A plane is at its most vulnerable just after take-off, when there’s no altitude to react to any malfunction, mistake or external hazard, and it’s the same for brands. As a passenger, it makes much more sense to grip your seat as you power off the tarmac, rather than during turbulence at 30,000 feet, or when you are coming in to land. As a pilot, or the owner of a brand that has just launched, your first focus is getting completely airborne with happy customers and decent revenues in the first trading quarter. More often than not, this revenue will be what pays off outstanding supplier invoices.
That was the case with Ebru Evrim, a state of the art Yoga and Pilates studio in the market town of Skipton, which took six months to design and renovate, at a cost close to £250k. Working on an old building is a bit like working on an archeological dig; until you start excavations, you don’t know what you’ll find, and what you find will to a certain extent determine what you can do to transform the space.
A safecracker called in to investigate the discovery of a locked antique safe hidden away beneath a false floor removed to check if the stairs beneath led to a cellar. As onlookers’ imaginations ran wild, the door swung open to reveal ….. a dusty HMRC VAT return form from the 1960’s. A stark reminder that this was a cellar in Skipton, Gateway to the Yorkshire Dales, populated by thrifty Yorkshire folk with a wicked sense of humour, not some hidden crypt in Luxor, Valley of the Kings in an Indiana Jones movie.
As plaster was removed to expose original building stone, and ceilings ripped out to reveal a massive 250 year old oak Queen truss roof beam, the plan to develop a prototype studio concept that could be scaled into other market towns was changed to develop a prototype boutique studio concept that would scale into other market towns, and in that one word is a doubling or tripling of budgets, because once you see boutique, it’s in for a penny, in for a pound, your aim is a product that won’t find like for like competitors moving in just up the high street to take a share of your customer cake for themselves!
And it’s not just the extra investment required to deliver the unique boutique design and atmosphere, it’s extra time. Some of the effort, especially the cleaning up of the stone, is slow, artisanal work that can’t be knocked off quickly to a tight deadline. And once you’re into a natural stone look, you’re into natural wood and glass to complement it. The old pine floorboards were replaced by a modern oak floor with underfloor heating, but the wood wasn’t thrown away, old cut floor brad nails were removed by hand, and the wood recycled into doors, shelving and furniture by a local cabinet maker.
Doing a boutique restoration is a state of mind where the design concept is carefully worked into the structure’s existing fabric, and then furniture and equipment with the right look and feel is sourced as it becomes clear what will fit in best. At the same time, things are moving fast, and without focus and foresight, some aesthetic possibility that must be seen and planned for in advance to fit in with building schedules, might have to be ignored. It’s like playing heads up rugby in broken play. Is there any area of life that doesn’t reward spatial awareness?
The other calculation that can’t be taught in text books, as the bills mount and deadlines pass into the rear view mirror, is how much projected trading income lost in delays caused by going boutique can be justified by value added to the brand when creating a unique design concept that can’t be copied, and the customer loyalty that accrues from that. We went the extra mile at every turn because there are a lot of functional branches of gym chains out there, even in market towns like Skipton, often with a studio space for classes, with a vibe tailored towards gym enthusiasts that doesn’t always sit well with the Yoga and Pilates crowd. And the alternatives are mostly public places for hire or rooms turned into studios which lack atmosphere and a level of service that can only come from a level of organisation that adds significantly to overheads. Nailing boutique means higher entry barriers for new arrivals, so most startups looking to secure a unique prototype look for that, but what’s not so easy to find is the extra money to fund it on the hoof, while building works are ongoing.
Ebru Evrim opened on Nov 24th, a date set in stone a month earlier to accommodate a free opening day of classes and a drinks party at Ellsworth Restaurant in the evening. That was the last weekend before everyone begins to focus in Christmas, and the latest the studio could open without stepping into dangerous cashflow territory. The state of the art Pilates equipment arrived a week later after last minute tax and shipping complications, and the activewear window display was only full because the Polymath bagman flew over to Istanbul to pick up a suitcase full of stock the day before opening. Some of those issues were related to the extra cost of going boutique, and in the end the first activewear range order only arrived in its entirety three months later, which turned out to be just before the pandemic struck.
Luckily by then the Ebru Evrim brand was fully airborne, with 130 happy passengers on board. At the planning stage it had been calculated that a full class timetable for Yoga and Pilates could handle 350 members, that that was in effect a full plane, and we’d allowed three years to get to that point. By the end of February, a month or so before the first lockdown and the full extent of what Covid would mean began to materialise, it looked like full member capacity would arrive at the end of the first year, or even sooner. Happy days! An even more important three month target – break even where monthly income exceeded monthly costs – was around 120 members. By the end of the first free months it was evident from the positive feedback that boutique had been worth the effort, despite the extra burden that placed on restoration budgets and opening deadlines.
At that stage the brand launch from kitchen table to high street opening had been about 80% paid for by a balance of equity, convertible loans and asset finance. The outstanding 15% owing was mostly final payments to suppliers, who agreed to monthly installments, since despite the excellent start, and the promise that a Founder’s investment would be matched by a startup loan, Barclay’s Bank wasn’t prepared to divvy up. Every other source of investment, inevitably friends and family at this early stage when it’s easy to doubt a brand will ever make it onto the high street, had gone the extra mile that came with going boutique, but the bank weren’t even prepared to do what they said they’d do on the tin. Luckily the firms involved were big enough to absorb the delay to final payment.
