Wymondham’s Ross Mendham tames dragon Peter Jones with Bare Naked Foods business
PUBLISHED: 12:18 19 September 2014 | UPDATED: 16:16 19 September 2014
The Big Interview: Norfolk’s Ross Mendham has transformed a £5,000 health-food business into a successful start up – albeit with a little help from Dragon’s Den star Peter Jones. Business editor Ben Woods speaks to the entrepreneur about his journey, as he puts pen to paper on a bumper deal with supermarket chain Morrisons.
Q: Your initial dream was to become a footballer – until injury set in – so how did you come to set up a business selling noodles?
I was heavily into the gym at the time and I was working as a fitness model at the time to earn a living, so I needed to be in shape. This meant that I needed to be on a low carbohydrate diet, but I found it hard to have no bread or pasta. I would always divert from my plan and binge on carbohydrate foods. One day I thought ‘it is the 21st century there must be something out there for me’, and yet I couldn’t find anything. It was then that I decided to create a low-carbohydrate noodle.
However, while I loved cooking, I had no technical knowledge about food. So, I started doing some research on the Internet and it was then that I came across this product in Japan called Konjac noodles. The main ingredient was Konjac flour, which is high in fibre, naturally gluten free, with virtually no carbohydrates, calories or fats. Yet, when I bought some they tasted absolutely awful – although I appreciate that different countries have different taste palates, so I needed to find a way to use this ingredient, but make mine taste better. With this knowledge, I approached some companies locally, but because I was a guy all on my own they thought I would never do it. So I naturally thought: ‘where do they do noodles best?’ The answer was China.
Bare naked statistics
Family: Father of one, married to Kelly.
School: City of Norwich School (CNS); Easton College, Norwich City Football Club Scholarship
Business: Bare Naked Foods
Office address: 47 Damgate Lane, Norwich
Manufacturing and packaging: China
Investment: £5,000 from father in law; Dragon’s Den, entrepreneur Peter Jones invested £60,000 for 50pc stake in business
Sales growth: 3,000 units in first five months; Now, 70,000 units per month.
Q: Some small businesses baulk at the chance of doing business overseas. How did you manage to broker a deal in the Far East?
I devised a business plan and showed my father-in-law. He wanted to see it before anyone else. I wasn’t expecting him to invest in the business, but he put up the funds to start it. The £5,000 he put in was just enough to do the absolute basics; to get some product development done by taking a trip to China.
To do this, it was a case of talking to the Chinese embassy to find out more about the country’s factories. It was a challenge because I couldn’t speak Chinese but I needed to make sure the factory adheres to all the regulations we have in Europe.
The embassy produced me a list of manufacturers which I went to visit, before I found one which agreed to help development of the product. After taste testing the product for texture and flavour, I made an initial order from the factory of 3,000 units. It remains a closely guarded secret where the factory is in the country.
Five tips to make your start-up sing
Ross Mendham share his tips for surviving the trials and tribulations of starting a business.
1. Making a business pitch? Get your head straight.
When I got really nervous in the moments before I had to face the dragons, I made sure that I listened to some classical music. I would always listen to something powerful like Nessun Dorma because it helps to bring out that inner strength by helping me relax and making feel like I can conquer the world.
2. You may love your business, but overvalue it at your peril.
Never overvalue your business when you are looking for investment. You need to be realistic about what you are going to use the money for, while making sure you do your market research.
3. Keep focused on your goal.
Never give up no matter how bad things get in your personal or professional life. I suffer from bipolar disorder – a mental condition– which can make things very difficult for me emotionally. It is important that you do not stray from your overall goal.
4. Make sure you have the support for when times get tough.
It is really important to have a strong support network behind you – whether it is your family, or a fantastic wife. There are times when you will just want to jack it all in. But if you have that rock next to you then you will remember why you are doing it and they will help pick you up when you are down. There are lots of ups and downs in business, and I had a lot of downs before I had the ups. You just need to make sure you are ready for a massive roller coaster.
5. Cash Flow is king, so don’t lose a grip on your finances.
Make sure that you work hard on your numbers and put yourself on an Excel spreadsheet course. I was rubbish at numbers, but now I am OK. It is important to know where your business will be in 12 months time and preparing for every eventuality, so you know that your company can react if a big contract comes along.
The next step was to source a shipping agent in order to bring the product to the UK – and because it was a food product there were all sorts of regulations. My budget was so tight at this point that it was really about selling my vision to get the best possible price. I ended up with an Essex-based company called Wilspeed. They talked me through how I could import my products and agreed to help me with the cost early on as long as I stayed with them as the business progressed – so I gave them my word.
I think that if you come across as a genuine person with a niche product then businesses will get excited about working with you.
Q: So you have got the product into the country, but how did you manage to market it on such a tiny budget?
Once I had got the products into the UK, the next step was to go about setting up a website. I had no knowledge of building a platform, but I bought a programme that helped me create one for £50 per month. However, I soon faced the challenge of getting people to go on it. I invested some money in Google Adwords, so when people searched for phrases like ‘low-carbohydrate noodles’ it would come up with my site. At the same time, I was also listing the products on eBay.
Slowly but surely, we started getting five to six orders per day and they were sometimes for five or six packets. I soon found that for every 10 people that were visiting the site, four were actually buying the product – I quickly saw that the demand was there. Then the sales started to pick up and we ended up getting 3,000 orders in the first five months.
