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Beyond organic growth

Kokako is getting accounting advice beyond the numbers

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Photograph by Alex Wallace

Kokako is getting accounting advice beyond the numbers

Entrepreneurs are good at many things but knowing who to choose as your close advisors is one of the most important decisions you can make.

In 2007, former Hell pizza franchisee Mike Murphy bought Kokako, and has turned it into a fast-growing organic coffee, cafe and wholesale food business. He’s the first to acknowledge the need for good help.

“What you want are advisors that have more than just technical skills but also share the vision for growing the business,” he says.

So it’s a happy coincidence that the team from accounting firm Bellingham Wallace became regular customers to his Parnell cafe. The firm specialises in assisting fast-growing, future-focused businesses and styles itself as ‘accounting beyond the numbers’.

“I believe it’s important for your accountant to have some form of presence or engagement in your brand. They should ask questions like, ‘How are you developing your business?’ or ‘What structure best suits your kind of growth?’ The guys at Bellingham Wallace did. They’d come into the cafe showing a genuine interest in my business.”

In addition, through its consulting arm Sustainable Advantage, Murphy discovered a firm that fully embraces his vision for creating a leading sustainability brand. “Bellingham Wallace shares my commitment to sustainable growth, putting their money where their mouth is with a new green-star-rated building [in Newmarket], its work with philanthropists and its Sustainable Advantage brand.”

So what has Bellingham Wallace actually done for Kokako?

Right structure

Aaron Wallace is a business improvement director at Bellingham Wallace and a regular customer at the Kokako cafe. “I’ve barely done any accounting for Mike actually—it’s all advice,” he says.

Wallace saw potential for the Kokako business but could also see that getting the structure right was key to not just growing the business but also planning for succession, such as a trade sale or bringing in an investment partner.

Kokako is a diverse business, so, following Wallace’s advice, Murphy has created separate divisions, recognised in legal and accounting terms. The divisions, broadly speaking, incorporate retail outlets, wholesale coffee and food supply and the Kokako brand, including IP.

By carving up the business, Murphy has increased his growth options. For example, Kokako supplies the Hell pizza chain with all its gluten-free chocolate brownies and has just won a contract to roast Fairtrade organic coffee for another leading New Zealand brand. This makes for a good business but it’s capital intensive, requiring machinery and manufacturing facilities. It’s also open to contract finishing, so it needs to make a profit from day one.

What you want are advisors that have more than just technical skills but also share the vision for growing the business

—Mike Murphy

The dynamics of wholesale contracting are quite different from the retail outlets, where staff, real estate and the public interface are much more important. To assist with this, Wallace is suggesting developing a franchise or licensee model for the cafe, where standards, intellectual property and branding are the key drivers. It’s also a way to share the cost of expanding a retail network.

Managing the Kokako coffee brand is different again, where distribution is the major factor.

“What you want is a structure that provides choices—about how and when you raise investment money, about tax efficiency, about management styles and succession options. I think we’ve achieved that now with Kokako,” says Wallace.

Right attitude

Both Wallace and Murphy acknowledge the partnership is working primarily because of shared values.

“Mike is prepared to listen,” says Wallace. “He’s not the kind of guy who just wants us to do the books, but is open to advice. Many of the business failures that we see come from uncontrolled growth and cashflow mismanagement. This is exactly the kind of thing we can help with. To be honest, I wish more customers were like Mike!”

Says Murphy: “Aaron gets straight to the point; he explains things in a really practical way. He was the first person to say to me, ‘Well, 2009 was a challenging year, but how do we turn this into a diverse multimillion-dollar business?’ I wish more accountants were like that.”

Kokako is only two-and-a-bit years old, but with an ambitious entrepreneur at the helm and an advisor who understands the vision, expect to see a lot more of this brand.

Warning signs

Bellingham Wallace business improvement director Aaron Wallace specialises in helping businesses grow, and has witnessed more than his fair share of failures. Here are his top five mistakes to avoid:

  1. Forecast cash flows
    Too many budgets are prepared with a view to profit using unrealistic assumptions. Cash forecasts become the poor cousin.

  2. Uncontrolled growth
    Growing faster than cash flow and resources permit is the death roll. A strategic plan should consider these boundaries.

  3. Wrong structures
    Get it right from the start so it allows for different funding, ownership, growth and succession options.

  4. Understand your market
    You may have a unique idea but will it actually make money? Know the pricing point, breakeven volume, and timeframe to get there.

  5. Don’t go it alone
    Use recognised advisors who aren’t emotionally attached.

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