In 1978 aged 12 I began my first ‘enterprise’ selling scratch cards and earning £7.50 a week. Later on a range of engineering jobs, including a stint at British Aerospace, taught me the technical and business skills I needed for the future.
Later still I ran the Wigan-based electrical firm PQE Ltd while my boss was unwell. But just before Christmas 2001, he failed to hand over control to me as I was expecting. I knew then that I would open a business bank account for myself and I set out to manufacture high-quality energy efficiency solutions for industrial and commercial firms.
I re-mortgaged our family home to raise £25,000. There’s very little trust in business if you want credit with suppliers, and I had to persuade them individually, based on my experience and credibility. It took time to get the funds to start the business and things were sticky at times.
I tendered my resignation in early 2002, but my calculations were awry. My first shock was I didn’t anticipate employee National Insurance in the business plan and the bank hadn’t drilled into the figures to help us. There was just myself, my wife and one employee. We paid ourselves less than anticipated and it had a huge impact on early cashflow.
I built the business steadily up to 2008, when I had six employees. Then a market-leading competitor began offering our clients a product that apparently did everything.
It was what’s called a Step Down transformer to adjust voltage. Some of our clients were advised they did not need our equipment anymore and switched it off. They soon incurred penalties on their electricity bills because of mis-selling from the rival company, and had to switch our equipment on again.
We saw this as a threat and looked in detail at the rival’s offering and the misinformation they were spreading. It took a while to fight back and we realised we needed to turn negatives into positives by designing anew, adding functionality, greater efficiency and above all, giving good sound and honest engineering advice. We had to be better, bigger and smarter and to do all this with a smile on our faces.
It took until 2012 to gear up to an expansion. I obtained an overdraft from a bank for this stage of growth, but it was not really enough. I needed new premises and funding, so I swapped banks, to HSBC, for a much larger overdraft. At this point, I joined the Goldman Sachs 10,000 Small Businesses scheme. It gave me the support to understand the risks I was taking.
In early 2014 HSBC declined us any more funds. That Christmas we’d paid nine employees but not ourselves. I was maxed out on my overdraft. Despite our track record, they wanted us to put the house up as security on a business loan.
I was struggling. I borrowed £40,000 off a friend just to pay the bills and meet a small order of work covering a three month period. We drew up an agreement to pay the money back in three months with interest. Then the ‘big one’ hit – a £600,000 order from a multi-site retail organisation that needed to be delivered in nine months.
To gear up quickly, I looked at all the choices (from traditional banks, guaranteed bank loans, debtor book funding). I was offered invoicing financing, but the charges were high – it wasn’t right for our business. Performance contracts can be delayed – cashflow would have been under constant threat.
I researched my options through advisors and went for crowdfunding with Funding Circle. The charges were reasonably low, there was a quick draw down and limited guarantees. It was a six-figure sum over a 12-month period and the funds arrived in three weeks. It’s supposed to be a fun way to finance – I wasn’t laughing but I was relieved!
The size of our manufacturing facility quadrupled. Within three months I doubled the staff to 20, including new people in sales and marketing. I also funded protection of our intellectual property.
Just recently Funding Circle declined to take my new proposition for funds to allow for the next growth phase. However, a six-figure tranche of Phase Two funding has been agreed with our existing bankers HSBC, who have now bought into the potential of the business.
Credit rating is always an issue. Funders look at accounts from 18 months ago, although our finance needs for the future are double what was in the last set of figures.
At EnergyAce we continue to benefit from R&D tax credits and grant funding from the Manufacturing Advisory Service (MAS). This year will see major changes to strengthen our board of directors. I am also seeking new international export markets.
Funders value my knowledge of the industry. We promise and we have to deliver. The values we operate on make us credible. But you have to align yourself to the right advisers for you to get appropriate, sustainable and ethical funding.
Gary Vizard is the managing director of EnergyAce
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