We worked on the basis that we wanted to make 100pc profit on the sales but this was quickly swallowed up by having to place further orders into China and the day-to-day running costs of the business. We also made our fair share of mistakes along the way. For example, the packaging kept breaking, so we had to send out orders for free before we could change our materials for more robust cardboard packages.
Q: With orders picking up it is understandable that you would want to keep the business growing. What made you turn to Dragon’s Den for investment?
I was getting to the point where peopled were ringing me up and telling me that they liked the product so much that they wanted to buy the concept off me and label it up as their own. Then one customer started up a business doing the same thing – and they had got their product in the Holland & Barrett health food stores. It was very frustrating, and there were many tears, because I kept thinking how I needed money to grow the business. At this point, I thought: ‘should I chuck in the towel?’ But having the support of someone close was very important. It was then I decided that I should start working towards getting Bare Naked Noodles into a high street store.
However, it wasn’t easy, and we needed to be clever in order to make the right contacts. I went to Holland & Barrett’s offices and started knocking on the door and told them about how I had invented this product and they should try mine.
We also went to the banks who wouldn’t even give us a £2,500 limit on our credit card because it was straight after the recession.
It was at this point that I applied for Dragon’s Den, but didn’t think I would get on.
However, a few weeks later I was in a dark room in my house suffering with a migraine when I got a call from Harry at the BBC who asked me a few questions before saying that if he called me back in 15 minutes that they would want me to go for an audition. I remember just sitting and looking at the phone for that whole time praying that it would ring – and eventually it did and I was invited onto the show.
Q: Pitching for investment is part of the journey for many small businesses, but that doesn’t mean it isn’t terrifying. How was your experience with the dragons?
They had to see everything and went through the business with a fine-tooth comb. After all the blood, sweat and tears it finally felt like the business was going somewhere.
When it came to my pitch with the dragons, it was a case of preparing and making sure that I got all my numbers right with the accounts and the projections. I needed to really know my product inside and out and try and anticipate the questions that they might ask.
It is really hard to read them. It is a TV show and they are trying to put pressure on you to see how you will react. However, when I walked into the den I was very confident. I had been speaking to one of my heroes, the comedian Jimmy Carr, who was filming next door, and he had wished me good luck – it all seemed like it would go well. But as soon as you get in there your legs go to jelly and things don’t go to plan. I was planning to do a cookery demonstration, but the production runners had set the hob to low not high. I quickly turned up the heat and tried to engage with the dragons but they insisted I cooked the product first for them to taste before I spoke about the business. I knew that what they were going to taste wasn’t going to be prepared properly, but you have to pick yourself up and carry on the best you can. They then started firing questions at me left right and centre and one of the dragons, interior designer Kelly Hoppen, said the noodles were not 100pc gluten free. I had the food certified to show that it was, but I didn’t have the paperwork with me. I started thinking that I had ruined my business.
But I had to take it on the chin, and from there on in it was like trying to climb Mount Everest with no help – I just wanted the ground to swallow me up. Dragon Duncan Bannatyne asked me about my wife Kelly, and how I was earning a living, and the emotion just got to me. I started thinking about all she had done for the company and the fact that she had just had a third miscarriage just two weeks ago. I felt like I had let her down. I was so gutted that I just left the set and sobbed. The executive producer said I could just go if I wanted to. However, after a while I began to feel like a weight had been lifted off my shoulders, and I went back in and apologised to the dragons.
I then told them that we were in talks with a retailer – Holland & Barrett – about getting the product into 800 stores, which was attractive to the dragons. I ended up getting three offers, which came as a shock because I never thought it was going to happen and the pitch didn’t go to plan. But I think they liked me because I hadn’t given up no matter how hard things had gone in the past. What is really key for them is that their investment is really going to mean something to someone who is then willing to put in the hours to make it a success.
I accepted an offer from Peter Jones for £60,000 investment in exchange for 50pc of the business. Some people say that I gave too much of my business away, but dragons always say that people overvalue how much their business is worth. They know the market place and the brands, and Peter had worked with Levi Roots on his Reggae Reggae Sauce products, so I thought it was right to give a larger slice of the company in the hope of a large return.
Q: So you ended up taking the offer from Peter Jones, what was it like working with a dragon once the dust from the show had settled?
In the six weeks after the show we had to spend time going through the due diligence process and making sure my brand was trade marked. I then started speaking to a member of Peter Jones’ team four or five times a week and they were offering me fantastic advice. Meanwhile, Peter and I began to develop a real friendship. We would touch base once a month, and I would often use his offices in Kensington.
We also needed a company to help us sort our warehousing and logistics and they knew the companies that were used to servicing big retailers like Holland & Barrett.
Even though Peter’s team could help it has still been difficult to get our product into the big stores. We are competing against brands worth millions of pounds and you have to convince the retailers that your product is going to sell really well and that you are going to support the brand financially. But we have managed to secure deals with Holland & Barrett to have our product in 800 stores, as well as a recent contract with Morrisons worth a five figure sum. We have also got distribution in Dubai, South Africa and France
My ambition now is to get it into the rest of the big multiples – and we are looking to double our sales growth to £500,000.
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