Pure founder Spencer Craig: ‘You have to be all over the cash position, or you are dead’

Sweat the model, watch the cash: how Pure founder Spencer Craig won £6.8m from Whitbread

Spencer CraigSpencer Craig started Pure, providing freshly made, healthy and delicious salads, sandwiches, smoothies and wraps, in London in 2009. Now he has 15 Pure stores in the capital and with backing to the tune of £6.8m from Costa owner Whitbread, further expansion is definitely on the menu.

Tell us a bit about how your background and how you came to start Pure?

I used to work in recruitment, in an office in central London, and at lunchtime I’d often go out and buy a sandwich from Pret.

I thought that it looked like a good business, but I also thought I could do something a bit better – more wholesome and more in tune with the way people eat today. That’s where the idea for Pure came from.

How did you go about raising start-up capital for your business?

I sold my flat, that was a big part of it. And I got a few investors to pitch in too – personal and family contacts. It was about 20% of my own money, plus I got another 20% equity as the founder.

It was only about £250,000 and it wasn’t that difficult – raising the money was not the hard part. I was working in Central London, I knew people. I didn’t have to write 150 letters or anything like that.

How long did it take for your business to start making revenue? How did you feel when it did?

In a physical business like this, you start generating revenue the moment you open the shop door – it’s not like a tech startup.

But it took three years to really get going – three years of constantly iterating, changing the menus, changing the staff, changing the design.

In this business you have to really make sure you have a model that works before you expand, otherwise, you go from having one or two stores with a problem to five or six with the same problems, and that’s much worse.

I never questioned the demand, I knew that was there. What I did question was whether we could deliver a model that would satisfy the demand and work as a business.

So when the revenue started to come through properly after those first three years, I felt pleased that the model was vindicated at last.

When the business started to grow, how was it financed?

It was self-funded – we had two stores and they paid for a third. A year later I did another friends, family and contacts fundraise to go to six stores.

Finding sites isn’t that difficult, but it is difficult to figure out what makes a good site for your business when you’ve only got one or two sites. You don’t really know what you are looking for.

We have 15 stores now, all in London. I am confident the model would work outside London but there are significant operational obstacles – we share staff across our sites for example. So we won’t be expanding outside the capital anytime soon.

Tell us about one scary time regarding cashflow. How did it happen, and how did you get through it?

If you’re a small business and you’re expanding and investing then cashflow is always an issue. Especially so for us where each new store is a significant CapEx lump. You have to be all over the cash situation or you are dead.

Before I started Pure I had another business in the same line that ran out of cash. It was down to my inexperience mainly, although having better systems for forecasting cashflow might have helped. What could we have done differently? We could have sold tastier food!

How do you manage cashflow today?

That experience has definitely made me more on it in terms of cashflow, I am always extremely aware of the cash position. We have a weekly cashflow model, it’s very simple, we don’t have creditors in the way some other businesses do, so it’s a spreadsheet with sales in and costs out.

I think I’m pretty scrappy but I couldn’t start a business again. Creating revenue from nothing – that’s really, really hard. For me going from 0 to five million is harder than taking a good business from five million to 50 million.

How do you envisage financing your ongoing growth?

In the summer of 2016, Whitbread invested £6.8m for 49% of the company. That’s financing our expansion plans. They found us – it could never have happened the other way around, given the size we are – and it was the best possible outcome for us.

It was incredibly lucky, but having a good business helped make it happen. We were profitable so our numbers did the talking, we weren’t selling hope.

Whitbread is a really good investor, they have lots of invaluable experience in this industry, they are in it for the long term and we really like each other too. They have two seats on our board and relations could not be better.

What tips would you give to other small businesses to manage their finances better?

Raise more money than you think you need, and be brutal with yourself – don’t believe your own pitch. If you start with £50,000 when you really need £100,000 you’ll always be behind the curve.

Provide as much of the startup capital yourself as you can, and make money as quickly as you can. If you make money then you’ve got options, but as long as you are burning through cash you’ll always need more.

Be very conservative about borrowing money. Only go on historical EBITDA never on forecasts, and only up to absolute maximum of 3x – in this business anyway. Because if you break your covenants it’s over.

Use the best tools you can find to keep track of your finances and manage cashflow, but remember there is no magic formula. You’ve got to work hard and constantly refine your business model.

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