Secrets of a Serial Entrepreneur : A Business Dragon's Guide to Success

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ARE YOU AN ENTREPRENEUR?

Well, are you? There’s a harsh school of thought that says ‘If you’re not in business for yourself already then you’re not an entrepreneur.’ While it’s true that most of the entrepreneurs I know are pretty driven people, many of them did go through an apprenticeship with a big company, learning about business, finance and management, before taking off on their own. So, let’s say it’s never too late.

It is worth a bit of time to think about what an entrepreneur is and does and to take a close look at yourself before you take the plunge. By the time you’ve read this chapter you should have a pretty good idea if you are indeed already an entrepreneur or, perhaps more importantly, if you can become one.

Millions of people want to make a million but that doesn’t make them entrepreneurs. Thousands of people have an idea for a business, but that doesn’t make them entrepreneurs. Hundreds have entirely original ideas with great potential, but that doesn’t make them entrepreneurs either. So before you answer the question at the top of this chapter, let’s talk a little about just what is – and what isn’t – an entrepreneur.

I remember in Dragons’ Den when we had a chap called Alex with a product he’d invented called the Ladder Buddy and I asked him if he would say he was an entrepreneur. His reply was that ‘if creating things and changing things and enjoying changing things is being an entrepreneur, then that’s me.’ I stopped him and said, ‘No, that’s an inventor, you’re not an entrepreneur.’

Alex had come up with a good idea, he’d done a bit of market research (a subject I’ll come back to with a vengeance) and he’d found a gap in the market – but he was not an entrepreneur. He wanted to own the product – it was his ‘baby’ – and he wanted to make it himself, despite not being from a manufacturing background. I told him that if I were he I would just have licensed the product for someone else to make and sell, but he didn’t want to do that. Despite saying this, I still liked his idea and offered him the money he was looking for … but only in return for 70% of the equity of his company. I also told him that the product would be marketed on my terms and my terms only. To his credit, Alex swallowed hard but he accepted the deal – as he admitted himself afterwards he had had a go and taken the idea as far as he could. He was stuck and unable to go further. To get to the next level he needed someone like me. I’m not in the business of making DIY products. I’m in the business of making money. Alex recognized that. Most people don’t. Most people can’t distinguish entrepreneurial nous from standard good business sense, or having great ideas. This is not to say there’s anything wrong with inventiveness or good business sense, just that they are not to be confused with the attitude and aptitudes required to be an entrepreneur. Don’t think that just because you’ve got an idea you’re an entrepreneur, because if you confuse your creativity with the ability to make money out of it then you’re likely to waste your chances or end up making someone else rich. Assess your strengths, assess your weaknesses, realize where you need help and you’re already halfway there.

A breed apart

There’s no doubt about it, entrepreneurs stand out from other people.

I used to be a student at Strathclyde University and, like so many before me, I looked around for a job as soon as I graduated and found one in a legal firm. I worked there for literally two hours before I decided that it wasn’t for me. No, I tell a lie, it was probably more like one hour forty-five minutes. I found it difficult to accept – I had people bossing me about and I thought to myself, ‘No, it’s not going to be like that – I’m going to be my own man owning any business I work in’.

Nothing too unusual about that: there are other people who don’t enjoy their jobs much. Lots of people also love their jobs and the security of working for an established company. Not so many of those who dislike what they are doing decide to do something about it and walk out the door.

Within two days I had my own company. It was nothing to do with law either. I had a conversation with a man on a train who talked about his work in an IT department and I thought, that’s an interesting business sector, one which is obviously growing and where demand is outstripping supply. So I started an IT business.

Looking back on how I started, there are a few lessons to be learnt. Hating my job didn’t make me an entrepreneur. If that was all it took then many more of us would be entrepreneurial millionaires! Walking out of my job didn’t make me an entrepreneur either, but having the will to walk was part of the process. Finally, starting up my own company was the clear turning point. To get there you don’t have to be me, you don’t have to look like me and you don’t have to sound like me. You might not even have to walk out of that job (not just yet anyway) but you’d better have the ability to make it happen, to actually DO something. So when you ask yourself if you’re an entrepreneur, don’t ask if you have the hunger to succeed, or a good idea, or even better than average business sense.

All of those are needed, but you’ll also need a healthy helping of the following.

Do you have the strength of character to stand out?

Lady luck smiles on ordinary people all the time, right? Wrong. We all wish it were true, and we want it to happen so much that we throw our money away on the lottery hoping it will be us. The only real winner in a lottery is the organizer and beneficiary charities. Entrepreneurs don’t trust to luck – they make it happen. To make it big you have to be ready to take the lead and push things through regardless of whether that suits other people or not.

