FURNITURE DESIGN AND PRODUCTION.
COPENHAGEN, DENMARK.
Dnmark was launched in 2005 by designer and architect René Hougaard and cabinetmaker and product developer Jens Hornbæk. They met when Jens was working at a bigger Danish furniture company where René came to pitch his designs. Dnmark’s concept was based on the idea that the Danish furniture industry was stuck in an intermediate position between a constant demand for the designs of old masters like Arne Jacobsen and a pressure from the market to see something novel from Denmark. Rene and Jens’ company Dnmark is based on the philosophy of embracing simple design and functionality but combining it with the latest technology and Danish craftsmanship. This has resulted in products that are one hundred percent Danish design but at a reasonable price.
Of course, selling furniture involves more than a design on paper: prototypes and demonstration models need to be made. To be able to produce the prototype of what became their first hit piece, the Pablo chair, Jens called on his network. He presented the project to potential producers and asked them to believe in the project and share the risk by giving him as low a price as possible. In this way production costs were held to a minimum. Yet funding was still needed and to finance the production of Pablo, Jens and René went to several banks with their business plan. “Banks are banks” was Jens’ first response when describing how banks reacted to Dnmarks’ first business plan. In total they went to ten different banks which all had different excuses for not wanting to lend them the money needed:
The thing is that bankers don’t understand what we are doing. They basically think we are crazy; because I said no to a monthly salary, a fairly good one, to do a crazy project like this. They would basically say, well you are stupid.
It was a mix of different factors and political circumstances that in the end got them a loan from a bank. At that time it was the government’s policy to financially support start-up companies in Denmark. The government had therefore made an agreement with some banks to lower their risk in lending money to start-up companies by paying back 75% of the loan if the start-up company went bankrupt.
Design and prototypes are only the first phase and once orders come in actual pieces (chairs, tables, etc.) have to be produced and shipped: something that can be very capital intensive. Dnmark’s first project, the Pablo chair, became a big success and the company grew fast. The money Dnmark had borrowed to get started wasn’t enough and to finance the increasing number of orders they were receiving they needed more and more money to produce the furniture. Even though a financial gap between finalising production and getting paid for each order is a constant theme in furniture production these gaps led to struggles with the bank. According to Jens, the bank had put Dnmark on the ‘lowest shelf’ and they couldn’t get higher up to get better loans and more credit. As Jens put it, the bank didn’t understand Dnmark’s business processes so Jens and René were chasing their own tail, getting more and more orders so the financial gap increased and with this the bank became less and less understanding of their situation. The turning point for Dnmark was getting in contact with a financial adviser, Morten Lund, who soon became their business partner and managing director of the company.
Morten Lund was an experienced business man and it didn’t take him a long time to figure out Dnmark’s need for a full time employee or a partner that could take care of the business and financial aspects of the fast growing company. Morten became a partner in Dnmark and changed their approach towards the bank, which resulted in moving their business to a new bank with better service. Morten knew how to talk to bank people and as Morten himself said, it was more or less Jens and René’s own fault how difficult the communication with their bank had become since they didn’t know what to do and how to present their ideas and strategy. As Jens put it:
We could not have done it without him, because he knew his way around accounting and lawyers and talking to bank people the right way.
What Morten did is a mix of few things. He was experienced in dealing with banks, hence familiar with the financial environment. According to Morten, it is more important to present a strategy and financial plan to the banks, not necessarily business plans as such, like Jens and René did. The banks needed to get a clear and compelling message about the commercial value of the strategy with an emphasis on prospective returns on their investment. Jens and René know this now and say about their initial business plan:
Sometimes we take it out these days for jokes. We had a good idea about what we wanted to do but it was fairly naïve, I would say. Today we have changed from being a design company to being a production company.
You have to choose which way you want to go. You cannot do both. We tried that for a while but the production company just kind of takes over because you can’t run two companies in one, you need to be very specific and put your energy into one place.
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This is the tenth part of Volante’s series Creative Business. The series is a complete version of the book ”Creative Business: 10 lessons to help you build a business your way” (Volante, 2010). The book is available for purchase in an ebook version on Amazon or Lulu (Kindle, ePub or PDF), a paperback version distributed directly from the publisher and soon also a print-on-demand version distributed globally.
