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Finance Focus helps businesses navigate the ever-evolving world of finance. Each episode features expert insights, practical advice, and in-depth discussions on topics such as crowdfunding, trade finance, angel investing and debt. Hosted by Tracy Smart from The Smart Team and Sam Jones from Satellite Finance.
[00:00:00] Tracy Smart: Hello and welcome back to the Finance Focus podcast. I'm Tracy Smart, head of the Smart Finance Team, and I'm here with my fantastic co-host, Sam Jones from Satellite Finance. We've been running this series talking about different ways of raising finance for your small business and so we're very excited to have an esteemed guest with us today who has experience in both debt, finance and raising equity capital as well.
[00:00:32] Sam Jones: Yes. Hello, Sam here.
we've got Paul Shett from gloveglu, which is a very exciting company I've been following for quite a while. They are on atremendous growth journey. I'm quite invested in them, not financially, but they sell goalkeeper products mainly and my youngest daughter is an aspiring keeper. So I've been following Paul's journey closely,and buying quite a few of his products to aid my daughter on her journey.
So, Paul, if you just want to say hello and a brief background on how you got into the business and what it is you do.
[00:00:59] Paul Sherratt: Hello, thanks for having me. So we are a,business that specialises in goalkeeping glove care. So hero a product is a spray that you spray on your goalkeeping gloves to make them grippy. Who knew? I can hear you all saying. Never knew such a thing existed.
Well, we launched very much as a side gig. Sat as a side gig for quite a number of years until about four years ago.I've had 30 years in sporting goods, all sorts of different,roles working with different sports brands over the years.
And about four years ago, decided to go all in, sat down with my wife and said, look, this is in 2020. I said, look, I'm going to be 50. I think I know how to build a sports business. I think we can make it a global business. Oh, you're up for it. And she said, well, yeah, I've got two teenage boys, and, what does that mean?
I said, well, I might need to remortgage the house and go all in. So, yeah, put all the chips on the table four years ago.
And as you rightly say, since then, we've grown at a phenomenal rate, sort of plus 40% for the last three years and continue to push on through, we sell the product in. 55 countries around the world, and we sell now one gloveglu product every 150 seconds.
So, continuing to expand rapidly.
[00:02:12] Sam Jones: Do you have a little ticker just telling you every time
[00:02:14] Paul Sherratt: Don't have, we have a little ticker that follows our, Shopify sales. but, but no, we don't have a ticker for overall sales. But hey, be nice, wouldn't it?
[00:02:22] Sam Jones: Exactly, so that's great. So when you started the business and you mentioned remortgaging the house, et cetera, so that was the initial investment, all your own money
[00:02:29] Paul Sherratt: It was.
[00:02:30] Tracy Smart: Bet that was quite scary, really, that whole commitment personally. Your wife was up for it by the sounds of it?
[00:02:36] Paul Sherratt: It was a tricky one because were paying for the boys' education and you've got your mortgages and your bills and everything. So yes, at that stage in life it was, option A, we're quite comfortable. Thank you very much, we'll carry on. Option B is, do you know what? I've got this itch that I want to scratch. I think we can build something really quite interesting and quite special here, and how big can we build it?
[00:03:01] Tracy Smart: It is interesting taking that sort of risk, isn't it? Lots of people say when you're young is the time to take risks to, you know, you haven't got quite so much to lose. But I think as a, an older entrepreneur, you've learned so much throughout your career. Was there anything that, having had all that experience came as a shock to you?
[00:03:19] Paul Sherratt: Honestly, probably no. You know, you occasionally get asked the question is, could you have done it earlier? I don't think I could have done it earlier. I think you've just kind of hit the nail on the head that the advantage of doing something that I like I've done late or later in life is there is a huge amount of experience behind you and therefore, if I'd have tried to do what I'm doing there 15 years ago. Definitely would not have been able to build it as rapidly because I wouldn't have had all the answers, and I'm not saying I have all the answers now, but experience.is absolutely key, really.
[00:03:55] Tracy Smart: Yeah.
[00:03:55] Sam Jones: I guess also from a capital perspective, if he'd have gone in as a younger man. Either might have had a small flat with a mortgage on it, you know, you'd have been looking elsewhere for investment, whereas you've built up your asset base, you can use your own backing if you like to build the business.
Was there always a, such a high growth trajectory? Was it always your goal to go global and be big?