There’s a popular stereotype of the entrepreneur as a hard-nosed, ruthless, grumpy sort of person. That’s not entirely true! You don’t have to be rude to be an entrepreneur, but if your first concern is what others will think or whether people will like you or not, then you’re going to struggle to drive your own agenda. Just look at the name Dragons’ Den. I have a reputation for being hard on people on the show, but I’m not out to be rude to anyone. I just weigh the pros and cons of their business proposition and make my judgement. The ‘rudeness’ that some perceive is because I don’t worry about what people want to hear when I give them my verdict, I tell them how I really see it. If you can’t do that, or learn to do it, then you’ll never really be running your own show, on your own terms and to your own advantage.

Yes, in the end it’s your call; but if you don’t consult and never go with someone else’s idea then you will end up with a team of ‘yes men’ whose talent you will never truly tap.

Do you have the self-belief?

Not a shadow of doubt about this one. You have to believe in yourself all the way or nobody else will believe in you either. This goes naturally hand-in-hand with showing strength of character but it’s worth pointing out separately because some people believe that by acting like Sir Alan Sugar with a hangover they will automatically become more entrepreneurial. It’s not about having ‘attitude’, it’s about having a rock-solid faith in your own abilities, your game plan and your figures. Yes, your game plan and your figures.

There are a lot of successful entrepreneurs with strong characters and it’s tempting to get the impression that they got there by force of character alone. But if self-belief is the hallmark of successful people there’s a difference between blind self-belief, and unshakeable self-belief based on the confidence that you’ve done your homework, run your figures, re-run them, and come to the conclusion that you are on to a winner. It’s the difference between someone who thinks they’re Napoleon because they’ve just put on the funny hat, and someone who thinks they’re Napoleon because outside the door there’s a 65,000 man Grande Armée ready to do their bidding. Be sure of yourself by all means, but be sure because you’ve got the insight, the strategy and the resources, not just because the face in the mirror tells you you’re wonderful.

Do you believe in your product?

Just believing in yourself is all very well but it really is just the starting point. The next step is to come up with a business idea that you genuinely believe is excellent. If you have doubts about it then others will have doubts too and that may be enough to stall the whole thing. Many of the best entrepreneurial ideas come from people who recognize that they are their own target market. Knowing just why a consumer or client wants the service is a brilliant starting point and will give you the assurance needed to convince others.

Even that is only the first step, however. Truly understanding the worth of your product is a great base to work from but you also need to ensure that other people share your needs or tastes. If you’ve got the belief in the product, the conviction that there is a market out there, then the rest is a matter of juggling the figures and working out your route to market.

Now let’s go back to Alex and his Ladder Buddy again. He understood the product because he realized that it was something he himself would use. He had also looked around the UK and seen that he is not the only bloke with a DIY habit. He’d even looked further afield and seen that if it could work in the UK then it could perhaps make that leap across the Atlantic and in the process make him a very rich man indeed. Yet at that point he got stuck. Why? Because his instinct was to keep the whole project for himself. His self-belief had got him just so far yet he couldn’t quite take it to the next level. He had run into the wall of his own limitations and he and his Ladder Buddy couldn’t get over it without help. Which brings us to the next crucial belief …

Do you believe in others?

Alex didn’t think of licensing his product because like so many people with a ‘brainchild’ that is very dear to them, they can’t bear to hand it over to the care of someone else.

However, to be really successful you can’t just do it on your own. True, there are plenty of successful characters who like to give the impression that they made it to the top without the benefit of any help, but there are very few businesses which manage to be one man industries and hugely successful as well. Even worldbeating novelists usually acknowledge the debt they owe to a team of editors and publishers. If you’re hoping to make an impact in any area of manufacturing or service provision then you’re going to need other people, and for that you need to be a good judge of character.

Life in general, and business in particular, is all about people and once you’ve made your call then you have to believe in your people as much as you believe in yourself. A lot of entrepreneurs fail not because they have a bad idea, but because they’re not ready to trust others. You can only get so far without outside help. If you’re so attached to an idea that you can’t bear to hand it over to someone else to help you expand it then you’re not an entrepreneur, you’re an inventor, or a foster parent for a business.

