case_study_web_pm_retail

A FRESH START

Just four months after launching PM Retail Solutions, a custom manufacturer of store display fixtures, owner Ted Hope began to see his contracts grow dramatically in size. While this was obviously good news for the brand new start-up, it also required Hope to rethink his business strategy.

At the time, PM Retail Solutions was essentially acting as a brokerage, hiring subcontractors to manufacture the POS units. The problem was, with the larger contracts coming in, the manufacturing process was taking upwards of three months, prompting Hope to open his own brick and mortar company—and acquire the employees and processing equipment needed to go along with it.

The move was successful—in under six months, the company was bringing in about $450,000 in business, with a net profit between 25 to 27 percent and actual gross over 50 percent—but it also gave rise to new challenges.

“We were self-financing, but as we got more sales, I had about $150,000 in A/R that I wasn’t going to see for at least 60 days,” he says. “It was at that point that I figured it was time to use factoring.”

“UTILIZING CLIENTS’ CREDIT WHEN YOU DON’T HAVE GOOD CREDIT YOURSELF IS JUST SMART  BUSINESS.”

Ted Hope, President, PM Retail Solutions Inc.

A TRIED AND TRUE FINANCING SOLUTION

Having worked with Liquid Capital previously, when he was co-owner of another display fixture manufacturer, Hope was familiar with Liquid Capital’s A/R factoring solution—as well as the company’s exceptional service and support. Factoring had helped his previous company more than double its sales in 18 months— going from $1.4 million to over $4 million—and he hoped it would allow PM Retail Solutions to do the same.

At a time when his new startup did not yet qualify for bank financing, Hope acquired a pre-approval from Liquid Capital to ensure the funding would be there when he needed it—but he waited a while before pulling the trigger.

“I wanted PM to prove its maturity with clients, so I didn’t use Liquid Capital right away. But as the business grew I attained a pre-approval, which allowed me to get $60,000 in my bank account within one day when I initialized it,” he says. “Factoring allowed us to free up our cash flow during a precarious time as a startup, making us almost instantly capital self-sufficient. We can pay COD for almost everything we do, and have better terms because we have money in the bank.”

Right now, PM Retail Solutions is implementing factoring selectively, using it solely to fulfill the orders of one of its larger clients, and pay for costly upfront materials (wood) and labour costs. In under two months, Liquid Capital has completed three fundings for PM Retail Solutions, totaling approximately $100,000.

“FACTORING MAKES IT EASIER TO SLEEP AT NIGHT. IT ALLOWS ME TO MAKE DECISIONS AROUND PURCHASES AND THE GROWTH OF THE BUSINESS. I CAN PROCURE MORE EQUIPMENT TO ENHANCE SALES, AND HAVE NO PROBLEM MEETING PAYROLL  OR CURRENT COMMITMENTS IN ANY WAY.”

Ted Hope, President, PM Retail Solutions Inc.

AN INNOVATIVE APPROACH TO GROWTH

Hope believes factoring is an excellent tool for any business—particularly start-ups—and one that can be used to foster steady, progressive and profitable growth. In the case of PM, factoring is allowing Hope to continue building a strong reputation, attract good-margin clients and accommodate increasingly larger projects.

“AS A START-UP COMPANY, YOU DON’T HAVE THE CREDIT OR HISTORY OF A MORE ESTABLISHED ORGANIZATION. AT THE SAME TIME, YOU’RE SUBJECTED TO A LOT OF COD AND CASH FLOW ISSUES. FACTORING TAKES THE PRESSURE OFF, ALLOWS THE BUSINESS TO STAND ON ITS OWN TWO FEET, AND GIVES YOU THE CONFIDENCE TO TAKE ON ORDERS YOU MAY NOT HAVE HAD THE ABILITY TO FUND.”

Ted Hope, President, PM Retail Solutions Inc.

And, according to Hope, it does all this without the downsides commonly associated with debt financing.

“We’re not in debt. We own most of our A/R, and we’ve already been paid for 80 percent of the ones pledged to Liquid Capital,” he says. “So we reduce our exposure and we’re not beholden to debt covenants.”

“AT A TIME OF BANK HESITANCY AND POTENTIAL COMPETENCY, FACTORING REALLY IS A GREAT ALTERNATIVE. I DON’T EVEN PLAN ON GETTING BANK FINANCING AT ALL.”

Ted Hope, President, PM Retail Solutions Inc.