[00:04:13] Paul Sherratt: Obviously that's your, goal, isn't it? You know, you want to be in this rocket ship and, and see this thing, you know? Absolutely. You know, explode.I honestly had no clue whether that was going to happen or not. We, you know, made that decision in 2020. Well, we all know what happened in 2020, so that was a slight, challenge in terms of seeing this aggressive growth.
The opportunity was the fact that with me going into that business a hundred percent and not having any other distractions, let's say, meant that my expectation was that we could grow this aggressively, and we could grow this aggressively multi-channel. Did I think we would grow as rapidly as we have done? Probably not.
Have we been lucky along the way in getting some nice listings and seeing some aggressive growth by getting into a Dick's Sporting Goods just for example in the US? Yes, we have. Do I look at it now and think we can still continue on the trajectory? Yeah, actually I do. Yeah.
[00:05:05] Tracy Smart: Yeah. 40% per annum is pretty, quite a high growth rate really, isn't it? Especially if it's been organic, and not through acquisition.
From a finance perspective, being a finance director, that's something that's very difficult to manage because actually it takes cash to grow a business and you have to invest in what an accountant would call is working capital.
So as you grow, you need more working capital from stock and to fund your debtors and things like that in order to grow. So what's been your experience and how have you done that?
[00:05:34] Paul Sherratt: Yeah, and I think that's the core question, right? That's the core question that probably people listening to this podcast want to hear and it's a really interesting question for me because going back to that 2020, my rhetoric would've been, Hey, I'm a sales and marketing guy, don't really have the finance side. It's not really my bag. It's not really my interest. Which is crazy, right? If you're grow this business and you dunno the numbers, there's no excuse for that.
Over the last, few years, I've sort of forced myself to, let's say become better with the numbers. The whole working capital requirements, is probably the one area that I didn't anticipate how challenging it would be. It's still probably the hardest part for me in terms of trying to understand and learn that financial journey. We have had cash flow challenges as you do. You know, you get into someone like a Dick's Sporting Goods. It's the world's biggest sports retailer. They've got 900 stores in the US that's our whale. But the problem with someone like a Dick's Sporting Goods is of course their terms are pretty onerous. So you know, it's 90 days payment terms, you know, it's aggressive, discount you and so on and so forth.
There's marketing contributions. So on the one hand that's amazing, but then on the other hand, you're suddenly tying up even more cash for even longer to try and service these kind of guys. So definitely some lessons learned and continuing to learn those lessons, which is really where Sam and I, have the relationship.
I think Sam and I, we probably talked three years ago, probably when we were quite early into this chapter two of the journey, if you like, the real journey. And even at that stage, as I mentioned, yes, we'd remortgaged the house and we'd put some cash in the business, when you're going from zero to 40, 45% growth.
[00:07:17] Tracy Smart: Yeah, people don't realize that
[00:07:19] Sam Jones: The cost to growth, isn't it?
[00:07:20] Tracy Smart: Yeah, there is a cost of growth from a cash perspective, and when I say working capital, just to explain that a little bit, it's cash in your bank to pay your bills, but it's also, an ability to work within the terms of people that will only pay you after 90 days.
So you've still gotta keep buying your product and providing your product, but you also need to have a certain level of stock. If you're growing rapidly and the larger you grow, then you need more stock in the business to be able to supply that to your customers. So, tell me about the actual finance solutions you came up with.
[00:07:56] Paul Sherratt: So we, we basically manufacture, we produce the product ourselves. So, we're not buying X factory. In fact, we're buying the raw chemicals, we're buying the bottles, we're buying the labels, we're buying the sprays, we're buying the boxes.
So there's the working capital requirement there go, goes right down the supply chain, as you've rightly say. It's even higher because we're buying the ingredients to make the finished product. Well, one of the first things that we recognized was. If we have our own production facility, we need to move away from a manual pouring process. It is at this point where the camera fades and it goes back to an image of myself and my wife sitting around the kitchen table, literally pouring this white liquid into bottles, which happened and manually applying labels to bottles.
So that was back in 2012. We got to a situation where, okay, we need to invest in a bottling line effectively and a poly rapid machine. So there's a 100K investment there.
