The CA who swapped Big Four firm for morphsuits

By Robert Outram

1 September 2015

Graeme Menzies CA talks to Robert Outram about his move from a Big Four firm into the entreprenurial world of morphsuits, and his vision for the future of the costume company.

The combination of chartered accountants and suits is not an unusual one. It's less common, however, for the suits in question to be brightly coloured, all-in-one spandex body wear.

That's the case with AFG Media, the company that trades as MorphCostumes, where CA Graeme Menzies is finance director. From plain black or white suits to superheroes and monsters, morphsuits have been making their presence felt at Halloween parties, stag weekends and festivals for the last six years.

The business was founded by Ali Smeaton – at the time a CA working in the Barclays leveraged finance team – with his brother Fraser and their friend Gregor Lawson. The inspiration came on a stag weekend in Dublin in 2009, where one of the other partygoers turned up in a spandex "zentai" bodysuit. The reaction he got on the street was amazing, but the three friends believed they could get something produced with the same impact but of better quality.

From its origins in the Japanese fetish scene, the "zentai" was redesigned and branded the "morphsuit" and a global fancy dress phenomenon was born. The three started out with the idea that this was a money-spinner that could finance their next skiing holiday. While the skiing trip still hasn't happened, the business now turns over £10m, selling to customers all around the world.

A 'chance meeting'

Graeme Menzies came on board as FD in 2011 after a chance meeting with Ali Smeaton in Edinburgh. Menzies was working in transaction services with PwC, where he had qualified as a CA and he was back in the city after a two-year posting with the company in Sydney.

Graeme Menzies

Graeme recalls: "I wasn't looking to leave PwC as there were other departments I was considering getting experience in. However, Ali was getting to a pinch point with the business where they needed someone to look after finance full time. He had been dealing with finance, sourcing, logistics, warehousing and doing a decent job but… it was unsustainable."

He adds: "In the end, the draw of a small entrepreneurial environment, with the opportunity to get into the nuts and bolts of the business, rather than being a small cog in a big engine, was too hard to turn down."

From start-up to succcessful business

Helping to take the business from frantic start-up to the next phase was a daunting task, however. Graeme says: "I was the first employee up to that point. When I started there was virtually no process, no HR, nothing. We were starting afresh and it took me about three months to actually pay myself."

Graeme soon realised how hard it can be to stand back to take a look at how a business is evolving and how it could be better, when so much is changing rapidly day to day.

He says: "We're still a young business; it's unique and demand is uncertain. We don't have the luxury of a predictable pipeline for the next few years; it's all very variable. When you're selling fancy dress to consumers you just don't know what their demand will be as what's popular can change overnight."

Graeme Menzies

MorphCostumes started out as an online retailer selling direct to the public and to a small number of stores in the UK's fragmented fancy-dress market. A trip to the US changed everything when AFG signed a deal with Party City, one of the biggest chains in the sector with around 1,200 stores. Party City's order was worth £3m in the first year and £5m the following year; the business had to gear up for rapid growth.

At a small firm the reward may not be the same in the short term, but what you get back in terms of learning how to drive a business is incredibly satisfying

Around the same time, AFG also benefited from an injection of £4.2m in equity from the Business Growth Fund that allowed the business to gear up for growth. Graeme explains: "It's a good fit for us. At the time we had a small amount of cash and a lot of stock because we were having to grow our stockpile to meet demand. It also meant we took on a chairman, which gave us extra credibility, and more formal board processes. We could take comfort from the fact that we had a supportive partner behind us with deep pockets, which has let us invest heavily in people and infrastructure."

"It also pushes us to pull our heads up a bit more, from working in the business to working on the business. That's a really hard thing to do, even now. We are passionate about the operational side of the business, we love getting our hands dirty, but that isn't necessarily conducive to the big strategic thinking about where you will be in three years' time and how you are going to get there."

Achieving sustainable growth

AFG's rapid growth was built on the popularity of a new product, the morphsuit. Menzies is confident that the core product will see sustained demand, but he concedes that this market is now maturing. So how will AFG achieve sustainable growth?

First, the company has already reduced its dependence on large retailers, investing in the website to enable more direct sales to consumers around the world.

AFG is also investing in innovation and original, high-quality designs. Menzies estimates that design, set-up and people costs are around $30,000 for each new product – which means that each new costume is a gamble, but helps to put distance between AFG and its competitors, where NPD investment per design is generally much lower.

The draw of a small entrepreneurial environment, with the opportunity to get into the nuts and bolts of the business, rather than being a small cog in a big engine, was too hard to turn down

To help support innovation, the company has been working with Canadian spray-paint artist Kyle Langlois, whose monstrous creations have brought a new dimension to the morphsuit. And in 2013 it acquired Digital Dudz, the brainchild of a former NASA scientist, that combines tablet and smartphone apps with costumes to create, for example, graphically beating hearts and swivelling eyes.

AFG has also signed a deal with Marvel to bring out costumes as part of the Marvel superhero, Disney and Star Wars franchises. Graeme says the new "stormtrooper" suit, set to come out when the new Star Wars movie launches "is possibly our best costume yet. It combines the power of the franchise with our brand and our photorealistic print capabilities".

Diversifying the business

The biggest diversification, however, has come with the decision to sell general fancy dress – produced by other manufacturers – on the website, alongside the morphsuits.

Graeme says: "We are cognisant of the fact that there's pressure on how we continue to grow morphsuit demand. As a result we are looking at how to move from the niche of spandex into general costumes.

"We believe that we currently sell to only 5 per cent of the fancy dress market. Our product has inherent demographic limitations because not all males want to wear all-in-one spandex and very few females do. As a result, we feel that the next phase of growth will come from selling a broader range of costumes through the website."

The investment required to build the scalable infrastructure to support the next phase of growth means finances have taken a hit in the short term. In February, AFG recorded a pre-tax loss of £162,943 in the year to 31 May, compared with a profit of £1.08m the previous year. However, Menzies says the company is on track to realise its strategic goals and is excited by what the company has already been able to achieve against its objectives.

So, four years on does the move into spandex still look like the right choice? As Graeme puts it: "I believe I absolutely did the right thing... I can do my own analysis and implement that change immediately, whether it's in pricing, postage, customer service provision or something else. That's very rewarding.

"In the Big Four you have a career path, a decent salary and employee benefits. At a small firm the reward may not be the same in the short term, but what you get back in terms of learning how to drive a business is incredibly satisfying."

In fact, he doesn't see it as "work", Graeme says. "I love what I do!"

Graeme Menzies

This article first appeared in the September 2015 edition of The CA magazine. Find out more about Graeme Menzies and AFG media.

Graeme is a judge in the 2016 One Young CA competition, which recognises CAs under 35 who are making a difference to our profession and beyond. Visit for further details.


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