Case study – Alton Garden Centre, Essex
How does your garden centre grow?
An Essex businessman who started in retail by selling eggs and potatoes at the door as a youngster has developed his business to become the largest independent garden centre in Essex - a business that is one of the UK’s top 20 independents in the sector.
The £10 million+ success story that is The Alton Garden Centre, just outside Southend-on-Sea, is the result of many factors but three aspects seem crucial. The first of these is the founder owner himself, Derek Bunker, a clear-thinking businessperson who is as passionate about his customers as he is about his family and his business. At an age when many people might have retired, 73-year old Derek Bunker works 6 – sometimes 7 – days a week at the garden centre for 9 months of every year.
The second factor was a chance meeting with an American banker on a cruise-ship who told Derek: 'When you get home, go and buy that land'.
The third factor was a great relationship virtually from the start with his Accountants, Goldwyns Limited, based in Southend. He is quick to point out that accountants (and bankers) can often be amongst those who can cause greatest harm to a business adding that, in the case of Goldwyns, they’ve stood by him through lean times and good.
Derek left school at 15 and worked as a junior clerk in the War office (now the MoD), marrying his first wife at 18 and becoming a father for the first time at 19. He moved to a job in Customs and Excise and, after the offices relocated to Southend where Derek worked in the import / export office, he found part-time jobs outside normal working hours to help make money.
At weekends, he worked at a sea-front general store at Canvey selling groceries, kiss-me quick-hats and other essentials. A second part-time job was private gardening work in the evenings and it was here he began to develop his knowledge of gardening. He sealed his interest in the sector by winning a prize in a local Gardening Club flower show – at the age of 18, one of the few young people involved. Winning a prize for a vase containing 3 flowers gave him the bug for exhibition growing. He was swiftly appointed Assistant Secretary of the Gardening Club, ran the members’ store and it was here that his love of retail combined with gardening was born.
He’d also run a business selling potatoes for 5 shillings a bag plus eggs door-to-door but swiftly realised it was a dying sector as farmers selling at the farm-gate undercut his prices.
It was in 1971 that he started what is now a destination garden centre with £1000 loan now working with his three sons, and seasonal help from his wife as well as a team of departmental managers to build the business to its present turnover in excess of £10m.
He rented land at the front of a nursery where tomatoes and geraniums were cultivated. It was at this point that he met - purely socially - the American banker who persuaded him to take out a mortgage to buy the 200ft square plot. He bought it and hasn’t looked back.
He has five adult children, three of whom work in the business: Andy (54) manages the outdoor plant area; Peter (47) runs aquatics and lighting; and Jay (34) is in charge of barbecue sales; with other managers running other departments.
His firm’s relationship with his trusted firm of Chartered Accountants has played a big part in the success story, Derek believes. He says: 'I worked hand in hand with Goldwyns – originally with John Bermon who was Senior Partner and with a then-junior accountant, Arthur Millman'. Arthur Millman is now the firm’s Senior Partner.
'I got their advice on all sorts of things, some major and some minor,' says Derek. 'In the early days when the bank was less than helpful Goldwyns have always advised me and it is nice because when you’re in business on your own, there are few people on your side. It was ‘them and me’ versus the bank. Goldwyns have always advised me on all on the options and we’ve always worked together. I’m not conventional. Banks want a cash-flow forecast. I don’t do that. I always said: ‘Tell me when the sun shines and I’ll tell you when the money will come in’. Goldwyns helped me jump through rings of fire to get the £4 million I needed to develop the business'.
Goldwyns’ Partner, Arthur Millman takes up the story: 'For many years, Alton Garden Centre operated as a partnership between Derek Bunker, as founder of the Garden Centre and his eldest son Andy, who himself has worked in the business since school.
'Some years ago, there was a major redevelopment of the garden centre given that buildings at the site had been added piecemeal over the years from when the garden centre originally opened in the early 1970s. The cost of the updating of the site was considerable and was funded by a £4m bank loan. Although the garden centre continued to trade successfully, the capital repayments of the bank loan had to be met out of income taxed at higher rates, thus making the true cost of the capital repayments excessively high.
'The transfer of the business into a limited company enabled Derek to introduce his other two sons into the management structure. However, the fundamental reason to transfer the business into a limited company was to enable capital repayments of the bank loan to be paid out of the company profits taxed at 20%, rather than out of personal income taxed at higher rates. There was a short-term cost to this project in that the company had to pay Stamp Duty on the acquisition of the garden centre, but this is more than outweighed by the tax savings achieved on the capital repayments of the bank loan.
'Furthermore, given that Derek is in his 70s, the bank was able to take a longer-term view on the loan as the whole family have shares in the company, and the opportunity was taken to restructure the loan over a longer period. In short, the annual repayments actually made are lower, and indeed far lower when the ‘tax cost’ is taken into account'.
Importantly, the company structure as it now is also enables Derek’s three sons, who will ultimately own the business, to achieve a more practical solution to succession problems when Derek and his wife Helen finally decide to withdraw from the company.
Arthur Millman adds: 'In essence, the effective reduction of the bank loan repayments has taken pressure off the company’s cash flow, and the fact that all Derek’s sons are now shareholders in the business within which they work gives them a direct interest in the success of the business.
'Sometimes it requires a little lateral thinking to achieve a result which has, in the case of Alton Garden Centre, enabled it to take multiple benefits from the restructuring process. Alton Garden Centre is now the largest 'stand alone' garden centre in the county'.
Asked about whether he’d wish to make this into a chain, Derek Bunker says: 'When I’ve got the best I don’t want the second best as well and I don’t believe in franchises. I believe in total control: that’s what I like. The managers come to see me and suggest what they want to do and if they don’t have a good reason, I send them away to re-think. It’s a very flat management structure. We don’t have a finance director because we rely on the good financial advice that Goldwyns has always provided. We employ 100 people full-time plus some youngsters at weekends and at Christmas time'.
He employs only people the firm can train. 'I don’t want people who think they know best,' he says. 'We home-grow them and make them into experts'.
Interestingly it’s an ethos that his Accountancy firm, Goldwyns, also practice as they prefer to train new accountants in-house.
The only thing Derek Bunker doesn’t directly control? His own garden. 'I delegate the gardening at home as I just don’t have time,' he admits.
www.goldwyns.co.uk
www.alton-gardencentre.co.uk/
his article was first published in Business Time in Essex (June 2017) and a subsequent version appeared in GTN (August 2017) which can be viewed here: https://issuu.com/gardentradenews/docs/gtn_august_2017