How do we finance that a hundred grand, to allow us to keep up with demand and keep the wheels turning way quicker than they would be if we were trying to still do it manually, which would've been a labor investment really. Let's move from a situation where we, instead of doing 400 bottles a day manually, we can do four and a half thousand bottles a day. So Asset Finance was the first one.
It was a huge step, but we got a Metro Bank funded solution there, and they were very, helpful with that. It was actually relatively easy process at the time we were actually discussing moving from HSBC to Metro didn't happen for various reasons, but part and parcel of that discussion we ended up with this asset finance solution. So that was one big step. One big chunky step. And then as we've continued to grow, then the discussions have been short term to fill holes to fill challenges, whatever it
[00:09:50] Tracy Smart: Bank loans, things like that, and overdrafts.
[00:09:51] Paul Sherratt: Yeah, bank loans and overdrafts. Then Sam and I, we've looked at
[00:09:55] Sam Jones: Stock funding, bit like trade finance we had on a previous episode, and the lender would pay for Paul's stock and then he'd pay that back over a certain period. Ideally when he's been paid and he's sold product. We looked at loans as well, haven't we?
Yeah, all manner of facilities. I think you've always let say you've always known the cost of growth and sort of embraced that.
How would the debt-based, investment compare with the equity investment that you've taken on?
[00:10:22] Paul Sherratt: In terms of giving equity away, we haven't done that. So that was a deliberate ploy. So,back in this 2019 / 2020 scenario, we looked at where we're going, looked at what we're doing, looked at this remortgaging scenario, and a very good friend of mine, who is very high up in Morgan Stanley, was there as a sounding board. His advice was try and hold onto your equity because further down the line, you know, if you start giving it away now in 2020, further down the line, you may regret that.
But at the moment we still have a hundred percent of the equity. So we haven't given that anyway, so that, that really forced us in inverted comm into the debt financing. Which is more expensive. Some of the debt finance that we've taken, some of the fees that we've taken on, have been pretty chunky. But as we continue to grow, of course economies of scale kick in, so suddenly by sourcing bottles better or labels better, or a box is better, there are some massive gains that drop straight down to the bottom line.
Which ease some of that pain, which gives a bit more cash in the business, which means we can go back and refinance. So I think having seen this aggressive growth and been through these challenges, I feel we're potentially coming to the end of the expensive borrowings cycle.
[00:11:43] Tracy Smart: Whether that takes us into a different cycle that might be a venture capital play or what's that next round of either taking money off the table or funding or is there an next round? Does there need to be an next round? Or actually are we in a point now where financially we're way more robust, which of course we are, and therefore can we self-fund as we move forward? We're just on that point now.
[00:12:05] Sam Jones: And I guess as you get more established, you've got more weight behind you to say, look, we've got this product, it's successful with Dickies. We would like these terms, and you don't have to sort of take what's given on the table.
[00:12:15] Paul Sherratt: Yeah, I've just had a, really interesting conversation and continue to have a conversation with one of our stockers in the Middle East. Football's growing in the Middle East. There's lots happening down there. Their terms for the level of business that they can potentially deliver are quite punchy. They're quite onerous. The dialogue that I'm having with them at the moment is almost "Whatever, yeah. You know, here's our terms. If you don't want to stock us, don't stock us."
I would've never have had that two years ago, three years ago. There's nowhere I would've approached, any potential partners, retail partners like that.
But as you say, the stronger you get. You know, we've created a category that didn't exist before around the world, which is this goal keeping glove care category. We're Category King, great, and I'm not complacent about that because we've got competitors that kind of, that are coming into the space. But the reality is when you've got a conversation with a retailer like that, at this moment in time, they don't really have a credible alternative. We've built our strength of brand and we've built our strength of product.
So I think we can afford to be a little bit more selective, a bit more picky. But again, you gotta be careful because if that does leave the door open for a competitor to come in, then clearly that's not, it's not a great strategy.
[00:13:30] Tracy Smart: When I was fairly young and early on in my career, the CEO of the business used to talk about critical mass. So getting the business to a certain size where, like you say, you can self-fund and make some big decisions, sort of growth, strategic decisions from there. But I do think that there is a, challenge and one of the things I think I'm hearing from quite a few of our guests is there's a challenge for UK businesses to get from startup to critical mass. Yeah, it's very difficult to be able to fund a business from the small size to something that has got that critical mass, and having that capital available for small businesses.
