Success for entrepreneurs as new business all washed up on first day

PUBLISHED : Sunday, 05 April, 2015, 6:17pm
UPDATED : Sunday, 05 April, 2015, 6:17pm

When former banker Rex Chan Chong-choi set up his business last year, he washed more than 2,000 plates on the first day.

"After six years as a banker, I was just bored and wanted to be the boss. So I set up a dishwashing company with my friends. I never imagined I would have to wash plates myself," Chan said at his factory in Kwai Chung.

Chan and his co-founder, Marcus Yeung Yun, are among the new wave of entrepreneurs. They set up Chongtin Dishwash in early 2014 when they spotted an opportunity, since many restaurants are willing to pay up to HK$10,000 a month and still can't find people to do the dishes.

"Dishwashing offers no career path and is hard to attract young people to. We thought, there are untapped opportunities in this business," Yeung said.

Funding was their major hurdle. The two took out a loan of HK$300,000 from the Hong Kong Mortgage Corp microfinance programme. Putting it together with their savings and an investment by a friend helped them to set up Chongtin Dishwash.

The banks won't lend just because you have a good business idea. They want collateral. They want turnover record.
Marcus Yeung Yun

The company found customers even before they got to install a dishwashing machine. As a result, they had to wash by hand more than 2,000 dishes a day in their first days in the trade.

Now with the machine installed and a team of about 15 people, they no longer need to manually wash dishes - but there are other weightier problems that start-ups face, like competition, staffing and rents.

"Competition is tough. In the six months we were preparing to set up our business, dishwashing companies doubled in number. Some offer low prices for business from restaurants," said Yeung, formerly in the trading business. "We prefer to charge higher for better quality."

This is the first venture for Chan and Yeung, both in their late 20s. The initial investment is always the hardest, they said.

"The banks won't lend just because you have a good business idea. They want collateral. They want turnover record. But how do you provide a turnover record before you start a business?" Yeung said.

The HKMC's financial programme helps, he said, but the interest rate of 9 per cent doesn't.

"If the government wants to encourage young people to set up their own businesses, it should help offer loans at lower interest rates," Yeung said.

One year into the business, Chongtin, which services scores of small and medium-sized restaurants, has already broken even. "With almost 80,000 restaurants in Hong Kong, and the fact that many youngsters do not like to take up dishwashing jobs, our business has strong prospects," Yeung said.

Yeung and Chan may have seen success, but start-ups don't often get that lucky. Industry players believe half the start-ups fail, which explains why banks are reluctant to lend to them.

Ricky Tsang, managing director of CaSO (HK) Engineering, a local company which sells environmentally friendly construction materials, recalled the difficulty in coming up with the initial funding when he first set up shop about 10 years ago.

"I fell back mainly on personal savings and family help. It is so hard to get bank loans in the initial stages. They don't like to lend if you have no property as collateral and no track record."

A decade on, having built up decent cash flow, he can now approach banks. He said he has also benefited from the government lending schemes for small and medium-sized enterprises, but added those schemes should be widened. "If the government can help people with the initial funding, it can help more people to start up their businesses."