What I wish I'd known
One example concerns Entertainment UK (EUK) within the Woolworths group. I grew that into a £1.6 billion turnover distribution business that supplied Sainsbury’s, WH Smith, HMV, Zavvi, Amazon and Play.com. We would routinely challenge ourselves over customer service and on-shelf availability, because if Shrek 3 comes out and you haven’t got it on the shelf, you’ll lose the sale. The best product in the world can fail to reach the customer and the best service can fail to reach the end-user if there is a breakdown in the supply chain.
When the credit crunch hit, I had already left Woolworths. I left in the middle of 2008, having built two world-class businesses, including EUK, and with the stores breaking even. Subsequently, Lehman Brothers went bankrupt and there was a perfect storm that no-one could reasonably have predicted. To this day, I don’t know what happened after I left.
There are one or two things I might have done differently. At one point the business was going to be sold to [private equity firm] Apax for £856 million. If you’d had perfect foresight on that one, you might have asked whether that sale have been brought to a conclusion. We ran a very correct process and fulfilled all our obligations.
Part of the problem, I think, was that my management team, when giving presentations, were viewed very favourably by Apax. So to them it may have appeared that the business was already being well run and there wasn’t much more value they could extract from it. You can’t brief people to go in and fluff presentations. So we were a victim of our own success.
As for the asset-based financing I put in place, I still believe that was appropriate. You don’t put away £385 million of asset-based lending without the fullest scrutiny. Its advantage is that it flexes with the business, so as your costs reduce, you have more headroom. It was also covenant-lite. Most financing of retail businesses is fairly high-covenant, with a high fixed charge.
One lesson I have learnt about people is that you have to back your judgement. Most people want to give others a chance, especially in this country, where we still have this British sense of fair play. But if you don’t think someone is really up to their job, you’ll be right nine out of ten times. It’s better to part company with those people earlier on, when it can be done with dignity and an appropriate level of support for the individual, rather than giving people a year to prove themselves one way or the other.
Now I’m working on a start-up business, where the biggest costs are web development and people. For the moment, my business partner, Frank Varela, and I are funding it out of our own personal resources. We’ve been live for ten months and we have a network of 250-plus recruitment agencies and 3,000 referrers who are active in social networks. You can move so quickly with a small company, and building a brand from scratch is hugely satisfying.
My golden rule in business is don’t be afraid of failure. If you create stuff and try stuff, even if it doesn’t work you learn things and move on. Too many people won’t take that risk.