AUGUST 1, 2005, was not a good day for Rachel Elnaugh. After two-and-a-half years of fighting to save the firm she had founded at 24, it went into administration, taking with it her dream of floating the business and making a fortune.

It was a spectacularly high-profile crash. Having been one of the Dragons on television’s Dragons’ Den, dispensing tough advice to would-be entrepreneurs, she found herself in the media spotlight, just days after she had given birth to her fourth child. “Looking back I don’t know how I managed to cope,” she said.

The experience of failing so publicly has had a profound effect on her. It also taught her several lessons. The first was that she should have acted sooner when she realised that Red Letter Days, which provides adventure and activity gifts, was in trouble.

“I didn’t take the problem seriously enough early on. I left it too late to get really good specialist advice. When you are an entrepreneur, you are a natural optimist. You always think some white knight is going to come out of the blue and save you.”

Her advice to others who find themselves in the same situation is simple. “Get really good people in early on. I am not talking about getting in a local accountant who happens to know a bit about corporate turnround, I am talking about getting some really shit-hot lawyers who know every trick in the book.”

Another big mistake, she said, was to limit herself to one rescue possibility. She knows now that if you are trying to keep a company afloat you must keep several options open – something she did not do.

“I closed down my options in terms of refinancing. I decided we only had time to focus on one deal but, of course, if that one deal falls through it is really difficult to get another deal off the ground because you have no time left. If I had kept three balls in the air there would have been three people vying against each other and if one deal had fallen through I would still have had two others. That was a big mistake.”

She was also wrong, she said, to be so trusting that other people had her best interests at heart. “One thing I have learnt is that you can absolutely trust no one, because everyone stands to gain from your downfall. If you are a small start-up business and you go under, nobody is interested because there is no value there. But when you are running a multi-million pound business, as Red Letter Days was, there is a lot of value for people to pick up from the ashes.

“Whether people are advisers or whether they are offering to help and do a deal, there is so much temptation for them to deceive you because there is lots of money at stake.”

She was particularly scarred by the large number of former employees who rushed to sell their stories to the press. “When I read an article in the Daily Mail called Red Letter Monster, I made a decision that I was never going to employ anyone again,” she said. “When you are running a successful company everyone wants to be your friend. A lot of people who I thought were my friends actually weren’t and that was quite tough.”

Elnaugh is aware of the importance of not dwelling on what happened. “After the initial melt-down you start to feel bitter about everyone who has betrayed you. But it is important to find a way of letting that go because otherwise you could just become a bitter old cow talking about the past. It is really important to forgive and forget.”

For someone with such a high media profile, Elnaugh found it particularly hard listening to what others were writing and saying about her without being able to put her side of the story. So six months ago she started a blog on her website, Rachelelnaugh.com , to respond to comments written about her.

Explore Entrepreneur

• SME

• Start-ups