A failed business venture, barely enough money to pay the mortgage, creditors knocking on the door and two young children underfoot – it’s enough to scare the heartiest of entrepreneurs back to a job. For husband-and-wife team John and Lotte Davis it marked the beginning of AG Hair Cosmetics. Lotte recalls their optimism back in 1998: “It was Christmastime, and we thought we really should capitalize on the lessons we had learned because we now knew how not to do it.”
That silver-lining outlook led the two to buy shampoo and conditioner by the gallon from a local manufacturer and bottle it themselves in their basement. They saved 35 cents a bottle in filling fees, and even more by hand applying a printed label. They borrowed $5,000 by taking out a third mortgage on their house, with part of that money going toward image – namely John’s. Lotte reminds John of the early days: “A new suit from Mark James and good-looking shoes, and you’d go around in our crappy family van, hide that, and walk in looking very professional and successful and somehow sell these two bottles with sticky labels on them.”
A year later, with sales of $176,000, the pair managed to attract a venture capitalist who offered them $50,000 for 50 per cent of the company. They talked him down to 33 per cent (which they would buy back a couple of years later for about 3½ times more). AG moved out of the basement. Cash flow continued to be a challenge. John and Lotte realized they had to sell their house in North Vancouver and put aside fears their visions might have been delusional. They expanded outside the Lower Mainland, and soon distributors were approaching them. “The growth was astronomical,“ recalls Lotte. “We were doubling the millions from 1.5 to 3.5 – it went very quickly.”
Today their manufacturing plant produces 42,000 litres of shampoo, conditioner and various styling products each week, with the $16-million-a-year business supplying 44 different products to more than 10,000 salons across North America. A tour of the plant reveals giant six-metre stainless-steel drums with multi-bladed mixers pumping product through food-grade pipes to the fully automated bottling line. When we stop in a back storage room, John pulls a contraption out from under a piece of plastic on a top shelf. It’s a rudimentary, homemade bottling system crafted out of eavestrough, some particle board and plastic tubes – a reminder of hurdles past.
In 2000 AG reached the $10-million mark in sales – a major milestone – but it was a tough time. John was in need of a kidney transplant and Lotte volunteered to be the donor. On top of that, they were experiencing entrepreneurial doubt. Lotte shakes her head as she remembers. “You think, ‘I don’t have the skill set to drive this any further,’” she explains. “We thought, ‘We’ve got to let someone else handle this now.’ We had that entrepreneurial lack of confidence that I think a lot of people go through.” They hired a CEO and stepped back to heal and spend more time with their then-teenage daughters. By 2003 the company’s growth had stalled and John and Lotte realized nobody could run the ship as well as they could. They gathered good people around them and got back in the driver’s seat.
Under their watch, the company has grown from $9.7 million in sales to $16.1 million in the past five years. They refuse to take all of the credit with Lotte claiming, “The secret to our business is the people.” John finishes her thought, the way married people tend to: “The product is just the starting point.”
AND THE JUDGES SAY... “Betting the family farm on manufacturing a product line to compete against world-class brands is no easy feat, unless of course you have the entrepreneurial spirit of all members of the AG team”