David Holmes has built up three businesses, all heavily dependent on overseas trade as importers of material for sign manufacture.
He founded Gateshead-based First Fix Plastics five years ago, Glasgow-based First Fix Plastics Scotland two and a half years ago and FirstLite LED Systems, also in Gateshead, was set up three years ago.
The three businesses employ about 33 people and First Fix Plastics in Gateshead has grown so rapidly in five years, it has gone from one 3,000 sq ft unit to its current 16,000 sq ft home, having moved three times.
FirstLite supplies LED modules to sign makers nationwide for illuminated signs. First Fix Plastics, in Gateshead and Team Valley, supply a range of sign making equipment, predominantly acrylic sheets. Holmes says: “We supply every aspect of what the sign maker needs, I know it’s such a twee thing to say but the one-stop-shop thing is really what we went for.’’
About 200,000 sq m of acrylic sheets are imported from China every year, coming into Felixstowe for Gateshead and Grangemouth for Glasgow in around 30 to 35 containers every year and then delivered to the businesses by the freight forwarder. LED supplies also come from China, from one key supplier as a mixture of sea freight and air freight. The air freight is costlier but the LEDs are small items.
Holmes says: “Whereas I can spend £100,000 on two containers, I can spend £100,000 on LEDs and it would fill a pallet or two pallets. So it’s significantly smaller to transport, but obviously much more expensive as a product.’’
He adds: “Because of the growth of the business over the last two and a half years, we have thousands of stock in. We have a very simple philosophy of more than two months’ worth of stock in. But you always have a run on a product and that tends to be a quicker turnaround. The plastics you’re talking eight weeks in advance with orders, so you know you’ve got the rolling stock coming in. The LEDs are normally between two and four weeks for production and delivery.’’
Cost pressures and competition have forced the business to buy from China but Holmes is careful not to compromise on quality. “We wouldn’t buy products – and I won’t buy products – unless I’ve actually physically visited the factory, because there are so many pitfalls, with the quality of the sheets,’’ he says. “One of the biggest dangers is that you’re dealing with someone who doesn’t actually manufacture, they’re just an agent out there and we’ve visited factories where that has been the case. We have to make sure that the quality of the product is to the UK standard and not just on one shipment but on every shipment going forward.
“On LEDs particularly, there’s an awful lot of cheap technology being brought into the country. The whole point of an LED is you put it in, you forget about it for five years, it’s maintenance free and a much lower cost because it produces electricity. A lot of the products coming in, within six months, you’re getting failures. So again, we’re very stringent on who we buy from and the continuity of supply and we visit at least once a year to the factories to ensure that the quality’s still in place.’’
Since the last move in Gateshead in January, the business has enjoyed a 20% growth in turnover. Holmes says the business is now the largest independent supplier in the North East and in Glasgow. “Our growth has been at the expense of the big national chains over the last two or three years.’’
Customers for First Fit Plastics are served from Gateshead and Glasgow. FirstLite operates nationwide and also has some European customers, which could be developed. Holmes says: “At the moment we’re in negotiations with a large supermarket for some of their signage, but that has been held up until March, but the idea being, as specification goes forward, that we move into Europe with them as well. So that would be our way of breaking in.’’
He works closely with his bank, Santander. He explains: “When I bought my first business back in 2006, we were with Barclays and stayed with Barclays for six or seven years. Then we began talking to Santander and it took a long time for the process to go through. “The relationship has been excellent and that has been based on how they have been with us. There was no question, when we looked to move to them about funding the group. With Glasgow we put a lot of costs in, we front-ended the costs with a warehouse that really was too big on day one but would mean we wouldn’t have the costs of moving.
“So we had a plan for 18 months that it wouldn’t make money. There was never a question with Santander. They saw the vision and where we were going and were prepared to back it.’’
And has the Glasgow move worked? “Very much so, but we’ve got two years left on the lease and we now need to move from those premises into even bigger again, which we never expected. But they’ve backed us, not only with the loan.
“Santander put forward a system we could use for import credit. One of the biggest disadvantages is you’re paying for everything up front and you’re having to bring in more stock than you would if you had a UK based manufacturer, because you have to forward order. You don’t get credit in China normally. But Santander came to us with ‘we could look at this with you’ and it was a way to effectively get 60 day credit on import.
“They put it forward to us, and although there is a cost to it, we couldn’t have gone forward on the scale we have without that funding in place. It was they who came to us, sat in a meeting, listened to what our biggest problem was, and then offered a solution to it.’’
The business was started during the recession but Holmes believes that worked to its advantage. He says: “When times are very good, people are less likely to look at their suppliers and the cost from their suppliers. Because there’s so much business to go around that it becomes ‘well we know the person, we know the product, the cost price isn’t so significant because we’re doing well’.
“But, in a recession, people start to worry about 5p and 10p on something that may cost £100, So, although it was right in the middle of a recession and not the time to do it in theory, what we found was that people were far more receptive to talk to us because of what we could save them as a business in the cost and the service element in what else we could offer them over the competition.
“As you come out of the recession, then we are their supplier and they’re not too bothered about switching and worrying about 10p and they move forward with us. We’ve seen the business start from scratch and enjoy significant growth.’’
For FirstLite, the group is looking at developing its own range in association with a manufacturer in China. “What we want to do is to make sure that the brand FirstLite is known for quality and to do that we want to produce our own range so that when people pick it up they know it’s a FirstLite product.’’
Would he look at other locations for First Fix, other than Gateshead and Glasgow?
“It comes down to people, not so much location,’’ says Holmes. “If the right person offered us an opportunity elsewhere in the country, possibly yes. At the moment, we have had such rapid growth, and although we have a management company that ensures there is structure and it’s not some house of cards that could topple at any time, it probably needs a couple of years of stability and growth in the existing businesses before we look at the potential to grow it again.’’