The only potential source of finance identified early on more risk averse and less understanding than Barclays was the State’s very own Business Enterprise Fund (BEF) who used the activewear as an excuse to duck their responsibility, despite that being the icing on the cake, the extra income earner that would complete the brand mix, not determine the fundamental viability that would cover the cost of their State secured loan. And their choice fulfilled their own prophecy, since that investment would have bought an online sales and marketing campaign, without which activewear sales growth would have to build towards requisite online marketing budgets from in studio sales. There is a very clear return on advertising (ROA) correlation between online advertising and sales, where the ROA climbs as early advertising within the correct online setup is steadily increased. There’s no real shortcut to that, other than a friendly celeb with a multimillion insta following who pushes your product for free.
As for Covid, for the Ebru Evrim brand, ever dark cloud has a sliver lining. The excellent first three months trading figures extrapolated to a year’s turnover resulted in a Bounce Back Loan from Barclays (that should have come a month earlier as a startup loan), which paid off the last remaining restoration bills, with a little left over to set up online classes. With online classes and the goodwill and loyalty of the members to the brand, membership cancellations were kept to a minimum. While it was impossible to give the activewear the online sales and marketing investment it needed, it was possible with the continued monthly membership income and by taking advantage of furlough and grants, to make it through all the stop start with just another £10k added to convertible loan stock. The brand could have bled out with monthly losses of anything more than £2k a month, sending £250k down the plughole.
Covid did force some painful management decisions to cut costs. Overall, the Studio Manager who’d done a great job supporting the Founder Owner in getting everything going, her assistant manager, and some of the freelance teachers, ended up being replaced by a more cost effective management structure with a Studio Manager who taught Pilates and Yoga to a very high standard, backed up by the Founder Owner, running a pared back class timetable switched online during lockdowns.
In relation to future branch expansion plans, the pandemic forced a change that improved management structure efficiency of the business model by creating a better and more cost effective balance between permanent and freelance teachers, and highlighted how flexible and resilient the business model was to upturns, downturns, and even closures, with Ebru Evrim able to increase or decrease the number of classes taught by freelance teachers as the market dictated. That way, the burden was borne more or less equally, and as soon as membership grows again, freelance teachers get hired to teach more classes.
It’s hard to imagine how much lockdown choices must have cost other startups, or indeed any business where even with government support, monthly losses were significant. As anyone who runs a business knows, what looks like a containable monthly loss soon adds up, even in normal trading conditions. Switch the income tap off completely, and just like being stranded in a desert without water, many perish. All that can be hoped, when all is said and done and independently audited (I’d recommend a Gocompare enquiry, since different approaches led to different results, and everyone wants to make the best choice next time with real data from this effort fully digested), is that honest calculations were made, and the cure doesn’t end up costing more than the disease.
No one crows about surviving a force majeure that kills off or disrupts competitors, even if that was a likely outcome anyway under normal market conditions; it’s more like relief mixed with commiseration. The reality for Ebru Evrim as things stand is that the pandemic accelerated changes and demographics that were already moving in the brand’s favour, which is why it was created in the first place. For example, a steady stream of new arrivals from big cities became a mini flood.
The lost year was an opportunity to tinker with the online platform for activewear, and improve online capabilities as far as possible, as a support to in studio classes. Were online classes massively popular? Yes, up to a point. So can we scrap the studio, and just invest in online growth, that of course received a boost in lockdown? Not according to our members, who found it hard to maintain class attendance discipline during lockdown, who missed the social aspect of the studio, and who can’t wait to get back to in studio classes. Rather, we are looking at ways to enlarge studio capacity.
From the first three months trading, it was clear where the brand was going without Covid. But survival of Black Swan events, where the business model is tested at the outset in ways that wouldn’t normally occur, where worse case scenario flexibility is taken to extremes, is perhaps in the long term a better way to get to a position of strength and safety, because so much more gets learnt along the way. That’s from the ‘if it doesn’t kill you, it makes you stronger’ Nietzschean school of thought.
There’s also the ‘beware the hero complex’ caveat that comes with big government decision making, where good intentions get kidnapped by political forces with ideologies that add to or even create problems so that attention seekers can solve them in a way that suits their agenda, while claiming saviour status. The brand wouldn’t have survived the lockdowns without government assistance, but it would have survived the pandemic without lockdowns. So we are entitled to opinions on pandemic policy, as wealth and job creators, and taxpayers.
Ebru Evrim is a small business, one of many, that prides itself on being self-reliant and independent. It is part of the private sector, which takes calculated risks to provide the energy and income that big government taxes to deliver services that society demand. Part solving a problem that you part created isn’t a good audition to handicap, blinker or even hood the horse of private enterprise, and then demand it races flat out against less burdened competitors on a tricky new course with artificial obstacles. After some rocky, ropey, dopey style Wuhan racing, most at the business end starting to feel the whip on their flanks want to know what the new race course looks like, and what those holding the reins swear by and now believe in, when racing on the old track by old rules was hard enough.
While it’s tough to do much more than speculate on forces that dominate the bigger command and control picture, Ebru Evrim has emerged from Covid in pole position to expand market share with a few improvements to the business model that the last year has identified, an opportunity that makes it worthwhile bringing on some new investors to raise the capital to speed that process up. The brand is perfectly positioned and prepared to take full advantage of a crowd equity funding platform like Seedrs, who offer a nominee shareholder service where they act as market makers for a raise typically targeting a larger pool of investors making lower average per capita investments, including Ebru Evrim members and followers, who can take an affordable stake in a business they know well.