Rachel Elnaugh shot to fame in 2005 as one of the investors on the BBC’s Dragons’ Den, but crashed back down when her gift experiences business Red Letter Days went to the wall, along with her career as a dragon
The main problem with Red Letter Days was that we over-expanded the business. It had run successfully for over a decade and generated over £100 million in turnover. I think we just tried to make it into something it wasn’t ready to be. In essence, we tried to go for a step change in growth and got it wrong. If I were to do it again, I would always go for organic growth over the longer term; it’s so much more stable.
I made the mistake of appointing a CEO to run the business and took a step back as part of the effort to grow quickly. Unfortunately it turned out to be a strategy that didn’t work. An entrepreneur is a very different animal to a director that is brought in; I can
see why business owners are often reluctant to relinquish control of their business.
Executives tend to think they can make money but in reality are often better at spending it. I’m now of the opinion that if they actually had the ability to be an entrepreneur, they would be doing it themselves. It’s far better to groom someone internally over a period of time and gradually hand over control.
The smart money
One valuable piece of advice that I’ve picked up is that there are smarter ways of raising expansion capital than bargaining with the ownership of your business. It is possible to hold on to all of it. A good example is Felix Dennis, who has built up an incredibly successful business in Dennis Publishing but kept hold of 100 per cent of it.
If you suddenly get a lot of money dropped on you, it can make you lazy. I’ve seen companies that have ploughed through a £100,000 seed investment without stopping to think. The moment you lose focus on generating sales, things start to go wrong. The vast majority of businesses don’t need outside funding and, without a doubt, the best form of finance comes from sales and profit.
Business is about being creative. If I dropped you on the side of the motorway with no cash and told you to meet me in Edinburgh, you’d have to get pretty inventive, pretty quick. You’d have to think about what you have got, maybe negotiate or see if there were any contacts who could help you out. It’s the same in business.
If you’re struggling with cash flow but your company has some intellectual property or you have a prototype and a patent, it could be a valuable asset and you need to make the most of that. You have to use that as leverage when you are negotiating service agreements.
On your head be it
The only person that is going to make your business work is you – it’s no use starting to blame someone else if things go wrong. There are no magic wands and nobody is going to come in and make everything work. It’s about taking personal responsibility and realising that your business success is absolutely in your hands. That might sound daunting, but it can also be empowering. It means that if any aspect of your business is holding you back, you have the power to do something about it.
Presumably you want to get your business to the next level so you need to be able to take a step back, stay in touch with the overall strategy and tweak the aspects of it that need adjusting, rather than being clouded by the day-to-day running of it. That is exactly what you should do if your business has reached a plateau or you are struggling; act when you see that there is something not quite right – it’s down to you and how much you want your business to succeed.
Presumably, if you started the business you did so because you love what you do.
I would say that the most successful entrepreneurs follow a passion rather than thinking ‘I want to make money’. People that do something they care about will naturally have the drive to make it work.