A Cautious, Canny Road to Success
Pragmatism and a refusal to leap before having a good long look are characteristics shared by brothers Tommy and Jimmy McLoughlin founders of Quality First, a company that produces high quality chicken dishes now sold to caterers, hotels, pubs, butchers and independent retailers.
Founded on the veritable shoestring in 1997, Jimmy McLoughlin was the first and sole employee working from a tiny 500 sq. ft space at the SPADE Enterprise Centre, North King Street, in Dublin’s North Inner City. A Master Butcher by trade, Jimmy is a serial award winner. He won the Irish Young Butcher of the Year Award, sponsored by the Irish Master Butchers Federation in 1994 and went on the be placed fourth in Europe in the International Butchers Confederation sponsored Europa Cup at the Frankfurt Food Fair.
The idea behind Quality First came to Jimmy on a backpacking holiday in Australia where he discovered the easy availability and popularity of the type of chicken dishes Quality First now produces. Meanwhile, his elder brother, Tommy, a Chartered Accountant and Chief Financial Officer with dairy co-op Town of Monaghan, was also involved in the food industry, albeit from a very different perspective. The brothers came together to launch Quality First, but only Jimmy would work full time in the business and Tommy would come on board when the business had grown sufficiently to bear his cost: caution from the start. The unusual combination of the McLoughin brothers professions appealed to their bank who liked the idea that production would be controlled by a specialist in that area and that the finances would be run by an accountant. It also helped that the McLoughins were prepared to invest their own money and reinvest as circumstances allowed. “Banks are into risk avoidance and it appeals to them when they see different professional disciplines in charge of key areas such as production and finance,” comments Tommy.
Canny caution
Both McLoughlin brothers share similar views about how start-up and micro business should behave in their formative stages. They cite haste and a misreading of business fundamentals, be they product development, marketing or financial management as factors that can spell disaster even for the best ideas. “We developed many different products that we discontinued and then developed others until we found the right balance based on feedback from out customers,” Jimmy recalls. “We continually create and test new products ourselves and also ideas suggested to us by our customers.” There are currently 15 chicken dishes in the Quality First range with Chicken Kiev, Chicken Maryland, Garlic Chicken Encroute and Mexican Tortilla Wrap, a newly introduced line, being the current best sellers.
Selling is now done through distributors servicing the ‘independent’ sector nationwide. To date no attempt has been made to sell to the multiples, again for reasons of caution. Move to multiples? But surely sales to the large supermarket chains would fast track the company’s growth and be much easier to service? “You can only deal with multiples from a position of strength, which most young companies don’t have,” says Tommy McLoughlin. “Yes, you can get big orders and just as soon be delisted. That can spell disaster for small companies. Until now we were not ready for that. However, with a projected turnover of €2.5 million this year, we are in a position to consider multiple sales. Sales to multiples will also require branding, increased marketing costs and an investment of E100,000 in a tray-packer machine. We are also aware that there is a great deal of organic growth left in the independent sector. There is also the Northern Ireland market to consider.” While the CFO of Quality First acknowledges that the company has the resources and strength to sell to the multiples and survive a hit, the McLoughlin brothers will proceed with caution as ever.
Help from DCEB
The McLoughlins first approached Dublin City Enterprise Board in 1997 for a Feasibility Grant of £4,000 that they used to assess the marketplace, do market research into what customers wanted and test products. Encouraged by the results, they decided to proceed and over the following two years received employment grants of £5,000 each first for Jimmy and then Tommy. A Mentor, Paddy Reid, fully versed in food production and marketing was appointed to work with the McLoughlins. At this early stage, production was by hand leaving the business vulnerable to unfilled orders caused by the absence of key workers at critical times. This fact and steadily increasing business convinced the brothers that the time had come to fully automate the production process. That would require expensive equipment and much larger premises.
Following discussions, the Board agreed to provide funds for development by way of a Cumulative Redeemable Preference Share investment of €120,000, €25,000 of which has already been paid back, says Tommy McLoughlin. Today, Quality First owns its own production 14,000 sq. ft plant at Bluebell in west Dublin, that is fully automated and employs a permanent staff of nine. There are no SUVs parked outside or other evidence of the proprietors self indulgence at the expense of the business. On the contrary, the McLoughlins point to such excesses as the downfall of many a promising business Despite the great progress achieved the brothers both acknowledge that they are reaching the point where important decisions must be made about the future of the business.
As Jimmy and Tommy see it there are three main elements to the choice or choices that must be made:
1) Stay with the existing customer base and develop it to its full potential. This may include developing a similar business in Northern Ireland
2) Develop and market new products
3) Move into the multiple trade.
In all probability, all three choices will feature in the future of the McLoughlins brand that looks likely to replace Quality First and branding and marketing will play an increasing part in the future of the business. One thing is certain: the choices made will be well and truly tested before final decisions are made. Circumstances for every start-up and young business are different, however the McLoughlin brothers formula of solid management skills, quality products, a diverse customer base and, above all, a cautious approach are lessons worth learning. And the lesson most worth learning? “Cash is king and cash flow is the most important thing to watch,” says Tommy McLoughlin with emphasis. “Many a profitable business has failed because insufficient attention was paid to cash flow.”
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