Ben Carroll’s entrepreneurial talent is obvious – he did, after all, start a market-leading garment printing business when he was just 21-years-old. But Carroll had to learn some painful lessons early on about the value of cashflow.
Founded in 2006, Velflex is a Sydney-based business specialising in digital heat transfer products imported from France and China.
Recording revenue of almost $800,000 last year, the company recently appeared in the StartupSmart Awards Top 50 list for 2011.
Although the business is clearly tracking well, it hasn’t always enjoyed success. In the early days, Carroll endured his fair share of trials and tribulations, including operating out of an underground car park storage room, commonly referred to by clients as “the Batcave”.
“My uncle offered to provide a building that I could move into – he bought it as an investment – and the only thing he could afford was a $200,000 storage room,” Carroll says.
“It provided me with eight months of very cheap rent, but it got to the point where I thought ‘I can’t really hire staff in this OHS-riddled building’.”
“Black soot from all the exhausts would settle overnight all over everything in the factory. The fumes from our heat presser would create a smoky, steamy room.”
“Each morning, I would have to clean all surfaces to ensure garments weren’t soiled during printing. Trying to convince courier drivers there was a business located in the basement was a challenge.”
“It was also very lonely. I probably spent 10 hours a day, five days a week by myself in there… Cold calls were [made] sitting on the concrete floor; furniture came second to sales.”
While the experience plagued Carroll, he says nothing compares to the cashflow crisis he faced further on.
“Because it was my first business start-up, I believed the sale was done once I’d produced the job and invoiced the client,” Carroll says.
“I was focused on doing the work, buying more stock, building the business, getting more customers – the whole works.”
“For the first six to 12 months, it was all about the sale and getting the job completed and invoicing afterwards, and putting [clients] on accounts.”
“Obviously, that meant I wouldn’t worry about collecting payment; I’d just presume that they would pay and I’d work on the next job and then the next job and, six to 12 months later, I realised I was going to be broke and $100,000 in debt.”
“Every alarm went off and I realised that the business that I was building and growing wasn’t viable at all and it was purely [a lack of] cashflow. Everything on paper said the business was growing, but the cashflow in my bank account was completely the opposite.”
Carroll says the road to recovery has been painful and expensive, but has put him in good stead for the future.
“I obviously had to learn the hard way – I wish somebody had told me that from the start. Very quickly, I had to make a change from putting everybody on accounts and focusing on the sale to focusing on doing the job but getting paid,” he says.
“This change was the turning point and best lesson so far – cash is king. In any business that I go into in the future, I will make sure right from day one that the sales process, and my focus on each individual sale, won’t be finished until I’ve been paid for that job.”