Theo Paphitis began his career at the age of 16 as a tea boy with Lloyd’s
of London insurance brokers. After gaining experience in retailing and
finance he started his own company at the age of 23 and since then has
specialised in buying up and turning round ailing companies, including the
stationer Ryman and the Contessa and La Senza lingerie chains. He recently
bought 61 Stationery Box stores. Paphitis is one of the dragons in BBC2’s
Dragons’ Den. In the fourth of a five-part series, he looks at how to turn
round an ailing company
Would you like to know the answer to that burning question I am constantly
being asked: How do you turn round those companies?
Well, I would love to tell you. But I am not going to. Because then I would be
out of work. All of you would be doing it.
However, I am going to share some important information with you, which if you
mix with your personality, stir in some hard work and add a sprinkling of
common sense, you should be able to cook up your own recipe to do what I do.
The most important rule is choosing the right target. Some companies can never
be turned round. Even if you spend the rest of your life and an endless
supply of capital, all you will do is end up being a busy fool. Choosing the
right target is the key to giving yourself a real chance.
But you also have to apply a lot of the elements I have talked about in the
past — focus, hard work and, most of all, identifying and knowing which
market you are in.
I personally am always drawn to brand. This, for me, is one of the most
important ingredients. A business that is recognisable, even though it may
be tarnished and punching below its weight or more likely staggering along
the ropes, can still give you a big advantage when you are relaunching.
While focus is of prime importance, do not underestimate the value of
opportunity. This is something that is constantly overlooked in many
business models. You can have the most detailed model in the world for
revitalising a business, but you must never be afraid of changing your
strategy when an opportunity comes along that you hadn’t planned for. And I
promise you that many opportunities will come along that many people ignore
because they were not in the original business plan.
This is one of the advantages of being a private business as opposed to a
public business where you would normally lay out your plans for investors to
scrutinise well in advance. For a public company, a deviation from those
plans might seem to send out the message that you are not clear and focused
in your aims. Private companies don’t have such difficulties.
There are some problems you will encounter that seem, at the time, to be
insurmountable. But, trust me, very few are. The first thing you need to do
is to break them down into bite-sized chunks that are easily digestible, and
avoid the bigger problems that are clouding your thoughts.
Nobody gets to the top of a mountain in one leap. You need to establish many
bases to allow you to consolidate or rest before tackling the next stage.
By adopting this approach, getting to the top of the mountain might take a
little bit longer, but your chances of achieving Next week: How to persuade
an investor to back you success and planting your flag at the summit are
that much greater.
There is also a lot to be said for the concept of JBDI — Just Bloody Do It.
Too much analysis will wrap you up in time-consuming and often confusing
meetings that serve no real purpose.
Make decisions. If you know your business, the laws of statistics will bail
you out. You will get more right than wrong. And by breaking down issues
into smaller parts, getting one wrong is unlikely to be terminal.
A hands-on approach cannot be overestimated. Your finger on the pulse is vital
in knowing whether the business is alive and well or dying on its feet.
The other key factor in taking a longer-term approach to the revival of an
ailing company is cashflow. This gives you time to put your plans in place
and for the company to recover. While a lack of profit in the short to
medium term is like a cancer and will eventually kill you in the long term,
the lack of cash is like a heart attack — the company will die right away.
Above all, make sure you are doing what you enjoy. This adds to your strength,
determination and endorses the three reasons for which we go to work: 1. To
make money. 2. To have fun. 3. Not to forget to make money.
Next week: How to persuade an investor to back you
