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Bootstrap to Success: Ditch credit for your customers · Hydroponics Daily

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  Hello there and welcome back to
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  Hydroponics Daily, your go-to podcast for everything soilless cultivation.
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  I'm your host Dr. Russell Sharp and on a previous episode I talked about bootstrapping
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  and this is where you fund your venture,
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  your business with the profits from sales rather than trying to get investment
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  from other people, other organisations.
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  From the stock market, things like that.
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  So venture capital, things like that. So bootstrapping is
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  my preferred way of getting going in hydroponics and i
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  encourage you to do that there's a couple of features i
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  didn't mention which i think are good to
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  mention bootstrapping is great if you've got a
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  unique product and you there
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  is a desire there's a push for your product often
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  you think you speak to customers and you say would you buy this
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  and they go yeah i'd buy that but when it comes to the crunch they
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  don't actually buy it when you get started when you find people are
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  actually seeking you out and there's a real desire and you
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  cannot fulfill demand that's when bootstrapping
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  works really well because you can then go to
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  the bank for a loan if you have order books that you cannot fulfill then the
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  bank will give you a loan in most cases as long as you have got good credit
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  rating so you don't need to go out and get venture money and give away part
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  of your business part of the control part of the fun part of the returns future
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  returns if you've got a really good business,
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  then if people have got a real desire for it, then you just bootstrap it.
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  If you need extra capital, go to the bank and get a loan.
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  And do it that way now if you're into commodities and leafy
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  greens that's where i think no one should really think well
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  this is thing very long and hard before starting up
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  a hydroponic business where you're going to grow leafy greens
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  because you're competing with both field grown cultivation
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  and large vertical farms that have got scale and
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  you're dealing in commodities where the margins are tiny the
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  other reason i don't think you should go for commodity
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  crops and probably more important reason is that
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  you have to give your customers credit and it's
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  not lack of sales that kills a company it's
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  not it's cash flow that kills
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  companies always cash flow it's never
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  lack of sales and if you offer
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  credit then your costs will increase to
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  the point where you cash flow will run out and you'll have to cease trading and
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  in farming and vertical
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  farming hydroponics is farming the credit
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  terms can be crazy so some companies can
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  be asking for 60-day credit 90-day credit in
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  ireland it's not unusual for farmers to
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  seek and get and their suppliers to get one year credit and so you can be in
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  danger of offering too much to your customer now if you have a novel product
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  and you have real desire from your customers for that product that they cannot get anywhere else.
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  Then do not rush into offering them credit.
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  Because you you will scupper your cash flow i would prefer to have a lower price,
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  and not offer credit than to offer credit
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  and have a higher price because i think it is better for your
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  cash flow and your long-term survival survivability and
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  i often say that the customers that ask for credit are the
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  same customers that you should never get credit for because if they demand credit
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  they're demanding credit for a reason because they are
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  suffering from lack of cash flow and they could be in
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  danger of going out of business at utrema we
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  only offer credit to one customer and.
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  That customer is what is part of one of the 200
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  largest companies in the world they're owned by a japanese conglomerate
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  and if they went out of business then the economy worldwide
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  economy has gone out of business so they're the only one we
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  give credit to everybody else doesn't get credit and
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  you think well that's just bad business and we've lost some
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  customers because of that some really big customers it's the
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  reason we don't sell gold leaf in the uk we have
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  to sell it our product as liquid gold because we
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  lost a customer because they demanded credit they weren't
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  paying on time they always had problems when it came to
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  credit so we decided you know what um you know
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  they said we don't do business like this we demand credit and i was
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  like oh well jog on and a number
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  of customers we've lost they said well no if you don't do credit we
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  can't deal with you and you know in the lawn care
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  and the turf care business you know we lose like colleges
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  and universities because their accounts department
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  cannot possibly deal with a company that doesn't give them credit and automatic
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  automatic payments things like this but i feel it provides you with a much more
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  sustainable business model especially like utrema all our products are unique
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  and if you were growing hydroponically say you were growing,
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  cardoon or you were growing sweet potatoes in the uk you've got a product that
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  nobody else can supply saw a company in the uk yesterday they were looking to
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  buy some of our products they were.
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  Completely unique product and for the uk market and
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  so my recommendation would always be
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  to don't give away you know
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  your crown jewels don't give away too much to your customers give them a great
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  price give them well not even you know give them give them a good price and
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  offer them amazing technical support and all the other things like we do at
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  utrimo you know we offer amazing technical support fantastic products you know
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  we'll bend over backwards we'll answer the phone at nine o'clock at night,
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  but you ain't getting credit because we know as a company that's growing so
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  fast, like we're growing at 300 to 500% a year annual growth rate that if we grow credit,
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  then we would screw ourselves over. We'd have no money for marketing.
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  We'd have to have loans. We'd have to service the debt on those loans.
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  So if this is my advice for hydroponic guys who are looking to bootstrap,
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  cash flow will kill you. So always be wary of offering.
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  Credit and even for high-end businesses
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  like michelin star restaurants worst
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  payers i've ever encountered michelin star restaurants
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  worst payers unbelievable with their either they're supplying
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  hydroponic fertilizers or actually selling them produce never offer
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  them credit because they just don't pay their living hand-to-mouth
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  and the other reason i'm a
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  big advocate of pro forma payment up front is
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  that you don't have to pay people to chase your bad
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  debtors you don't have to have a credit controller you don't have
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  to pay for credit score ratings and
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  experian and things like this so always think
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  long and hard and once you start offering credit to one customer it's
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  very difficult to not offer it and your your whole system gets your whole business
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  model it gets arranged around offering credit okay and hydroponics is very much
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  a boom and bust industry and you might be able to make loads of money for six months but.
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  Around the corner could be a a trough
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  a valley in the market and not
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  having vast amounts of people owing
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  you money is can help you dramatically we've
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  seen in the hydroponics industry in the uk companies going bust because
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  like their their customers haven't
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  been able to repay them the money that they owe them and it's always oh yeah
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  yeah i'm just gonna next month i'm getting 600 thousand pounds in but they're
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  not because a load of people have gone bust in the meantime and they've walked
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  away with their debts so there's my advice if you're a hydroponic company always
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  start with a unique product.
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  And then make sure that you emphasize how unique that product is.
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  Test the market, make sure that it is one that people actually want.
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  There's a push pull for it. If you need money to scale, then use that pull to
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  show banks that there is a demand.
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  Real people are trying to give you money and you can't give them the product.
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  And if you can give them the product without the loan, even better,
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  and then never offer credit because cashflow will kill your company.
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  All right if you disagree then let me know if you think i'm
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  not living in the real world let me know but i've you know built my company without any
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  business loans without any credit offered so
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  it is possible obviously i'm sure to speak i'm not hydroponics
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  because well we do we dabble but we're
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  mainly in the inputs business specialist fertilizers
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  biostimulants and biopesticides and
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  if you're interested in those sorts of products check out utreema.co.uk something for
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  everyone every order at utreema.co.uk for
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  the foreseeable future gets a hydroponics headache card
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  game 32 amazing challenges for
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  hydroponic growers and a solution on how
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  to solve it on the back of the card it's a really fun game to play and
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  very very informative if you've got a bored
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  day in your grow room then it's a fantastic game to play and just look at all
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  right so yeah check out utreema.co.uk any order at all and you get a copy of
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  that and we send out goodies to our best customers all the time so if you're
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  a growth shop or a hydroponic grower and you buy from us consistently you'll
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  always be getting stuff through the post.
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  Snoods jumpers sweets beer mats card games all right that's enough for today
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  thank you very much for listening to hydroponics daily and i'll see you again tomorrow.