Pension Led-Funding Case Study 7: DMACK Tyres
Dick Cormack has always been forward-thinking. At just 16, he left school to join his father’s milk delivery business and, surprisingly for a lad of his age, took out a pension.
It was this foresight that has helped to put him at the top of a global motorsport supplier business.
At the same time as delivering milk, Dick also became interested in cars; in particular, rally cars. He built them, drove them and soon joined preparation specialist Mike Little Motorsports in his native town of Carlisle. With a solid apprenticeship in rally car development, Dick then moved to a major tyre manufacturer where, after 13 years he had risen to head up its UK motorsport operations.
It was at this point that Dick felt he wanted to invest his expertise in his own business.
In 2007 He Set Up DMACK Tyres And Soon After Came Into Contact With Chinese Tyre Manufacturer, Yongtai
“None of the Chinese tyre makers had been involved in motorsport at that stage,” Dick explains. “But, I had complete confidence in the Chinese and their manufacturing base and Yongtai were very keen to work with me to develop a brand of motorsport tyre, particularly because of my experience.”
Initially, Dick aimed to sell own-brand tyres to the UK market. That meant finding development money to design and manufacture a single, 13 inch, tyre size to UK rally privateers. “Basically, we needed £150,000 to get to the point of production. Our bank was supportive but weren’t able to lend me the full amount and it was a case of ‘all or nothing’ for us.”
It Was At This Point That Dick Was Introduced To Pension-Led Funding
“At the end of the day, we were starting a business in the middle of the financial crisis and people were just laughing at us. But the pension-led funding advisers were prepared to listen and provide us with all of the facts on what we could or couldn’t do.”
One of the most important aspects of what DMACK could do was to use the Intellectual Property (IP) inherent in Dick’s tyre designs and potential product range to fund the business. To do this, the advisers worked with Dick’s accountant and recommended the use of IP-led pension-based business funding. This required a full, independent IP valuation and an assessment of the pension fund that Dick had started when he left school.
The results of both were surprisingly positive and, with the advisers moving Dick’s pension funds into a Director’s SIPP, £75,000 in finance was provided by the pension scheme, offset against the value of the IP, and a further £75,000 from DMACK’s bank.
DMACK Tyres Ltd Was Finally Rolling
The business began as Dick had envisaged: supplying a single size tyre to UK rally drivers. But, because of the combination of low cost, good design and excellent performance characteristics, DMACK’s market began to expand rapidly. “Before we knew it we were into Europe,” Dick comments, “then South America, Australia and New Zealand. Within a couple of years we had a business providing 28 tyre sizes and 50 compound and tread combinations.”
Ironically, in 2010, Dick’s former employers pulled out of the World Rally Championship (WRC). “Pirelli decided to focus on Formula One,” Dick explains. “Up to that point, I hadn’t even thought of the WRC, but I realised this was a real opportunity given my previous experience and contacts and decided to push the boundaries and go for the top level.”
Motorsport’s governing body, the FIA, put the WRC tyre supply contract out to tender. “In fact, the tender didn’t require too many tyre choices, so it was relatively straightforward for us,” says Dick. “We were chosen alongside Michelin as the two approved tyre suppliers to the championship. That gave us the chance to compete on a world stage and supply private drivers and factory teams.”
The deal turned DMACK into a global organisation: “This has elevated the business massively and we’ve gone from an unknown brand to a global brand that everyone recognises in motorsport. After being announced as a WRC supplier, we went overnight from literally selling a couple of thousand tyres to 10,000.”
Equally Importantly, DMACK Has Continued Its Relationship With The Pension-Led Funding Advisers
New Directors have joined the company, including international rally star Mark Higgins, allowing the SIPP to grow and provide further funding for DMACK and a new business that Dick and the team are creating to produce and supply standard road tyres.
According to Dick: “We’ve taken on four more people since the WRC contract and set-up a global network of agents, working on a commission basis to sell DMACK tyres. We’ve already got orders flooding in for our road tyres as everyone wants to buy them having seen the brand in the WRC. We’re even sponsoring our own WRC car and we scored a Fourth Overall in the 2012 Rally Argentina.”
More importantly, Dick’s foresight as a 16-year old, combined with the advisers expertise, has been a catalyst for success. “The advisers have been with us every step of the way, offering advice and support to provide funding through our pension scheme. Without this, we would have struggled to have even produced our first tyre.”
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