The imminent failure of WhiteLabel NZ, liquidation next?
WhiteLabel NZ has a novel business model.
They are an outsourced sales & marketing company that employs business development managers (BDMs) across NZ. These BDM's have represented many large multinational IT vendors and distributors.
It was started and run by channel veteran John Booth.
The promise was that for around $3,000 per month, WhiteLabel would market a vendor or distributor's solutions and generate 10 customer meetings per month. Then commission would be collected on the actual booked sale if one occurred from the meetings.
This included a bunch of services from graphic design through to actual feet-on-the-ground sales meetings to channel partners across IT.
According to customers, Mr Booth often said there was 20-25 BDM’s on the road around New Zealand. While the number appears to be more like ten at any one time.
Over the last year the year the struggling firm has had large staff turnover with numerous BDM’s leaving, with some claiming to be owed not only their base wage but training commissions. The figures claimed to be owed to ex or current employees was sometimes over $100,000.
The business model was thought to be that out of the customer's $3,000 monthly invoice, half would go to the BDM in the form of a retainer. Although this appears to not have been paid in at least some instances.
On these numbers, for an IT BDM to earn the market rate of $150,000 to $180,000 per annum, each would need to represent 8 - 10 customers at any time. This would appear at face value to be a difficult task, including the promised 10 meetings a month for each of them.
About two weeks ago, a team member was promoted to sales manager, and another was promoted to COO. TechDay has removed the names of these two individuals, as they aren't directly associated with the companies failures.
Since the change, things appeared to have improved, with more organisation & sales activity occurring, according to sources. Although the original promise of cross-functional opportunity management and selling across brands still wasn’t up to scratch.
Also, the company announced two weeks ago that it was raising between $180,000 and $2 million on the crowdfunding platform PledgeMe. The prospectus talked about massive growth in Australia and the UK. It valued the company at $18 million.
"Fantastic opportunity to own a piece of WhiteLabelNZ as we take the company international," said John Booth, Chief Executive, WhiteLabel NZ
"A successful campaign will support the expansion of Whitelabel NZ in Australia, Canada and the UK and continue our New Zealand growth."
As of yesterday evening, $4,800 had been raised with 14 days to go in the funding round. Most of the six funders appeared to be friends and family of Mr Booth who wrote notes wishing him well with their pledges.
The way PledgeMe works is that unless the $180,000 minimum round is raised, none of the pledges are collected.
Also, in the last week, customers started receiving invoices and demands for the whole of their contract in advance, which to many, is a red flag of cash flow issues.
Although the company's office has not been updated as of the time of publishing, the sole director John Booth has sent an email to employees saying the company is in liquidation. Customers have also received emails today stating that the company is to close. This cannot be confirmed.
Other claims have been made that the company has been insolvent for a long time, owing employees' and suppliers' funds. Some have mentioned that the bank accounts are empty and money may have been misused. This cannot be confirmed either.
One of the sources put the blame firmly on Mr Booth, who, according to the source, has been facing marital issues as of late. This cannot be confirmed either.
While many facts are far from certain, the prospectus on the PledgeMe website has been removed today, along with any trace of its existence.
When asked for comment, Booth responded by saying that the business has struggled to get payments from accounts across New Zealand over the past 6-9 months, as small business tighten their spending.
"More than 63% of our accounts failed to pay their invoices on time at the end of November. With more than $330k in outstanding income that business cannot continue," he remarked.
He also claims that his two two spin-off business, WhiteLabelNZ Consulting and Vendorlabel, are trading well.
"These are tough times for Kiwi Startups," he says.