[00:14:11] Paul Sherratt: Yeah, I think arguably a B2C play is easier because you're not waiting. You know, we are invoicing 30, 60, 90 days for some of our B2B customers. So obviously the cash isn't coming as quick. If you look at in my sphere, a brand like Gym Shark that, you know, goes from zero to unicorn state.
It's amazing. They never had any external finance funding coming into that business until they got that billion dollar valuation and investment. Why? Predominantly because A it's B2C. B, the margins are very good, and they were just very,they managed to ride the wave very, very well.
So I think it probably depends to some extent what sort of business you're in. You know what your margins. If the margins are a bit skinny that's harder If you've got money tied up in raw materials or incost of goods and you can't turn it around very quickly into cash and your margins aren't very good anyway, and I think that's a different play than let's say a B2C business where your margins are maybe 70-80% and therefore you can pay very little for the stock and turn that into nice cash pretty quickly.
And again, if you can negotiate terms with your suppliers to help you with that. We can turn our products around pretty quickly. If we were sourcing from the far east, which is a lot of sports brands bring their products in from the far east. China in particular. Well, we all know the challenges that would face now anyway, but also then you're throwing in lead times.
So I'll give you a great example. Our core business is goal keeping glove guard. It's chemical based products, it's sprays.
One of the reasons we have taken on probably additional finance and have had bigger challenges than we perhaps should have done was I took a view three years ago let's expand into, apparel goalkeeping gloves, and a wider product range. To go deep and wide into goalkeeping, to give ourselves a bigger footprint in the goalkeeping world.
That as a strategy,was a great strategy. The downside of that is with goalkeeping gloves and apparel and so on and so forth. you've got sizes, you've got minimum order quantities, those products are produced in Pakistan, China. You're paying the factory up front. The factory's producing them, you're putting on the water, you're shipping them. It's 90 days before you even see that product. You are then invoicing that product on 30, 60, or 90 days. The margins on those product lines are, they were near as good as the margins that we make on our core lines. So whilst as a strategy, it appeared to be the right thing for us to push wider and deeper into the goalkeeping world. Actually, the reality is it was a mistake. Because it put us under more financial pressure.
So in the last 12 months, we've pulled right back to concentrate on our core business which we can control, which we can turn the raw materials into finished product really quickly and therefore to get it into the market quickly and turn the cash quicker, andand goalkeeping gloves. We still have that cash tied up for a longer period of time with goal keeping gloves. But the market opportunity there is still quite attractive for us. So big learning curve that in terms of, yeah, tying up cash, you know, nobody wants a warehouse full of size 11 gloves because we've ordered too many of size 11 or size double extra large apparel because we've got the size curve wrong. If it's a one size product, like a bottle of gloveglu, that's great because we don't have any of those issues.
[00:17:46] Sam Jones: I think one thing that's helped you with the investment and thefinance you've taken on, like Tracy, you mentioned it's, it can be hard. For new starts and growing companies to get that money. But Paul's always had a plan. You've known what you're spending that money on. It's a specific marketing campaign or a certain stock line, or we're going into this market, I need this fund to do it.
So you've always, you know, you, I think you do yourself a disservice and you said the numbers weren't your game. You've always had an idea of how much you need to make this particular project worked, and the finance has been quite specific, hasn't it? Whereas, you know, I have a lot of clients who are a bit more generic with it and that they just need some more working capital and all of a sudden that's fritted away. The growth isn't quite what they should have got from it, and the return on the investment hasn't been properly calculated.But obviously the business is growing rapidly. You're always adding on bits to your business, certain bits of software to make life easier and add value. How important is that to you to get the value into your business from outside sources and be open-minded?
[00:18:42] Paul Sherratt: Massive. I think for me I've just joined FEBE which is a group of the fastest growing companies in the uk, basically. Of which we are lucky enough to be one of those. You've got some phenomenal businesses and entrepreneurs in that room. That I find super exciting and inspiring.So yeah, an answer to your question, hugely powerful.
The tech stack play for me is also really important. That we make sure that we're building the company dashboard in a way thatI can remotely manage the business wherever I am in terms of understanding the numbers and those, that, that might be the key financials or the production numbers or cashflow or whatever it is. So our tech stack is really quite strong.
[00:19:30] Sam Jones: Has there been a point, obviously you're scaling quickly, have you ever got to the point and think, I want to get here and I just have no idea how.
