Founder Stories: Helping People Build A Stronger Financial Future
Co-founded by Luke Ladyman and Tariq Zaid, Cheddar is on a mission to help people build a stronger financial future. We spoke to Co-founder Luke Ladyman about the startup’s journey so far - and the ups and downs of founder life.
You are one of the co-founders of Cheddar, a payment and rewards platform, and recently won “Best Newcomer” at the British Bank Awards 2024. Congratulations! What is the mission you are working towards?
Cheddar's mission is to help everybody become financially better off - by giving them the tools to do so proactively, not reactively. If you look at the UK, 1 in 3 adults have little to no savings in their bank accounts1. While many people want to save they are physically unable to do so. What’s even more alarming is that 45% of UK adults would not be able to cover their cost of living after 91 days if they lost their source of income2. That’s where Cheddar comes in. We want to help people save money.
You started your first business back in 2012. How did you become a founder? Was starting a business something you always wanted to do?
I wouldn’t necessarily say that I actively wanted to become a founder. I qualified as an airline pilot at 19 - first with Easy Jet, then with British Airways. Pilot training is very expensive. It taught me very quickly about debt and interest payments - and it also created an entrepreneurial bone in my body. My basic expenses exceeded my income, so I had to do something about it. That’s why I started my first business – through necessity to supplement my income.
It helps that I’ve always been someone who wants to learn and have never been satisfied with just accepting inefficiencies in the way we live. I am comfortable not knowing things and operating under stress. You need to be able to figure things out as you go, dealing with known unknowns, and generating swift solutions for unknown unknowns as they land.
So how did Cheddar come about?
Financial literacy is not something that comes natural to most people. Many are not taught how to look after their money growing up – and it’s a fact that most tools and services designed to do this are not available to people with a poor credit rating or low savings, for example.
If you look back at 19-year-old Me, who had lots of debt because I was training to be a pilot: I would have benefitted from financial advice at the time yet banks tend to prioritise credit over saving and I saw this first hand: When my bank account first reached the fifty thousand pound mark of savings - that is when the bank first started calling me to discuss managing my money and investing. I remember thinking: “Hold on a minute. What about when I needed you when I had 50 pounds in my account?” That’s why the idea for Cheddar came up in the first place. To help people save and grow their money.
What are some of the biggest challenges you have been facing on your growth journey with Cheddar? What helped you overcome these?
The biggest challenge has been understanding the consumer. Trying to build a product that meets people’s unique needs isn’t a straightforward task. It needs to be “generic” enough to be applicable to small differences in people’s needs, yet specific enough for people to find it useful. You can put a lot of work into a new feature you think people will love. Yet, when you launch it, people may not like it. Getting this kind of feedback from customers is difficult and while you shouldn’t take it personally, it can be a challenge to not let it affect you in that way. Receiving feedback and actioning it in the right way has definitely been a challenge – but it’s a crucial skill to develop if you truly want to understand your audience and their needs.
What has been one of the biggest learnings on your founder journey so far?
One of the biggest learnings for me as a founder has been how important it is to have a team of people around you that you can trust. Being a founder involves a lot of risk and nothing calms your nervous system more than having people around that you can rely on. I would rather hire somebody who operates at 80% capacity all the time but I can trust them 100% , than hiring an employee who may operate at 100% but you can’t trust them to be reliable and make decisions that are in the best interest of the business.
As a founder, I have had to learn to trust my intuition here as well. I have hired people before who may have had a great CV but deep down I had a feeling that they had characteristics that could make working with them difficult over time – and that I couldn’t fully trust them. Ignoring those “red flags” was wrong and that is something I have had to learn the hard way.
Reflecting back on your founder journey, what piece of advice would you want to give first-time founders looking to start their own business?
There are two main pieces of advice:
1. Don’t build a business just for the sake of making money. Make sure you build a business around something you enjoy and care about. Being a founder is probably one of the toughest jobs out there and there will be so many parts of it that are unattractive. You may not enjoy monthly reporting, bookkeeping or VAT returns – it still needs to be done. At Cheddar, we are lucky to have Scaleup help us with all of that - but the reality is that for a while I had to look after the company finances myself. Staying motivated here would have become difficult if I didn’t care so much about the mission we are working towards at Cheddar.
2. Perfection doesn’t exist. It can be easy to fall into the trap of spending too much time on ideation and strategy – and never really executing your business ideas. The reality is that it will probably not be perfect and to really test your business idea, you need to build, launch and iterate. Whether it’s developing a website, speaking to potential customers or developing a prototype – enjoy the process and learn from it. These are the things that will eventually help you create a successful startup.
[1] https://www.money.co.uk/savings-accounts/savings-statistics#:~:text=According%20to%20savings%20stats%20from,money%20to%20fall%20back%20on
[2] https://fair4allfinance.org.uk/about-us/#whyweexist
FAQs
All the answers you need for all the questions you’ve got.
(But also TL;DR)
How should a startup business prepare its budget?
To prepare a budget for your startup, begin by listing all potential expenses you anticipate in starting and operating your business. Next, organise these expenses into categories. After that, estimate your monthly revenue and calculate the total costs required to start and run your business.
What are the key steps to creating an effective budget?
Step 1: Determine and track your income sources.
Step 2: Make a list of your cost. Include both fixed and variable costs.
Step 3: Set achievable financial goals.
Step 4: Develop a plan to meet those goals.
Step 5: Put everything together to build your budget.
Step 6: Regularly review and revise your forecast to ensure it remains effective.
What does capital budgeting entail for a startup?
Capital budgeting for a startup involves allocating a set amount of funds for specific purposes, such as purchasing new equipment or expanding business operations. This process is crucial as it supports making strategic investments that are expected to yield long-term benefits for the startup.
FAQs
All the answers you need for all the questions you’ve got.
(But also TL;DR)
How can a startup forecast its cash flow?
To forecast cash flow for a startup, follow these steps:
Step 1: Create a sales forecast by estimating the revenue your products or services will generate over the forecast period.
Step 2: Develop a profit and loss forecast to understand your expected expenses and income.
Step 3: Prepare your cash flow forecast, which involves calculating expected cash inflows and outflows. This can often be done for longer-term by using assumptions around payment terms to forecast a Balance Sheet, and using the movements in Balance Sheet and Net Profit/Loss to calculate the cashflow.
Step 4: Consider ways of improving cash flow by improving your invoicing methods, considering short-term borrowing, and negotiate better payment terms to manage cash flow effectively.
What is the most accurate method to forecast cash flow?
The most accurate method for forecasting cash flow in the short-term is the direct method, which utilises actual cash flow data. In contrast, the indirect method is better suited for longer term forecasting using projected balance sheet movements and income statements to estimate future cash flows.
How is cash flow calculated?
Cash flow is calculated by deducting cash outflows from cash inflows over a specific period. This calculation alongside forecasts of future cash flow helps determine if there is sufficient money available to sustain business.
How do you project cash flow over three years?
To project cash flow over a three-year period, undertake the following steps:
Step 1: Collect historical financial data.
Step 2: Identify all expected cash inflows, which could include revenue, investment, grant income, etc.
Step 3: Estimate all anticipated cash outflows including expenses, suppliers that need to be paid, investments into assets, debt repayments, etc.
Step 4: Calculate the net cash flow by subtracting outflows from inflows.
Step 5: Consider your cash reserves and explore financing options if needed.
Step 6: Regularly review and adjust your projections to ensure accuracy and relevance.
