Posted: Mon 15th May 2017
Graeme Menzies left a corporate career to join a start-up selling spandex suits. Crazy decision? Well not really as that business, Morphsuits, is now a fancy dress giant that has sold more than two million costumes and has over one million Facebook fans.
Here, the Morphsuits finance director shares some insights into the growth of the company and the role Amazon has played.
How did the co-founders come up with the idea for Morphsuits and turn that idea an actual business?
Unsurprisingly it all started on a drinking weekend where a mutual friend of the founders wore an all in one spandex suit that they had sourced online.
The founders saw the reactions it received and decided that they could develop the product into a brand and a business. It took a bit of time prototyping to get to the right mix of quality where you could see out but people couldn't see you.
Why did you decide to quit a career at PwC to join a start-up business?
The opportunity to join Morphsuits came at a time when I was assessing what path to take with my career.
My father was a serial entrepreneur so the environment of hard work, commitment, risk and reward were always around us as we grew up. I always saw myself working in a smaller company at some stage where I would be able to make decisions and drive the future success of the business.
PwC is just not that type of environment. The structure is too rigid and it's a long time until you're a partner and able to drive the business forward so while I really enjoyed my time with them, it was the right time to do something new.
What did you learn working for a big corporate that you've applied to your role at Morphsuits?
One of the interesting and rewarding aspects of Morphsuits is how different our management team is and how we approach work in different ways.
My time at PwC makes sure that I assess all of the information, reflect on it and present it in a succinct way to the other directors as that's how I was trained and the way my brain likes to process information.
On the other hand, my fellow directors look at things differently and approach problems in a different way. In the end the differing approaches mean that we have more valuable conversations and get to a more balanced outcome than if we all looked at the problem through the same lens.
What did you do to help grow the business in the early days and what challenges did you face? How did you overcome the challenges?
Initially our biggest challenge which is true of many SMEs was funding and access to capital.
The business grew incredibly quickly and we had to rapidly recycle cash back into stock whilst trying to scale up our people to ensure the business had a sustainable future.
Traditional bank funding didn't really suit and although we were able to obtain some PO finance from Barclays we decided that it was appropriate to take investment to help shore up our balance sheet and give us more credibility with retailers, manufacturers and licensors.
How is innovation encouraged within the company?
It's the lifeblood of our business and is what we do differently to the other retailers within the fancy dress sector who generally churn out the same products year after year.
We love the innovation process and try to make sure that it's not too rigid so that we don't risk making it sterile.
We run various all employee brainstorm sessions throughout the year and staff are encouraged to bring ideas to us at all times of the year.
It's important to note that we don't limit innovation to products only but are always looking at new ways to refine our operations, packaging, reporting and marketing and continually challenge staff members to trial new solutions that they believe will make us a better business.
What role has selling on Amazon played in the company's success?
Amazon as a standalone channel now accounts for about 20-25% of our Group turnover and is growing at circa 100% per year so it drives great bottom line profitability.
That said, one of the most important aspects of Amazon is in its ability to let us cost effectively test new products and brands on a global basis.
This quickly lets us assess the size of the respective opportunities and deploy capital in the right areas as the test environment comes with very little fixed or sunk costs.
What's your advice to small business owners looking to successfully sell on Amazon?
Currently it's hard to imagine a world where Amazon doesn't exist and with millions of shoppers globally it's likely that most business will see some value in retailing through the platform.
As a small business it's all about prioritising opportunities where you can trial new countries and new products cost effectively.
That said, Amazon has millions of products available for sale so by simply listing a product on the platform never consider your job complete, you still need to drive awareness, make sure the product is discoverable and make sure that listing is as shoppable as possible.
I'd always suggest you list fewer rather than more products initially and do everything to get them right rather than launch many, part thought through listings.
What's your advice for how entrepreneurs can successfully manage cash flow and finances as they grow?
As actively as possible. Many great opportunities fail through a lack of cash control not a lack of demand and that's really frustrating.
It's important to make sure that all staff members are clear on the importance of cash to the extent that it should be a KPI for all staff members in the early stages.
Accompanied with this, it's important to separate short and long term profitability. For example it's not always the right thing to buy two years of stock at the outset in order to secure a volume discount as that capital could be better deployed elsewhere.
You should consider buying less, paying more and preserving cash in the knowledge that with volume you can get to increased profitability through volume discounts.
That cash you now have could fund the marketing or people that give you the sustainable growth you need.