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In our fifth series Maree Morrissey talks to Cathal Kenneally, founder
of Cartridge Kiosk about his business’ crux. See the critical advice offered
by our panel below.
| VITAL STATISTICS |
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| Cathal Kenneally, owner of Cartridge Kiosk |
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Business Name:
Cartridge Kiosk
Year of Set Up:
2005
Founders:
Cathal Kenneally
Location:
Cork City
Business Type:
Retail and B2B, operating in the cartridge retail market
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Set up in March 2005 by
24 year old entrepreneur
Cathal Kenneally,
Cartridge Kiosk is a retail
business based in Cork
city.
Specialising in printer cartridges,
cartridge
refills and printing
consumables,
Cartridge Kiosk also offers
customers a wide range of computer
accessories and related products.
Prior to starting up Cartridge Kiosk,
Kenneally had a good practical insight
into the dynamics of business planning
as he was a joint winner of Enterprise
Ireland’s overall student entrepreneur
awards in 2004 while still a student
at Cork Institute of Technology. Along
with a fellow student, Kenneally
developed
a business plan and
a database
system for Guardian
Employee Assurance Services.
BACKGROUND
When Kenneally first came across the
model of refilling printer cartridges
it was a relatively new concept and
he felt that saving on printing costs
while helping the environment were
attractive selling points. Home printing,
home photo processing and digital
camera sales were also growing in
popularity. Kenneally worked for a
company in the refill business for a
period prior to setting up.
At the outset, Kenneally affirms how
product sourcing was an important
factor and that finding suppliers was
difficult. As he was careful not to rely too
much on any one source, the business
now has around a dozen main suppliers
and source goods from five countries.
Says Kenneally, “this allows us to be
extremely competitive on pricing.”
FINANCING
Kenneally invested some of his own
money into the business which he saved
during his college years. The remainingfinance came from AIB, which,
according to Kenneally, has been very
helpful since the business’ inception.
CURRENT VIEW
Cartridge Kiosk currently employs
both Kenneally and a full time
manager who handles day-to-day
affairs. Kenneally says this gives him
time to plan for the future of the
business and their expansion options.
However, Kenneally also spends
time on the shop floor. “I think this
is important as our customers often
provide me with new ideas for product
lines etc.” They are about to take on
a part-time staff member while they
also hire promotional staff on shortterm
contracts from time to time.
THE CHALLENGES
While Cartridge Kiosk’s sales are
going well the business is at a type of
juncture at present on how to expand
and develop. Affirms Kenneally,
“as with any retail business we are
constrained by local demand for our
products and services and thus limited
returns.” Now seeking the best method
of growing his business, Kenneally is
researching avenues such as franchising
out the business or expansion by setting
up additional units.
With the franchise route, which
would require a lot of upfront
investment, Kenneally has just started
researching it and feels that Cartridge
Kiosk needs to first get one or more
units up and running. “We are only
assessing the feasibility of franchising
at this point. I think we need more
retail units before it becomes a real
option.” To entice franchisees to invest,
Kenneally infers that the business
needs to first become a proven model
in more than one location.
Chain expansion of Cartridge Kiosk
would require a lot of staff training,
taking up time and costing money. As
staff turnover in retail is quite high,
Kenneally feels the business could
run into some problems on this front
believing that one or two more units
won’t cause many problems but going
beyond this will be tricky.
FUTURE PLANS
Aside from growing sales in Cartridge
Kiosk’s flagship base, Kenneally’s main
focus is on expansion. “Competition
is set to grow in this sector so by
establishing a good base now we
will be better positioned in the long
run.” Ideally, Kenneally would like to
see Cartridge Kiosk having a strong
countrywide presence. “The greater our
purchasing power, the better prices we
can deliver to our customers,” concludes
Kenneally.
CATHAL'S QUESTIONS FOR THE PANEL
- What do you think is the best method of expansion for Cartridge Kiosk?
- Can you suggest cost effective financing options
which will not affect my equity base?
Read below comments from our panel of experts about ways in which
Cathal could steer his business in future directions to overcome
his current dilemmas.
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This is a good business proposition and, while cartridge refills is just one part of the business,
it offers the consumer the benefit of being environmentally friendly as well as cost savings.
Given that a large part of the business’ overhead is fixed, the key to growing profitability is to
increase sales volumes through the existing outlet. To achieve this growth, investment in marketing
is required. At this stage, this should be the focus rather than investment in additional sales outlets.
Building Turnover
Looking to expand Cartridge Kiosk through
franchising
or additional chain type outlets is likely
to dilute the business effort and is premature.
