In collaboration with Endeavor Global and Stanford University, the World Economic Forum recently released a new report, “Global Entrepreneurship and Successful Growth Strategies of Early-Stage Companies.” Click here to learn more.
The report, which demonstrates the importance of High-Impact Entrepreneurship in driving economies forward, includes interviews and insights from eight Endeavor Entrepreneur companies: DocSolutions, Globant, MercadoLibre, Petfor, Pharmacy 1, Refinancia, Technisys, and Yola.
In this special series on Endeavor’s blog, we are reprinting the published interviews with each Endeavor firm. Below is the section on Petfor.
Petfor is a Turkish recycling company whose major activity is the recycling of PET, a commonly used consumer plastic. Semih Yuzen, who had worked at his family business (Yalteks) where he experienced shortages of polyester raw material, started Petfor in 2004. Recycled post-consumed PET bottles can be used to produce polyester. Yuzen spent time in Italy studying the recycling business prior to establishing Petfor. Operations began in 2004 with a state-of-the-art plant that recycles plastic bottles and produces high-grade PET flakes. The PET flakes are cleaned and the recovered material used to produce plastic bottles. Yuzen became an Endeavor entrepreneur in 2006.
Semih Yuzen was born in Istanbul in 1970. He was 16 years old when he entered Istanbul University, and was one of the youngest graduates when he received his degree in business administration in 1990. He graduated from Pepperdine University in 1994, and worked at Yalteks between 1994 and 2001 as export and import manager. He took a year off in 2002 and travelled to Italy, and decided to establish Petfor in 2003. Money was raised through a bank. His father was the guarantor and all of the US$ 4 million loan was paid back 100% by 2009. Both his father and brother are chemical engineers. His brother lives in New York and his father has an asphalt processing business that supplies modified asphalt to the major road contractors in Turkey.
What was the source of the initial idea, and how did that idea evolve into a viable high-growth business venture? How did it change over time?
Yuzen: “I came back to Turkey after getting my MBA in the US in 1994 to work for the family company, Yalteks, which was already being run by my brother for three years. Although I was a 50% owner of Yalteks, I never thought it was mine and had to work as export/import manager for seven years. We had different ideas about running the company. Since he was the older and the more experienced one, I had to respect and continue working under him. We had to fight during the day and went out for drinking after work since we were (and still are) also best friends. It was really a strange and very difficult process. At that time, I was 24 years old and he was 30. We also had to fight against our father over business matters. He also had different ideas about how to run the business. We always managed to unite against him and that also brought us closer. The cash flow was always the issue. I was responsible for getting the raw material ready on time for production. I had to practice and learn the just-in-time concept. That helped me a lot, being able to run a business without money. At that time Yalteks had to import over 70% of its raw material from abroad and the most critical one was polyester felt, which was used as reinforcement in our products. Polyester felt is produced by 100% recycled post-consumed PET bottles and we were importing it from Italy, France and Holland. In 2001, we decided to run Yalteks differently and we let our production manager run the business. I took a year off and went to Italy to study Italian and recycling, and my brother decided to move to New York to open up a restaurant. In 2004, Petfor was up and running. The idea was to export PET flakes, which eventually would come back to Yalteks as polyester felt. At that time, we always dreamed about producing polyester felt one day using 100% Petfor’s flakes.”
What was the initial growth vision or aspiration of the founding team? Was there a sizeable change in this growth vision or aspiration over time? If a change, please describe.
Yuzen: “I always tried to keep it small and simple and looked for the talent inside Petfor. When this was not possible I brought in people. Pushing people to the limit and empowering them at the same time ensured loyalty. There has not been a sizeable change. Keep it small, efficient and under control. That is, I believe, the best method available. We are facing fierce competition and the learning curve is much shorter for them. As I previously mentioned, selling is not an issue. However, supplying enough PET and maintaining the quality is. For this reason we are bringing people from outside and increasing the number of people in production and quality control. We now concentrate on using existing personnel for getting enough bottles. We are opening new collection centres in various parts of the country; otherwise we will face a PET bottle shortage once we install the new line and double the capacity.”
Describe the strategy or business model that enabled your company to achieve its high rate of growth.
Yuzen: “Quality was the key to our success and still is. During the crisis, we were able to keep our customers with a higher rate of profitability. The margins were almost doubled because of the lower cost of input (PET bottles). We kept investing in new technology and that saved us during difficult times. We had an edge over our competition and Petfor remained as the benchmark for our industry. We also responded promptly to the claims of our clients. We always tried to come up with a solution that is the most convenient for them and they kept coming back.”
What were the major growth accelerators for your company in its high growth years?
Yuzen: “Again, quality, new technology and availability. We are always available and reachable not only by our clients but also by our suppliers. That is very important during difficult times.
“Other than quality, it was the freedom to make mistakes and learn from them. My father helped me a lot and gave me breathing space. Although I was only six months behind my initial business plan and break-even point, his support enabled me to concentrate on quality and establishing good relationships with my clients.”
Briefly describe the financing of your company and how this financing impacted the growth of your company.
Yuzen: “Family and the banks. Thanks to the family financing we were able to maintain high growth and profitability initially. That helped me taking risks.
“My cash flow was never in place despite the profitability. We were making enough money to pay the bills, however we had no bottles in stock. There were days when we were not able to produce due to bottle shortages. We were utilizing only 20% of our capacity. It was enough to keep going but not enough to grow. Because in recycling, you have to scale it to make it meaningful and really profitable.”
What were the major challenges your company had to handle in its high-growth years, and how were they managed?
Yuzen: “Recycling is a very difficult industry and requires a lot of working capital especially at the beginning. The answer to that is hands-on management. I still have my book open and I calculate the cost every single day (the price of what people eat, etc.) In the first three years, I was the first one to arrive in the factory and the last one to leave at night. I paid the salaries after shaking hands and thanking my workers personally during the first three years. That was also the case for our suppliers.
“Becoming a dependable supplier to the major European packing companies was also a big challenge. Getting the foot in the door and keeping it inside was difficult. I even learnt Spanish and Italian so that I could discuss the business and challenge them in their language (especially with their technical staff). But it has always been the quality that matters the most.
“In 2007, we started Ekosistem and invested heavily (both money and time) in this new business. In times it was frustrating because money and time was never enough. Instead we should have invested in Petfor and then in Ekosistem.”
Give examples of dark moments or negative periods that your PETFOR company or you as an executive faced as part of your journey with this company.
Yuzen: “Trying to run a company with limited cash was (and sometimes still is) the most difficult part. You have a million things in your mind and no cash in your hand. You have to wait, and when you wait too long there is always someone else who does what you were supposed to do. You lose the opportunity. That is really frustrating.”
What are the key lessons about entrepreneurship and successful growth strategies you take from your company experience?
Yuzen: “I would say success is dangerous. Once you start thinking ‘I am invincible’, that is the time when you are most vulnerable and you start making wrong judgments and mistakes. However, there is no better way to learn other than failing. You keep failing and making fewer mistakes. If you are clever, you don’t repeat the same mistakes but you make new mistakes, which I think it is acceptable. The key is to not repeat the same mistakes.”