Published: February 26 2010 18:04 - Financial Times
England and Sussex cricket star James Kirtley and cricketing enthusiast Roger Myall had long nurtured a desire to start a business. Kirtley needed an income when his cricketing career came to an end and Myall had always wanted to be his own boss. The problem was that they did not have a product.
“We considered lots of barmy schemes, including setting up a fish and chips themed restaurant and breeding racehorses,” Kirtley says.
It was Myall’s job at Newbery, a cricket equipment manufacturer, that provided the inspiration.
“People used to ring up and say we love the quality of the Newbery shirt, but can you do it in a certain colour and in a small quantity,” Myall says.
Newbery could not do this because, like most suppliers, it offered a limited range of colours and styles. Myall, 38, and Kirtley, 35, decided there was a need for bespoke, quality teamwear. The plan was to provide a start-to-finish service, with the client choosing the style and colour from a wide palette and the company designing and manufacturing the product.
The pair launched MKK Sports in Eastbourne in October 2004 with cricket as the main focus – because of Kirtley’s connections to the sport and because there was a gap in the market, according to Myall. The business aimed to capture the surge in popularity for the shorter form of the game, known as “Twenty 20”.
“At that time there was not the interest in cricket that there is now the Indian premier league has raised its profile,” Myall says. “Back then, there were no big name suppliers.”
Their initial targets were high-end, independent schools and professional clubs – people who cared about how they looked and their brand identity, according to Kirtley.
The two partners offered complementary skills. Myall had a degree in leisure management from Sussex University and 10 years’ experience at Newbery. Kirtley brought sporting prowess and cachet.
The business was set up as a private limited company with £40,000 from Myall, Kirtley, and two other investors. With Myall’s dining table as their office, they used his business contacts to find a supplier in China.
In their trawl for customers, they initially concentrated on Sussex and on cricket because of Kirtley’s name and contacts.
The strategy worked. In April 2005, they landed their first customer: Kirtley’s team, Sussex CCC.
“Sussex had used a variety of suppliers and been let down on delivery – it either turned up late or the embroidery was incorrect”, Kirtley recalls.” So Roger and I put together a range of kit based on my experience of what cricketers want: comfort, quality and to look good. We then approached the club.”
MKK won the tender to supply 4,500 pieces of kit in a £60,000 deal. “It got us up and running,” Myall says.
However, there was a slight hitch. “In our planning, there was little or no risk involved because any order we placed with our factory would be pre-sold and we did not need to have loads of money tied up in stock,” Myall says.
“Customers would pay a 50 per cent deposit, then the balance before delivery and we would pay the factory on a 30-day agreement from when they shipped it.”
Sussex did not pay up front and the gap had to be plugged with the £40,000. But such a high profile client brought in others, including Middlesex CCC, Eastbourne College and Charterhouse. This allowed Myall to join the business full time.
To continue to grow, the owners recognise that they need to focus on public schools to provide a steady flow of new and repeat sales, and expand into more sports. For public schools, rugby is the number one sport and MKK is now focusing on this. But here, Kirtley’s influence was not as strong as hoped.
Kirtley says: “We went through one public school tendering process and were told our presentation was spot on, our prices and quality were better, but we had no heritage in rugby.”
To get into the rugby market MKK took on Will Green, the former Wasps and England rugby player as an ambassador.
Expansion is pitching MKK up against more competitors, but Myall says the business is rising to the challenge. “We keep making our product and quality better and [aim at] top teams wearing our kit so others will want it,” he explains. “No-one yet seems to be doing great kit and delivering it on time. There are chinks there.”
MKK is also adding a semi-bespoke range, stocking kit to which a logo can be added on a fast turnaround, and has expanded its colour palette.
But problems have hit cash flow and margins. The company buys in dollars so a weak pound pushed gross margin from 45 per cent to 39 per cent in 2009.
In addition, bigger customers do not leave a deposit and pay 30 days after delivery, generally after MKK pays its suppliers. And allowing customers to order bespoke kit to draw down and pay for only when required – has hit cash flow. Expansion has meant higher overheads, too – with a bigger office and more staff.
Kirtley has injected a further £20,000 into the business and there is a £120,000 overdraft facility. But the pair are tackling the issues. They believe foreign exchange forward contracts and economies of scale this year should push the gross margin back up from 38 per cent to 45 per cent, and the profit margin from 6 per cent to 11 per cent. They plan to reach a turnover of £2.5m within five years.