Saving MY: What’s the plan?

CLICK HERE FOR INFO ON OUR LOAN FUND
There is no simple solution to saving Matthews Yard and in the interests of transparency I wanted to write this blog post to demonstrate what we have done so far, what we are doing now and what we will do differently in the future. I also thought it would help explain why we are in the financial position we are in now, forced to turn to the community once again for help. 

Matthews Yard has never been in a strong financial position. We have always been on the back foot and playing catch-up. Over £150,000 has been spent on refurbishments, repairs, maintenance and equipment at MY since we started working on the space in January 2012. Another £240,000 has been paid out to local people employed by the business. While we have traded at a loss, we have been profitable (on and off) from the outset.

Three years in we still have work to do, but we have stopped our debt increasing and begun to reduce it. All the remaining work is non-urgent and can be carried out at a pace which fits our budget.

The problem we now have exists because when I started work on Matthews Yard, I had no investors or capital to speak of. With only a few thousand pounds in the bank and another few thousand owed by my clients and a regular income from my job with Freelancer.com, I embarked on what was surely the most ambitious project of my career.

I quickly ran out of money and in our first year we were forced to obtain capital injections from sources including the GLA Loan fund, my former fiance and her mother and several credit cards.

Late in 2012 as part of the process for applying for a premises licence, I was advised by the Fire Brigade that the means of escape from the workspace was insufficient and if possible we should rent additional space available from our landlord in order to create a second means of escape. With absolutely no spare capital and no viable plan for the space. I wracked my brains. How to make it a valid extension of the yard? With the cuts to local arts provision a studio theatre seemed a logical move. In December 2012, we turned to the community for the first time, to fund the studio theatre via Kickstarter. We raised enough to get the project off the ground, but had to subsidise the refurbishment by topping up the Kickstarter fund with an additional £5k from our coffers. We hadn’t realised until after we launched the Kickstarter fund that all the income would be subject to VAT as it was not classed as a donation (we asked for it, you see).

In 2013 we hunkered down and got on with the job of fitting out the studio and building the business. We grew, incredibly fast. Faster than we were ready to grow. In the last quarter of 2013 our turnover was virtually the same as our turnover from April – December 2012.  In January of 2014 things came to a head. It was our busiest month yet, but we had predicted a drop in sales and reduced staff accordingly. Exceptional demand and a shortage of staff was a painful combination for many customers and our first big customer service setback was upon us. A victim of our own success and the unpredictability of doing business in Croydon.

Following a food safety inspection in January, we were advised to tile the floors and walls of the kitchen and upgrade the equipment. The Investment appeal was launched. The plan was to raise enough money from investors to upgrade the kitchen and repay all our urgent debts, effectively resetting the clock and putting us on a solid footing for the future. The target was ambitious – £140,000. We raised £37,500 – a huge help, but not enough to achieve that crucial reset.

A series of additional setbacks plagued us throughout 2014 from equipment failure, to a crash of our POS system which involved identifying a new provider and switching across. We kept our head down and made progress where we could, but it was clear we needed to raise more money and reduce our daily operating costs. It was time for drastic change.

In the past six months we have made various changes to the business in order to save money, to reduce outgoings and to improve profitability. The changes haven’t always been popular, but against the backdrop of our cashflow problems, we have had no alternative. Our hours have reduced and we close on Mondays. We have reduced product line and dropped brunch. All these decisions have been driven by the bottom line and the need to balance the books, fast.

At the same time we undertook a comprehensive audit of all our overheads and trimmed things everywhere we could. In total, we have reduced our fixed operating costs by 70% per year and delivered savings in excess of £200,000.

While the changes have been successful in correcting our position, the lack of cash reserves has left us vulnerable. The loan fund and other actions we are taking will help us to stabilise our position and convert un-arranged, high risk debt, to agreed, low risk and affordable debt. This will relieve pressure and allow us to focus on running the business, rather than juggling debt.

In 2015 our plan is to modify the business model and work more closely with a collection of young entrepreneurs to enable them to trade from within Matthews Yard. We will continue to run a bar so our cash-flow position remains positive. Apart from the bar other aspects of the business will be run independently by our members and the local community. We will focus on managing the perfect space and programming a varied range of events and activities.

The Loan Fund is our way of spreading the load of debt from ultra-short term and high risk borrowing to agreed, affordable levels of debt, repaid over three years instead of repaid “as soon as possible”.  While this will make our position manageable and remove pressure, it won’t actually reduce our debt levels – for this to happen we need to attract investment, or use our profits to pay down the debt. Both are viable options.

At the moment of writing we are just over £100,000 in debt. We are about to sign a contract for £15,000 of investment from a trader coming into MY. We are also negotiating with our biggest creditor, my former fiance, to transfer the bulk of her debt out of Matthews  Yard and into another company which I will operate and monetise in order to repay her. These two moves will reduce our debt by more than 50%. With more movement on the loan fund and half a dozen prospects or deals in the pipeline for February and March we are confident that we can achieve the reset we need and move forward with a new and more sustainable model, ensuring Matthews Yard continue to trade and provide a haven in the town centre for artists, creatives and entrepreneurs.

Rightly or wrongly, what I have done, or what I am trying to do, is to the fund the business in reverse. This has proved to be much more challenging, time consuming and physically draining than I had expected. To me it seems a logical investment and a safer one than a start-up. The risk has been taken, the viability has been proven and we now turn a profit. To invest or lend now offers more security, not less. People have seen what we are capable of without funding. Now lets add some money to the mix and see where we go!

If you are interested in getting involved in Matthews Yard – by taking over an element of the business, by lending money, or by investing, then please feel free to contact me by email on saif@mattthewsyard.com