Founder David Mills followed master investor Warren Buffett into a party plan business with a focus on cooking. He shares his winning recipe with MIKE PRESTON
By Mike Preston
Founder David Mills saw a tasty business idea, put it on the front burner, and served up dividends.
Warren Buffett probably doesn’t know it, but without him fast growing Australian kitchenware party plan business The Chefs Toolbox may never have got off the ground.
After 14 years as an investment banker, David Mills was casting about for a business idea when he saw that famed investor Buffett had recently purchased The Pampered Chef business in the US. Just four months later, The Chefs Toolbox was born.
“I was looking for a business and saw that The Pampered Chef had been bought by Warren Buffett and I thought ‘if it’s good enough for him, it could work for us’, and away we went,” Mills says.
Five years later, his punt on Buffett’s buy – and a whole lot of his own hard work – is starting to pay dividends. With a network of just over 400 consultants across Australia, The Chefs Toolbox achieved revenue growth of just over 60% to more than $4.7 million in 2006-07 and looks set to surpass $7 million this financial year.
But the sailing hasn’t always been smooth. Although The Pampered Chef concept provided the rough outline of the business – essentially, consultants hold cooking demonstrations in people’s homes and sell products after – a huge amount of work had to be done sourcing wholesale kitchenware products, building a network of consultants and training them to conduct cooking parties and sell the product.
Having moved from business idea to reality in just four months, most of that was done with limited time and even more limited funds.
“We set up the business by drawing on our mortgage, basically, so it was stressful. But there’s also a lot of naivety there, and in a way that helped us push through,” Mills says. “We really did make it up as we went along, and a lot of stuff didn’t work – not to mention we were miles off hitting our targets in terms of sales and consultants. Put it down to being because we were new, we just pushed through it.”
Sourcing product meant heading to China, but the outbreak of SARS in Asia put a crimp in Mills’s plan to visit tradeshows in the region. Instead, Mills turned to the web, procuring a steady stream of samples from which the business’s first batch of product was eventually selected.
Building a consultant base was another early challenge. Early on Mills realised his target workforce would be mothers looking for a flexible way to supplement their family income, and advertising in magazines targeting young mothers brought in the first few consultants.
From there it was all about growing numbers through word of mouth, and quickly. “From the very beginning we had a huge focus on training our consultants and ensuring they enjoy themselves and see the rewards for their effort, and then it’s all about encouraging our consultants to talk about how much fun they have,” Mills says.
The breakneck pace of growth achieved by The Chefs Toolbox – the business only started serious growth in 2005-6 – and its shoestring budget meant errors along the way were inevitable.
As recently as last year, Mills says, bugs that crept in during those early days were still being ironed out of the system.
“Some of our suppliers didn’t meet our normal standards in terms of quality, and there were shipping delays. They weren’t huge delays, and it wasn’t a fundamental issue from our perspective, but our consultants are busy mums and they don’t want to have to deal with calls from customers asking where their product is. We didn’t communicate as well as we should have and how long the delay would be, and the impact is direct in terms of a drop in enthusiasm,” Mills says.
The business has since resolved these issues by adding extra steps to the quality control process of its Chinese suppliers, increasing inventory levels in Australia and tightening up information flows to consultants. But the experience of The Chefs Toolbox in these early years exemplifies the strengths and weaknesses of the party plan model.
Because consultants are less integrated into the workplace than permanent employees and thrive on word of mouth, if things aren’t working the effectiveness of a consultant network can go downhill fast.
“Keeping our consultants happy and committed is our biggest challenge,” Mills acknowledges. “Their enthusiasm is what drives our business, but it is so word-of-mouth driven and you can’t buy it. If you make a change that is disliked or there is an issue with a product, that gets around incredibly quickly and it is very hard to control, so it sets a very high hurdle for us to keep on top of our game and give consultants a great experience.”
If managed correctly, however, those same qualities can also give party plan-style selling an edge over conventional store-based retail formats. Mills says it was the prospect of harnessing what he saw as a more effective sales channel that led him to choose the party plan business model.
“I just think it’s a really powerful way of selling,” Mills says. “What we do is very hands-on and personal, and by comparison I think it is very difficult for retail to stand out and make an impact on consumers. We aren’t just flogging a product, we try to be very engaged with our customers and provide them with entertainment value – that all comes together in the party.”
The evidence suggests The Chefs Toolbox is keeping its team of 450-odd consultants on the right side of this equation. The average consultant with The Chefs Toolbox stays for 15 months, Mills says, three months longer than the industry average. The business’s average sales per customer increased 12% in April despite a general slowdown in the retail sector.
The Chefs Toolbox’s future plans also hinge on growing its consultant base. The business has already passed the 50 consultant mark in New Zealand, and Mills says he plans to obtain some form of external investment to pursue further international expansion in coming years.
Many of the business’s Kiwi recruits have come via referrals from its Australian consultants, Mills says, allowing it to quickly grow there without the need for advertising.
It has also provided a laboratory to trial some new marketing techniques. One, working with sporting clubs with large female membership – mainly netball clubs – to recruit consultants has already proved so successful it is now being trialled in Australia.
As for Mills himself, he hopes to start spending less time in head office and more time working with consultants on the front line.
“I feel I’ve got a bit removed as the business has grown and had to spend more time on strategic type things. I’m now trying to actively get more engaged with our consultants because they are our bread and butter, so it’s a challenge for me to invest as much invest time and energy in them as possible and not get caught in the office,” he says.