Project Chaiwala expands amid the pandemic

UAE-based home-grown tea concept Project Chaiwala was launched in 2017 as a pop-up by two friends, ex-colleagues and now business partners Ahmed Kazim and Justin Joseph due to their shared love for chai (tea). “From casual chit chats to brainstorming sessions, we have had so many conversations over chai,” recollect Kazim and Joseph. “We wanted to create such special chai moments for fellow tea lovers in the UAE.”

With the desire to create meeting points for people to bond over their favourite cup of chai, Project Chaiwala has slowly spread its wings. Having bootstrapped up to 2020 with their personal savings, just before the pandemic, Kazim and Joseph started their fundraising journey for future expansion.

Currently, the brand operates six retail outlets in the UAE at Alserkal Avenue, Dubai Media City, Ibn Battuta Mall, Dubai Silicon Oasis, City Centre Al Zahia and a brand new Two Leaves by Project Chaiwala concept at Time Out Market Dubai, along with its recently launched e-commerce site.

Pandemic hastens digital efforts

“The pandemic has taught us a lot, especially how to be agile in our decision-making to quickly adapt to changing consumer sentiments and needs,” Kazim says. “And implementing an agile methodology requires an understanding of the circumstances and shifts in consumer behaviour, which can be temporary or permanent in nature.”

For example, as the pandemic hit there was a significant change in footfall figures within Project Chaiwala’s retail business. Footfall figures declined to as low as 20 percent in some of the outlets, significantly impacting the brand’s revenues in 2020. “So, based on the market circumstances, we had to quickly implement some changes in the way we operated. As the first step, we had to increase our delivery service as people stayed at home. This meant accounting for delivery related costs through collaboration with aggregators.”

“We also expedited our digital efforts by launching a direct-to-consumer (D2C) e-commerce site in 2021 selling loose leaf teas, gifting items and more, which was part of our growth plan. It is already performing well and is expected to account for 35 percent of our revenues by 2022 and touch 50 percent by 2023,” Kazim shares.

Diligent financial planning leads to growth

Besides their shared love for tea, Kazim and Joseph who were consultants at Deloitte have another thing in common, an ability to dig deep into numbers. This helped them build a solid financial plan even before embarking on their entrepreneurial journey. By the time they decided to bootstrap for their start-up, Kazim and Joseph had already conducted the required due diligence to evaluate commercial viability of a concept like Project Chaiwala.

“Ever since we started the business, we have been diligently looking at the budgeted and forecasted numbers month-on-month to have a clear understanding of our financial health and plan our future growth. In fact, since the pandemic struck causing considerable financial challenges, we have been doing this exercise every two weeks to ensure effective cashflow management,” they share.

Such diligent financial planning also helps the duo to keep a close eye on operating expenses.

“Our per store operating expense is above Dh15,000 per month and the payback period (the amount of time it takes to recover the cost of an investment to breakeven) is less than a year. Since ours is a consumer-centric business, we are heavily dependent on marketing activities. An approximate monthly budget of Dh20,000 is allocated for marketing expenses across the brand. Having said that, the monthly budget varies based on seasonality and market conditions. Given our financial backgrounds we have tried to break down every detail to understand any possible expense that could come our way. However, unsurprisingly, there were many curve balls that eventually helped us to better understand cashflow management and grow the business.”

Why financial planning is crucial

Kazim credits his early education on financial planning in shaping him into a diligent entrepreneur. “Belonging to a family of merchants engaged in trading for decades, financial planning has always been deeply ingrained in my roots,” he says. From an early age he was taught the importance of budgeting. Even as he was given a monthly allowance, he had to carefully budget for every expense. “That was my first lesson around budgeting and forecasting expenses, so I didn’t exceed my monthly allowance.”

Both Kazim and Joseph agree that financial planning is crucial while starting a business. Sometimes entrepreneurs might be so passionate about their business idea that they overlook the financial groundwork. “Financial planning is one of the most important bits in entrepreneurship. It is important to understand the difference between cashflow and profit and loss (P&L) accounting.” While P&L indicates viability of the business model, cashflow reflects the financial health of the company. “Cashflows can make or break your business.”

As a message to fellow entrepreneurs, Kazim and Joseph suggest, “Diligently control cashflow and develop a clear understanding of fixed versus variable costs in your business. Take a leap of faith, but only after calculating the associated risks.”