Building “structure” into Pacific Direct saved it from going bust, according to straight-talking founder Lara Morgan. But the process also saw the global manufacturer and supplier of toiletries to five-star hotels increase sales from £4.5 million to £23 million in a few short years.
Lara readily admits her focus has always been on sales. “I’ve never met an entrepreneur who enjoys admin,” she laughs, adding that the lack of bean counters, paper shufflers and details people in her company almost caused its demise. “A one or two-person company can achieve a £1 million turnover – there are disorganised chaotic businesses out there that produce good profits,” she says, “but without structure and direction you will never make it to £10 million.”
Lara speaks from experience. Her business started as a one-woman band and grew over 20 years into a global business of scale with hundreds of employees, factories and warehouses sprinkled across the world and customers in 110 countries. During that time the business ebbed and flowed, changed tack, reorganised and – most dangerously of all for a business lacking cohesion – started manufacturing and exporting a diverse product range in overseas markets.
Yet for a long time, Lara was running it with the same sales-driven approach as she did when it started trading many years before. Pacific Direct began life in 1991 when, at the age of 23, Morgan breezed into London’s Dorchester Hotel and convinced the manager to buy her sewing kits for the hotel’s room guests. The needles were pre-threaded, which was her only real USP.
Pacific Direct grew in wayward fashion as Morgan moved from hotel to hotel, selling her own-brand sampled pieces of shampoo and other toiletries under the banner of Cavendish & Clarke. Despite this unstructured approach, the business flourished and in year three Morgan recruited her first member of staff.
After four years the business snared its first international customer, a hotel in Russia, and by year nine it was turning over £4.5 million, though Morgan admits she had, “no idea if that was good, bad or indifferent”, because of her lack of financial experience.
“I knew nothing about strategy or business,” she says. “Growth was pretty quick, but I understood zero about that and I learned as I went. After I went to business school at Cranfield, I realised that Pacific Direct was the fifty-seventh fastest growing business in Britain – I didn’t know that before.” Pacific Direct moved from being a wholesaler of own-brand goods to becoming a licensee for luxury cosmetic brands, eventually including Elemis, The White Company and Penhaligon’s, all of which benefited from penetrating the luxury hotel market.
Following the recipe
According to Lara, making branded toiletries is “like making a sponge cake”; you just have to follow the recipe. The luxury brands brought new impetus to sales and the business expanded into more and more territories. In the end, the business created more exports than it sold in the UK market.
“We had to go into manufacturing to compete on a global level,” she explains. “It meant changing from a trade business where you buy and sell goods, to actually owning the manufacturing plant and buying the machinery. What on Earth made me think I could do that?”
As soon as the business reached a big turnover, started a new strategy and expanded into new territories, the tragic events of September 11 took the shine off the world economy. Morgan now had to use every ounce of her newly acquired management skills in order to save the business. “The combined impact of the September 11 terrorist attacks and a tiny change to the regulatory environment affecting labelling meant that the economy fell apart at the same time as we lost our factory in China,” Lara recalls. “We had to lose 30% of the 221 people we employed, which was horrible. But having something smaller and alive is better than having nothing at all. We nearly went bankrupt, such was the strain on our business.”
Returning to the top
But there was a happy ending for Pacific Direct. The business turned around, partly because of its new emphasis on structural business development and partly because of a commitment to quality and customer service that had been there since day one. Other factors included a relentless desire to stay ahead of the competition. “Paranoia” that rivals were improving more quickly and setting “outrageously high” standards.
Driving it all forward was a sprinkling of new recruits including a top executive from Reebok who became Pacific Direct’s general manager at a cost of £126,000 a year plus benefits. Lara was herself taking home just £24,000 during the same period.
With the new structure in place and sales, turnover and profits growing steadily, Lara decided to sell the business in 2004. However, “details” got in the way and she eventually decided to pull out, only to build the company further and sell it for a lot more in 2008, 17 years after founding the business.
A successful sale
That year, Pacific Direct turned over £23.5 million, with £3.3 million of profit, fronting nine quality brands and selling in markets around the world. The business sold for £20 million, with Lara still a 99% shareholder; the other 1% was owned by her mother. “I enjoyed writing that cheque,” she smiles.
Lara’s message to entrepreneurs is that they should work on their business and not in their business. Her pursuit of sales and growth was almost the undoing of Pacific Direct and it was only when the born saleswoman began managing that the company truly flourished. Lara believes this is the only way for a small business to hit the big time.
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