Challenge: Get funding for scaling a defence-specialised consultancy without a trading history

Solution: Sonovate funded RC Fornax based on their invoices and clients

Results: RC Fornax grows very fast and opens a second office in Bristol

 

Defence is an industry on the up. Conflicts around the world reminds us that the armed forces are on the front line keeping us safe, and budgets are rising to reflect this.

The upsurge in interest in defence keeps RC Fornax quite busy. It is a consultancy that helps many of the leading Prime Defence Contractors pivot from seeking labour based contracts to outcome-based packages of work which are executed by the best engineering talent in the UK.

Paul Reeves and his partner Dan Clark both served in the RAF, Paul as a radar specialist, Dan as an ICT technician.

“The proof of our model is the revenue we are generating. We’ve gone from a start-up to £5m in a year”

 

 

The challenge

The uniqueness of their business model

The RC Fornax model is ingenious. To help customers cope with the onerous IR35 regulations, the company pivots them away from labour-based contracts and over to outcome-based services delivered under a Statement of Work. In doing so, they become the IR35 determining organisation and absorb all risk from customers.

“IR35 was a mess when rolled out,” recalls Paul. “So many organisations stopped using PCSs (personal service contractors) altogether. They took a risk-averse approach.”

RC Fornax offers an ideal solution for big companies looking to hire contractors. “We look at their requirements and the tasks, then document the scope within a Statement of Work. Afterwards, our recruiters go out to the UK contractor market and put a team together,” says Paul.

“Much of our work is confidential, but I can tell you we’re working on next-generation platforms and investigating cutting-edge technologies to be included to maintain the UK position at the forefront of engineering excellence”.

The proof of the model is in the revenue RC Fornax is generating. “We’ve gone from a standing start to £5m in a year,” states Paul. “Our pipeline is ridiculously healthy.” But because of the lack of trading history, the company had big cash flow gaps which were slowing its growth.

 

The Solution

Why banks couldn’t help with funding

“Success is challenging. We began as two guys in a shed, and we got big orders pretty soon. Our clients have 90 or 120-day terms, and our contractors command a high wage. That means cash going out the door.”

The company needed funding. So, it searched for a funding partner able to finance its business model. “We stumbled across Sonovate,” explains Paul. “Actually, it was recommended to us. Sonovate takes a sensible view, looking at the risk profile of our clients. This is important. Banks want to see trading history. As a young company we hadn’t got any records or tax returns, so they couldn’t help us. Sonovate provides a bridge on invoices at a low rate.”

Bridging the cash flow gap with Sonovate

“Sonovate means contractors get paid on time, and the cash flow is healthy no matter what payment terms the end clients agree on”, says Paul. “It understands our market, so our partnership is really close. The funding has helped us grow over the past 12 months without worrying about cash flow.

The ability to access rapid, low-cost funding has meant Paul and Dan can grow without limits. “We aren’t afraid of taking on work,” says Paul. “Without funding, we might need to ask clients for down payments. Without Sonovate, we would not have experienced the success we’ve had.”

“Banks want to see trading history. As a young company we hadn’t got any records or tax returns, so they couldn’t help us.”

 

 

The Results

RC Fornax’s mission now is to keep growing!

“The staff of 11 will be increased. In addition to our Manchester office, a second office will open in Bristol, focusing on engineering delivery. There is a huge talent pool in the South-West, the majority of our customers have a base of operation there, and it’s close to the Ministry of Defence’s Abbey Wood site.” shares Paul.

Overall, Paul and Dan are confident they’ve got a suitable model for the long term. “Being an entrepreneur can be a rollercoaster,” admits Paul. “We’ve had tough times. Contracts we thought we’d win we didn’t get, people who let us down. And we’ve had tremendous highs. You go through every emotion. Every challenge.

You do things you never imagined.”

He reflects on the meteoric success of RC Fornax and concludes: “I’m so proud of what we’ve achieved. The next couple of years look really good for us.”

“The ability to access rapid, low-cost funding has meant we can grow without limits. Now the staff of 11 will be increased. In addition to our

Manchester office, a second one will open in Bristol”

 

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