Eight years ago, Kathy Caton was running along the Brighton seafront after a late night out. She noticed she didn’t feel quite as bad as she probably should have. Kathy mulled this over while she ran and realised that one possible explanation was that she’d only consumed high-quality gin the night before. This led to an idea: to create a new premium gin, paying homage to her home town.

Fast-forward to today, Kathy and her team are making around 1,000 bottles of Brighton Gin every week, stocked in Waitrose and M&S stores in Southeast England as well as a number of online retailers. Whoever said nothing good happens after midnight?

The Business Finance Guide spoke with Ellie Dobing, Chief Gin Peddler at Brighton Gin, about funding the business and their plans for the future.

Developing a product

“Kathy and I have known each other for years. We worked together in radio and even shared a flat in Brighton. So, when Kathy got a gang of folks together and suggested we make our own premium gin, we all decided to go for it”.

The first thing they did was to apply for a license and order a still from Ebay (previously used as a prop in the film ‘The Fifth Element’), which Ellie’s partner helped them to build. And from there, their attention turned to creating a gin that would turn that big idea into a reality.

“We spent the next two years gathered around the kitchen table, working out how to make a smooth, fresh, delicious gin. We were determined to get the recipe just right and as a result, every ingredient used in Brighton Gin has really earned its place.”

From the kitchen table, the team went on to set up shop in the basement of a small Victorian pub in Hove and began distilling the gin. Once happy with the final product, it was time to get the landlords (and customers) in different bars and pubs in Brighton to try the gin.

“We were delighted by how well people responded to Brighton Gin, they have really championed the cause for our gin and the support in general has been fantastic”.

The importance of cash

Many profitable businesses are constrained by a lack of cash.

For some, this is a seasonal trend (e.g. a retailer, ice cream or gin manufacturer), whilst for others it may be indicative of a gap between the time that suppliers and contractors need to be paid, and the time when customers pay a bill (e.g. construction).

One of the most valuable things a business like this can do, is to create a “working capital toolkit” that allows them to free up cash in the business. This should include multiple tools, for example:

• leasing or hire purchase on vehicles and equipment
• organising an overdraft with their bank
• factoring (or for a larger business, invoice discounting)
• supply chain finance
• vcards (construction-specific scheme)

In this way, with pressure on cash removed, businesses can continue to make the right decisions in order to grow, without worrying about liquidity.

Clearly, these working capital facilities should be used with caution – racking up huge debts, without the orderbook or other facilities to repay the debt, is dangerous.

But with a strong sales pipeline and robust business plan, businesses can (and should) take advantage of any or all these facilities.

Finding suitable financing

Cash flow can be a real issue for businesses starting out and is one of the biggest reasons small businesses fail. When starting a business, there are often a lot of expenses involved, money moves out quickly, and you may not have made enough sales to balance this out.

In order to avoid these issues, Brighton Gin opted for factoring with Close Brothers, a leading merchant banking group, after a recommendation from one of their financial backers.

Close Brothers provides a factoring facility which allows Brighton Gin to immediately fund any raised invoices. They also deliver a full credit control service, enabling them to focus all their resources on growing the business – as opposed to chasing outstanding customer invoices which can be enormously time consuming.

“Close Brothers have been absolutely instrumental in helping our business grow to where it is now. Using factoring has freed up our cash flow, allowing us to employ more people, buy new kit and ultimately, produce more of the gin we love.”

What is factoring?

Factoring is typically used by SME businesses to support cash flow by generating money against unpaid invoices.

It’s available to businesses that sell products or services on credit to other businesses.

The factor will advance the majority of the value of customer invoices (usually 80-90%), with the balance made available once invoices are paid, less charges. The factor works on behalf of the business – managing the sales ledger and collecting money owed by customers. This relationship is transparent, and customers of the business will be aware that a factor is involved.

Factoring combines the provision of finance with a service element, helping the business with credit control, which can be particularly valuable for smaller businesses.

Growing businesses can benefit from combining a range of working capital tools to help manage cashflow and liquidity. Larger businesses may find an invoice discounting facility more appropriate, perhaps complemented by supply chain finance.

You can find out more about factoring, and other forms of asset-based finance, through UK Finance. UK Finance is a trade association for the UK banking and financial services sector, formed on 1 July 2017. It represents around 300 firms in the UK providing credit, banking, markets and payment-related services.

Where are they now?

The Brighton Gin team have moved to an industrial unit in Portslade, on the outskirts of Brighton, and continue to produce the high-end spirit, by hand, using premium ingredients including the fresh peel of oranges and limes, and milk thistle which is indigenous to the South Downs.

Wanting to reflect the birthplace of the gin, much thought has also gone into the design of the bottle, for example, the packaging uses ‘Brighton Seafront Blue’, the colour of the railings on Brighton seafront.

Now a blossoming team of seven, Brighton Gin has won over 20 awards from Sussex Gin Producer of the Year to international awards including Gold and Silver at the International Wine and Spirit Competition (IWSC).

“We still do everything absolutely by hand, whether it’s peeling the fruit or the waxing and labelling of the bottles. In fact, Kathy’s mum is our production manager and carries out this process. It’s all very hands on here.”

The Brighton Gin range boasts two premium gins – Pavilion Strength is the original gin produced by Brighton Gin; and Seaside Strength is a 57% volume gin which launched in the run up to Christmas last year.

Top 3 business challenges

1. The gin market is hugely competitive – there are more than 650 gins produced in the UK alone. Making a big noise and standing out from the crowd when we are quite small can be challenging.

2. Cashflow was a real headache for us. Factoring made a huge difference to our journey.

3. Our background is not in the drinks industry. There are things we know now that we wouldn’t have even dreamt of knowing a few years ago, whether that’s how to get a barcode or what temperature to melt wax at, it’s been a steep learning curve.

“There have been lots of mistakes. The challenges don’t go away, they just change. But we love what we are doing, and the amazing product we are making, so we’ll just keep doing what we’re doing, learning along the way.”

What’s next for Brighton Gin?

Brighton Gin is currently stocked in a variety of retail outlets across the South of England and beyond. The business is now expanding with exports to Denmark and Germany.

“We’re now in a position where we can scale up. We’ve got the capacity to be making more gin than we are at the moment so want to keep this momentum going.”

Over the next year or so Kathy and Ellie also want to expand the export market more globally.

“Kathy and I were recently in Hong Kong as part of a huge trade show sponsored by the UK government. We received a really positive response to Brighton Gin and the first pallet heads out there this week.”

The team is also aware that during certain times of the year, UK gin sales plummet, with post-Christmas budgets and the trend for Dry January having a huge impact on consumers. With this in mind, Kathy and Ellie have set their sights on targeting the Southern Hemisphere during their summer months.

“We want to target places where people are enjoying a G&T during the time that the UK and Europe may not be. It’s important to keep the wheel turning.”

Factoring is working well for Brighton Gin, but there are many other finance options also available for early-stage businesses.