep growing.

As a growth category I could have entered the coffee market with a twist on the basic theme, but that wasn’t what caught my eye. No one in the UK was selling takeaway coffee from convenience stores like I’d seen in the US. I unknowingly created virgin territory to play in that was all mine.

If you cannot lead or be one of the leading set in a growing market, set up a category from scratch that you can lead. If you create a new category you make the competition irrelevant. Companies that own their space are often characterised by having high margins and an emotional connection with their consumers who come back again and again and are willing to pay a premium price. They are highly differentiated, have an unfair advantage and explosive growth potential. They are talked about and are memorable.

Most companies focus on being better than their competition, but very often it’s preferable to be first than it is to be better. People want to hear what’s new, not what is better. This realisation was an overnight game-changer for me back in 1998 and credit for this must go to a great little book called The 22 Immutable Laws of Marketing by Al Ries and Jack Trout. This book ...