Living lean and closing deals.
When I founded ImPOS, I was in partnership with two others; one who I’d only just met from the bars I had invested in, and the other was the developer. Together we began a new company called ImPOS Solutions International Pty Ltd. We each were to throw in $80,000 equity to start up and purchase the IP from the existing company.
I looked to my parents to borrow some money that I knew they didn’t really have. However they did manage to selflessly scramble it up for me. It was only $20,000 but at the time this was a lot, to both my parents and myself. This, along with the money that I received from the bars and a loan from a friend, I had my start-up capital.
As we had put such a large sum of money behind the IP acquisition, and because one of my partners didn’t end up contributing his share (lesson learnt), we had very little money left over as working capital.
The next few months saw us enter and soon exit an office on Collins Street. We believed that having a city bound address would be the best thing for the business in regards to making sales. Unfortunately, the cost of car parking became an issue, along with the constant traffic. On top of that, the office was quite small (and to be honest a bit of a dump). It also didn’t do a great deal for us business-wise, and we soon realised that the rent wasn’t worth it.
By this time, our funds were low and there were not enough sales coming in to make ends meet. At this point in time I was renting a room at my best friend’s Nan and Pop’s house. It was at this house in suburban Flemington that I converted the garage into our brand new ImPOS office.
Our product was extremely basic. It didn’t yet have the ability to allow the user to create an item (such as a drink) and add it to the screen, let alone change a price or put through a discount. We had basically just spent a lot of money on a really fancy calculator, but it was fast and that was the crucial feature.
We had also just hired our first employee, Eugene, a Sales and Marketing Assistant through an RMIT graduate placement. He tried to quit three times on his first day because our office environment wasn’t exactly what he had imagined (we were laying carpet tiles in the garage that I had purchased from eBay). However, I was able to convince him to stay on board with me and he ended up working at ImPOS for the next five years.
Our time in the garage was surprisingly good; the meetings were fun, plus we had an outdoor heater to keep us warm and a well decked out bar and pool table. In the middle of winter we had to cut up our couch (which we had found on the side of the road) and stick it in the top of the two roller-doors to stop the breeze from coming in. Despite this, I was actually pretty proud of our ‘office’.
Amazingly we managed to sign our first major deal from the garage; leading winery Domain Chandon, which is owned by Louis Vuitton Moet Hennessy (LVMH). We had also rolled out to a group of pubs in Geelong. We received a great deal of helpful feedback from these venues on our product’s features. We were able to make some critical improvements that won us many major deals over the years to come.
Despite winning these deals we still had more going out than we had coming in. However, this was pre Global Financial Crisis, when obtaining a credit card was easy. I had a credit card with almost every bank. ImPOS had started to get a really good name for itself in our target market. We were in all of the good nightclubs, bars and cafes, and had just installed at a group of TAFE colleges too..
To help with our finances we organised a deal with a finance company that allowed us to provide our own finance options to market and we paid the interest for the customer. For example, as opposed to trying to sell a solution for $24,000, we would pitch it as $1,000 a month for 24 months, we would end up with approximately 80% of the amount financed. This deal was also great for our company’s look; we had our own branded finance documents, which made us look well established and provided a competitive advantage. We closed a lot more deals having this facility.
The financing helped our cash flow a lot. Unfortunately we couldn’t afford a lawyer and there were some serious flaws in the contract with the finance company that ended up costing us a lot of money years later, almost sending us broke.
Nonetheless, our product development was going well and our overheads were low for the first few years. We ended up contracting our development out to the company we purchased the IP through initially. They worked with us exclusively on the basis that they had the option to sell ImPOS to their existing contacts (primarily Asian cuisine restaurants in Melbourne’s East). In hindsight, this was a bad decision, as the company lacked long-term strategic development objectives. We had a cost effective development team in place, but it ended up costing us a lot of money because they were working on development, as well as supporting a growing client base, which was distracting for them.
We used to fly interstate at the drop of a hat in a bid to make a sale. Nothing worried us. In many cases clients would pick us up from the airport when we landed and if we had to stay the night we would often end up on a couch somewhere or above a pub.
We would promote ourselves jokingly as the only POS company where you deal with the one person who ‘sells, installs and provides support.’ We were a two-man band with a small team of geeks that no one ever met.
Read the final part of my start-up story next week: Growth, growth, growth