Growing a coffee empire and viewing loans as an opportunity instead of debt | Leon Foo, Papa Palheta & Chye Seng Huat Hardware

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    26 March 2018

    Key Takeaways

    • Diversification should be a consideration when it comes to expansion. By doing so, business risks may be mitigated
    • Sometimes, such diversity allows employees to cross-function which in turn may lower turnover rates
    • Viewing loans as an opportunity instead of debt. Loans were critical to Papa Palheta's success as it allows the company to expand, bulk buy and venture into new opportunities.

    Entrepreneurs seek challenges endlessly. Once their small business is humming along, growth is the next exciting challenge. When it comes to expansion, funding is of vital importance. But some SMEs may view taking up loans as being in debt instead of a growth opportunity, while others may still be in search for answers to the question of what and how do you expand with the funds obtained.

    In this video, Leon Foo, founder of Papa Palheta & Chye Seng Huat Hardware shares how he sees loans as an opportunity and not debt, how he is growing his coffee business beyond the usual expansion route of opening a 2nd/ 3rd outlet, the importance of diversification while staying relevant, and how it has created a vibrant environment for both his customers and employees, potentially resulting in lower turnover rates.

     

     

    Like what’s been featured in the video above? Read on below for more in depth insights on his business and funding philosophies and how external help can give SMEs the boost they need to advance to the next stage.

    Papa Palheta started as a small coffee-roasting and wholesale business at Bukit Timah in 2009.

    Going into the business with a passion for beans, Leon realised that he didn’t want to just sell coffee but to create an entire culture.

     

    Beyond just a cup of coffee

    Leon says, "I feel very passionate about coffee because it’s not just a commodity, but also a lifestyle. It connects the farmer to the consumer. It also relates to arts, science, design, and even music."

    He understands the need to build a foundation for a coffee business that extends far beyond creating the perfect cup of coffee, and has since built an empire overseeing the distribution of quality espresso beans and equipment, to opening cafes, and even a business arm that educates about coffee.

     

    Business Expansion or Risk Stagnation

    Business expansion for Leon didn’t just mean opening bigger or more outlets.

    He took a different approach by moving upwards and sideways, which allowed room for further diversification.

    Today, Papa Palheta is not only a café; but a coffee company that deals in everything to do with coffee. Operated by Papa Palheta, Chye Seng Huat Hardware houses a cafe, roastery, and a retail space - the Annex.

    Catering to both consumers and other businesses like restaurants and cafés, the company:

    • Produces their own beans
    • Selling brewing equipment online and in retail stores
    • Own a coffee school that trains baristas and even coffee enthusiasts who want to learn a thing or two about coffee brewing and latte art, amongst the many other classes they offer.

    Leon adds, "We do not just make coffee, we also source coffee and we also supply coffee. Because we do those things, we also provide a one stop solution with coffee equipment and training,"

    "So when you put all this together, whoever joins the company can actually move sideways, upwards, backwards. They can move to the front of the house (customer facing), back of house, upstream, roasting or training."

    His out-of-the-box expansion plans created diversity in his business - a vibrant environment, more jobs for his staff, raises engagement levels and ultimately, higher staff retention.

    His out-of-the-box expansion plans created diversity in his business - a vibrant environment, more jobs for his staff, raises engagement levels and ultimately, higher staff retention.

    "So when you put all this together, whoever joins the company can move to the front of the house (customer facing), back of house, upstream, roasting or training."

     

    Loans – An Opportunity, not Debt

    Naturally, Leon worried about risk and debt as any SME would with expansion plans. But by being able to create so many different types of businesses within his coffee business, Leon was able to diversify and lower his risk.

    "For many SMEs, viewing debt is always something that they are super afraid of. You shouldn’t see loans as debt but as an opportunity or a source of funds to grow your business." Having a good grip of his finances meant having a good cash flow and knowing how to use it.

    Leon explains, “There is nothing wrong with leveraging. If the loan allows you to expand and build a business that allows you to pay the interest payments, why not? As long as there is careful planning, getting a loan will not hold you back, but propel your business to greater heights,”

    Leon explains, "There is nothing wrong with leveraging. If the loan allows you to expand and build a business that allows you to pay the interest payments, why not? As long as there is careful planning, getting a loan will not hold you back, but propel your business to greater heights,"

    Aside from various sources of funding, taking a bank loan was one of the good and reliable options of investment injections.

    Leon recently took up UOB Business Loan to fund his expansion plans.

    He chose UOB because the bank has a strong reputation of supporting SMEs. Through his journey with UOB, his knowledge for business and finance grew through responsive service managers who also gave competitive interest rates to the company.

    The loans helped the company cut its costs, by allowing it to do bulk purchasing of goods. It was able to achieve certain expansion plans and execute certain trades that they wanted to do to grow the business. Ultimately, this supplied the company the ammunition it needs to open a new type of outlet next year - store is that it will be run entirely by employees, also known as a co-operative, with part of the profits going to the staff themselves.

    This is another business diversification for Papa Palheta.

    Find out more on how you can expand your business with UOB Business Loan that provides SMEs with extra funds of up to S$550,000*, with no property or collaterals required.

    To sum up what he envisions the company to be with all the business diversifications, Leon’s ultimate goal is to connect people with coffee.

    Leon says, "This is beyond just roasting and serving coffee - it’s about the arts, science, design, music, and also the coffee drinking community. When we embrace all that, we can really feel this connection with people."

     

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