The
brand needs to be established and the business
model refined. By concentrating on building
turnover in the existing outlet, valuable market
information
will be gained. Kenneally should
examine
the customer mix as, between consumer
(retail) and commercial, the commercial market
may offer greater opportunity for expansion.
Financing
If the business can
generate
sufficient
profitability
and cash-flow
then financing expansion
through bank borrowings
should not be a problem.
However, many emerging
businesses can not grow
this way and often there
is no alternative but to
raise new equity.
Gerry O' Neill, First Step
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Before looking further at expansion, Kenneally should examine why
his current single outlet in Cork city is offering only ‘limited returns.’
Kenneally says that it’s due to constrained local demand. If that’s
true, it’s not clear how expansion will help.
SELF ANALYSIS
Kenneally should look at the mix of products
the current outlet is selling. Where is the money
coming from: cartridge refills or from other
computer-
related products and, if so, which
ones? From this, Kenneally can identify
what market he is actually or should be
targeting.
Are cartridge refills really his core
product?
ON THE HORIZON
Constrained local demand and the increasing
presence of multi-national cartridge refill
franchises
makes this part of the market a hard
place to be in. Directly contrary to Kenneally’s
aspirations to grow the number of his
outlets, I’d be thinking
about improving
margins fast, selling
Cartridge Kiosk
within the year and
using the capital
thus released to
start a new
venture in
something
with
fatter
margins.
Brien O'Kane, MD, Oak Tree Press
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Cartridge Kiosk is facing a common problem faced by many early stage
companies, i.e. how to correctly go about expanding and growing the
business and specifically how to finance that expansion.
BROAD VISTA
Like many business owners Kenneally is anxious
to use finance options to expand the business,
which will not affect his long term equity base.
Even though this does reduce the options open to
him, there are still a number of forms of finance
for him to consider:
- Internal company sources such as retained
profits,
cash collection, stock and debtors.
- Bank finance: short, medium and long term
finance options.
- Business Expansion Scheme which is designed
to aid SMEs grow their business.
- Grants, e.g. Government, Local Enterprise
Boards, State Agencies, employment grants etc
I would recommend that Kenneally arrange to
meet to one or all of the following
people to
discuss
his expansion
plans: the business
accountant, his
relationship
manager in
his bank, industry groups
such as ISME, the Small
Firms Association (SFA),
Chambers of Commerce,
etc., and support
agencies
that offer grant
aid and assistance.
Adrian Moynihan, Business Strategy, AIB
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| ACHIEVING COMMERCIAL ADVANTAGE |
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The cartridge refill market is very like the mobile phone market in
the 1990s where there was quick money to be made by opening retail
outlets. Like any market, shops came and went and some dominant players
now control the market. Those players were the ones that had the best
systems, highest margins, biggest marketing budgets and, most importantly,
the most customers.
CUSTOMER BASE
So right now the most important strategy for
Cartridge Kiosk is to develop its customer base.
The business won’t survive unless it can build a
sustainable, competitive advantage versus larger
chains such as Cartridge World. The company
needs to undertake market research to understand
where best to make profits from customers and
what future segments should be targeted.
EXPLORE AVENUES
The company has not explored online ordering
and the development of an ecommerce site will
widen its customer base
beyond its existing retail
store and increase the
potential
for selling new
products and services.
Finally, I suggest
that Cathal Kenneally
takes on a mentor
or business
coach
with strong retail
experience
to assist in
the development of his
business.
Patrick Munden,
Director, South East
Business & Innovation
Centre
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Kenneally’s main focus may be on expansion but his first priority
needs to be on consolidation of his existing business to ensure a
strong base for the next phase of the business.
VIRTUAL SALES
Why invest in bricks and mortar when the virtual
sales market that is the Internet is literally at his
fingertips? The Internet is best suited to, among
other things, products that people feel strongly
about. The fact that Cartridge Kiosk is recycling
and supplying an eco-friendly service is a
newsworthy
sales point.
TARGET CONSUMERS
Internet marketing needs to focus on the
consumer
and his/her exact needs so that the
exact products can be offered at exactly the right
price and the right time. With email, the consumer
can be regularly informed of products and offers.
The key to email marketing is to get people who
want the information to join a database where
they will receive regular alerts.
The ability to supply
refilled cartridges or
other consumables
through the net on a
24 hour turnaround
could be promoted. It
certainly will be less
expensive than a new
premises.
Mark Fielding, Chief
Executive, ISME
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