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Client case study: Kerastraight & Innoluxe

by | Mar 3, 2022 | FK news

Recently, we had a conversation over a coffee with a GKP client who has successfully brought not one but two businesses through the pandemic, despite operating in one of the worst-hit industries.

Who are KeraStraight & INNOluxe

John Hubbard is one half of the team who founded the award-winning hair repair treatment business, KeraStraight. Way back in 2009, John and his business partner, Jez Barnett, started with the aim of leading the way in providing sensational treatments and products that deliver client delight as well as significant business to salons. When asked what his role involves John laughed and asked,

“Do you mean on paper or in reality? I am COO, which means I am involved in most aspects of the business activity from logistics to website development. Whereas, my partner Jez who is CEO manages business development and sales.”

In 2015, along came INNOluxe, the baby of the group, this arm of the business pushes the boundaries when it comes to the latest research and development. Working with a team of scientists in Brazil to lead the way in hair repair, INNOluxe came from the realisation that they could not only emulate what a competitor was doing in another sector but do it better through the use of alternative technologies from those being protected by competitor’s patents.

The duo got to work building a new brand to initially operate here in the UK. John told us how this wasn’t to be the case for long,

“With a strong and sustainable brand and a sound business plan behind us we ensured that we were investing in a new sector with the intent of staying there – future-proofing the move.”

The new venture spent a lot of capital on product innovation, after all, that was the backbone of the offering. Financing from sister business KeraStraight allowed this freedom but it wasn’t long before INNOluxe became self-sufficient and enjoyed very healthy growth in its first few years. Even managing to grow 30% in 2020 during the COVID-19 pandemic.

How, do I hear you ask?

Both businesses operate a B2B sales model selling direct to salons. Early on in the beginning of the pandemic (if you can remember when this all began back in the first half of 2020), the team realised the thirst for their products wouldn’t disappear but that their clients were one of the worlds worst-hit industries – being salons or salon product distributors.

At the height of restrictions, revenue dropped by 95% overnight as salons were forced to close their doors and distributors left with no one to serve. The much-reduced team were reactive and agile and sold in the countries they could,

“As governments around the world opened and closed borders the business geographically ping-ponged around the world. We also couldn’t sit back and watch the suffering, so we quickly introduced an affiliate programme to ensure our clients’ customers didn’t cut out the middle man completely but instead kept them in the customer journey. This allowed salon owners to continue to earn commission on sales.”

Selling into 10 countries, with a presence in the Middle East, America, Australia and India, India being the largest territory outside the UK.

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What support was needed?

The KeraStraight and INNOluxe team have a staff of seven, including John and co-founder Jez. They made use of the furlough scheme, received initial help from government Bounce Back Loans, later refinanced by the Coronavirus Business Interruption Loan Scheme (CBILS) – easing the pressure of the amount of borrowing done during the height of COVID-19, when monthly shortfalls were hitting the £30,000 mark. Costs were reduced as much as possible, all advertising halted for instance and the only main expense being storage, staff and rent.

Local grants consisting of a larger initial lump sum and a monthly subsidy helped with business needs like maintaining marketing costs – after all the brand couldn’t be left to dissipate. Further comfort was offered by business rates relief.

As for Brexit and all that overseas trading?

“With production in Brazil and packaging here in the UK, there have been big impacts on the supply chain – not perhaps exclusively as a result of Brexit but rather a toxic cocktail of it and Coronavirus, import lead times from Brazil increased from typically around six to eight weeks to upwards of 20. At the heart of our business is science and innovation, Brazil has the best to offer when it comes to the expertise we need. Constantly innovating and looking at our products allows us to push the boundaries in response to our customer’s feedback and their needs. It’s also the most cost-efficient and environmentally friendly way to operate at present. We import in bulk to keep the loads as efficient as possible and mindful of our impact on the environment.“ John tells us.

Selling into the EU has become really difficult for the business, so much so that some territories have been abandoned, Spain for instance is no longer operated within as getting product through the borders after packaging in the UK was proving too difficult.

Focusing business targets on bigger distributors remove the exercise of jumping through exportation hoops and lets John and the team focus on what they do best – supplying innovative and award-winning products that hairdressers love.

How has GKP helped?

“There is the comfort of a consistent reassurance of support from my GKP accountant, Tara Aldwin, she offers a lot of support and advice. Often we speak when I just want to soundboard business decisions. Input particularly around the likes of payment plans on tax and negotiating conversations with HMRC is invaluable.

Regular check-ins with Tara allow us to discuss the most efficient way to run the business and in times of crisis we will speak more but the rest of the time I know that FK and GKP are looking after things and security in knowing the conversation doesn’t need to be happening too often unless more support is needed.”

Tara told us;

“I have been really impressed with how John and the whole team have navigated their way through the hurdles thrown at their business over the past two years.  It’s demonstrated that quick reactions and forward planning can really make the difference.  It’s been great to work with them and see them come out strong and agile on the other side.”

How are things in the wake of the pandemic?

The return to business has not been straightforward, financially a lot was borrowed at the same time as new product launches and technology were being invested in. Although, when salons opened their doors again there was a resulting initial rush – things are not fully normal, for anyone, yet. The remaining pressure on salons is caused by a reduction in business and a shift in the industry with staff moving away from salons to more flexible, freelance working. Both have a big impact on the size of the customer base.

John and his team were recently finalists at the SME Hertfordshire Business Awards in not one but two categories – Business of the Year and Employer of the Year.

John is confident they are, hopefully, over the worst of it and is excited to have recently launched both new-generation products and redeveloped brand websites – the signs are showing all of the right indications of a return to growth trends seen pre-pandemic.

Key lessons

  • A strong and sustainable brand and a sound business plan backing are vital
  • Innovation is key, at a product level and wider business level
  • Smart financing decisions when funding new ventures are crucial and speaking to your accountant to soundboard plans is invaluable
  • Having the flexibility as a business to adapt to the environment you are operating in makes all the difference, as does being able to pivot the business model and respond quickly to external threats.