[00:19:38] Paul Sherratt: Yes and no. I think if you say, I want to get here, I want to get to 10 mil, 25 mil, a hundred mil, whatever it is. The bigger that number gets clearly the harder it is to visualize how to get to that number.
[00:19:51] Sam Jones: Because you can't do it by just working harder, can you?
[00:19:53] Paul Sherratt: You can't do it by work harder and I'm interested, going back to going back, right back to this conversation that I talked about with, with my friend who at Morgan Stanley. Who said at that time, 2020, how do we get to five mil? We were obviously substantially less than that at the time.
In his head it was, you know, can we chuck cash out the problem to get there quicker?and you can't suddenly, you know, if somebody said, Hey, here's whatever number, here's a million quid, here's 5 million, here's 10 million, I'm going to drop it in your account tomorrow.
Can you quadruple your business on the back of having a large cheque and you can't. So I think it's clear for us that we have these three revenue channels, B2C, B2B, Marketplaces. Do all of them have the opportunity to grow? Yes, they do. For us to grow our B2C business, we need to push that into localized stores in core markets. So that might be a German store and a French store, and a Spanish store and a US store and whatever, whatever. There's an obvious pathway there, which requires investment, which requires people that understand the culture and the language and so on and so forth.
So I understand B2C. The B2B play is harder because we've transitioned from being this niche goalkeeping glove brand to have the ability now to appeal to the broad sports multiple businesses. So the Sports Direct, or the Dick's Sporting Goods, or the Rebels in Australia, or XXL in Scandinavia, whatever it is. That's a great push for us in the future, but is a scope to grow B2B? Yes, there is. And then the marketplace thing is just, you know, we are in Amazon,across the world, and Amazon's just a beast. And I think more and more consumers can continue to use Amazon. So I think that will only grow. So have I ever looked at it and thought, dunno what to do? Yeah, you question yourself, but I think, I think we've got a clear, pretty clear idea really as an overarching strategies, how to grow those three revenue streams.
[00:21:47] Sam Jones: Okay, and what are most proud of?
[00:21:49] Paul Sherratt: Super proud of the team that we've built and continue to build. I think for me, the culture that I'm trying to build in the business is a culture that people enjoy going to work. They enjoy, their job. They get satisfaction,they're empowered and if they make mistakes, that's just fine, because that's part of learning.
So I'm really proud of that and that's really come together, particularly in the last 18 months.
We've got two new team members in the last couple of weeks.It's really nice to see that. It's really nice to see people in that environment grow and learn at whatever stage they are in their own personal journey.
So, yeah, get a lot of pleasure from that.
[00:22:32] Tracy Smart: It's interesting you say the team because I'm a strong advocate that people are at the heart of successful businesses really, and another thing that is important to me is that people don't just concentrate on revenue growth. Profit growth is just as important, and actually the reality is the cash. Because if you don't have the cash to fund the next cycle, then that's the end really. But yeah, it's nice to hear that people in your team are sort of the number one thing that you are proud
[00:23:00] Paul Sherratt: Well, you think how much time do you all spend at work? You spend more time at work than you do with your family in some instances. It's like, well...
[00:23:07] Sam Jones: It's great to hear that you'veput so much into your team and you must pinch yourself when you think back to filling up those bottles in the kitchen table with some wonky labels and now you see your, your second family if you like.
[00:23:18] Paul Sherratt: Yeah, absolutely right. I love standing and watching bottles come down our bottling line.
[00:23:23] Sam Jones: Typical boss not doing any work.
[00:23:24] Paul Sherratt: It's just great. This is just wow!
wow. As you say, how far we come?
[00:23:31] Sam Jones: Excellent. Well, thank you very much Paul. is there anything else you'd like to add? Any pearls of wisdom?
[00:23:37] Paul Sherratt: Being on top of the numbers, don't be under any illusions how critical that is. There are multiple opportunities out there. Clever ways of bringing cash in.
So I think if you find yourself as a business in a challenging cash situation. Don't panic. There's definitely help out there.
[00:24:01] Tracy Smart: Excellent. Thank you very much.
[00:24:03] Sam Jones: Thank you. That's another podcast. My contact details and my cohost, Tracy and Paul's will be in the show notes in whichever platform you get your podcasts from. Thank you very much.
[00:24:13] Paul Sherratt: Thanks very much.