Construction sector yields success for new start-up
Specialist funding helps ex-recruiter target building industry
Sussex businessman Mal Bannatyne saw an opportunity for a new business venture in the construction trade, which involved selling-up his existing recruitment business and starting all over again. With the help of independent funder, Bibby Financial Services, Mal’s decision to step into a new arena has been a success.
After starting Bannatyne Construction in January 2014, Mal initially targeted a £150,000 turnover in his first year of trading, but went on to achieve £825,000 by the end of December 2014. This calendar year, with the help of Bibby Financial Services, he has a goal of £1.5m.
This achievement is all the more impressive as Mal has never worked on a construction site, and until last year he ran a recruitment business. Mal attributes his success to a good business plan and the right form of funding.
Mal commented: “I ran a recruitment agency, and was mainly supplying staff for the construction industry, so had a contact book full of highly experienced people. I looked at the figures, and it struck me that if I cut out the middle man and ran my own construction business, it would be more profitable for me.”
Mal also realised that it would be better if he specialised in one area of the market, so Bannatyne Construction focuses on steel fixing, form work and concreting. His team of steel fixers, carpenters and concrete finishers go in at an early stage of the building process and complete a working structure. They then leave others to complete the remaining steps, such as brickwork and roofing.
Mal added: “I decided it was better for me not to be a jack of all trades, preferring instead to fulfil a gap in the market that I had spotted.”
Employing the best people, including top class foremen and contract managers, has been vital in Bannatyne’s success, explains Mal: “The people I employ are highly professional, with a lot of experience, so our clients know that any job we do will be finished to the best possible standards.”
However, there was a real risk of Bannatyne Construction’s forward momentum stalling, when Mal’s bank refused to support his venture.
Mal said: “After a few months of trading, cashflow was becoming a problem. Everything moved a lot quicker than I expected. The projects were coming in thick and fast, which was great, but I needed to find the money up-front to pay people to do the work. Total wages were soaring up to £10,000 a week.
“It got to a point where I wasn’t able to take more work on, which was just crazy and very frustrating. I went to the bank, but they weren’t willing to take a punt. They wanted me to be trading for a year before agreeing to invest. It was a stalemate.”
To keep his business growing, Mal decided to look at alternative forms of finance, and after researching his options, he got in touch with Bibby Financial Services, whose specialist Construction Finance team were able to help.
Mal continued: “At my bank it was a computer making the decision, but with Bibby Financial Services I had a conversation with a real person. A member of the team came to my home within 24 hours of my enquiry, and discussed my options on a personal level. He saw that I had only been trading for four months, but had achieved a lot and had plenty of work on the horizon.”
Helen Wheeler, managing director for construction finance at Bibby Financial Services, says that banks do not always see the potential of young, growing businesses. Helen said: “Owners of new start-ups can find it difficult to secure funding through traditional routes. It can be extremely frustrating, as businesses can easily end up turning work away because they are waiting for payments for past jobs.
“This is where our approach is different. We don’t just look at the company’s performance to date but at what its future holds. Construction finance means businesses can use their outstanding billing to advance funds. As the finance is based on a business’s sales ledger, it also means the funding can grow as the business grows.
Concluding, Helen said: “In addition, having specialist funding in place such as construction finance ensures that businesses work with expert partners that understand the intricacies of the sector.”