Another group of would be entrepreneurs fail because they don’t understand that leaders don’t need to be liked. They need to be respected. They may be liked as well, but the first step is to be respected and trusted – which doesn’t necessarily mean being popular. The key to being respected (and it often leads to being liked) is to be straight with others, and for me the key that underpins being straight with others is the idea that I’ll trust them in return. If I tell someone I believe that they can do something then I mean it (or else they wouldn’t be there). People respond well to that kind of trust, they ‘step up to the plate’ and they become the kind of co-workers you always wanted them to be. Fail to believe in them and they start to believe that they will fail you.

Can you handle it?

Being an entrepreneur is a risky business. It’s all about seizing your chances and believing in yourself whatever the odds. People ask me all the time if I’ve ever had failures and I tell them of course I have. If you’re an investor and you make ten investments then, on average, six of them are going to fail, three will break even but it will all be worth it for that one that makes it – and makes it spectacularly. If you’re afraid of failing you are much more likely to fail because you won’t press home your opportunities. Most people fail for the simple reason that they don’t dare have a go in the first place.

Dominic Byrne, Radio 1 presenter and the presenter of Dragons’ Den Online, once observed to me that the stress looks immense for the people who come on and present to us. Of course it is. Public speaking is a terrifying experience for most of us and the show ramps that up enormously with TV cameras and a scowling bald Scotsman to impress (I’m not talking about co-Dragon Julie here). But what’s easy to miss in the shows is that the candidates aren’t the only ones under stress. Believe it or not, the Dragons’ pulses are racing too. The adrenaline is pumping when we’re in that situation. Get it wrong and you lose £50,000 of your own money. If we back a business that folds or miss out on a good opportunity we will be a laughing stock so we have to be careful when we’re out there making that decision.

I think failing to attempt something is more of a failure than having a go and not succeeding. But for a lot of us the prospect of failure is more embarrassing and frightening than the idea of doing nothing at all. Instead we prefer to play safe.

There’s a problem with ‘safe’ though. If ‘safe’ means not taking chances or trying to better our lot then it goes beyond safe and becomes a form of imprisonment. ‘Safe’ is what keeps us stuck at that desk in a job we hate. You might reasonably think that this book is about getting rich. It’s about something a lot more important than that. It’s about daring to take your chances and realize your ambitions. To peek out from the cover of ‘safe’ and decide that you like what you see and that you want to live a more challenging but ultimately more fulfilling life. Of course if you happen to become rich along the way I don’t suppose you will be complaining too loudly.

Are you prepared to make the sacrifices it takes?

Thomas Edison famously defined genius as ‘one percent inspiration and ninety-nine percent perspiration’. This is as true as it ever was but that sweat takes on many different forms. Being ready to be an entrepreneur means being ready to pay the price, whatever that means: the long hours, the loneliness of going solo or being in command, the investment of all of your savings. Remember that you don’t really make your money on an investment until you pull out of it so if you have a long-term exit strategy then make sure you can survive for the time it takes to see it through to fruition.

I don’t want to go on too much about the sacrifice: I certainly don’t want to put you off; but some people find it difficult to appreciate just what it means to go it on your own. It’s not just the risk that you’re taking but the small things as well. You’re not expecting just how many things will come along that you will have to sort out before you can get back to the main part of your work. A friend of mine gave me a good example of these little things.

‘The day after I left my job as a second line manager in a multinational, I was sitting at my desk in my one-roomed office making phone calls to prospective customers. The light above my desk went out; the bulb had gone. Now in my old job I would have told someone in my team about it and somehow, I didn’t know how, it would have got replaced. Now, though I was on my own.

‘To reach the bulb I needed a ladder; I had no ladder and certainly did not want to spend any money on something like that.

So I went out and borrowed a ladder from a shop nearby. I climbed the ladder and got the bust bulb out. Off I went in my car to a shop that sold bulbs and bought one. Back to the office, replace the bulb and take the ladder back – amount of time wasted – one hour and a quarter.’

So it’s hard work and you have to keep yourself and your family going through some difficult times; but everyone I know who has done it has found it worthwhile in the end.

Can you see the devil in the detail? Or does it make your eyes glaze over?

I’ve said before that just having a good idea doesn’t make you an entrepreneur; at least not by itself. In order to get to the next stage you have to take a cold, hard look at the numbers and that’s where I think a lot of people let themselves down when they come into the Den. I’ve said many times that Dragons’ Den isn’t some kind of game show. We’re there as genuine investors and I don’t care how entertaining an idea is or how charming the person is that’s presenting it, if there isn’t a gap in the market or if the figures don’t add up then I’m not going to put my money behind it.

I always tell the entrepreneurs to know their numbers well before they come on the show. The idea is that they’re not selling me a gadget, they’re selling me the business idea behind the gadget and that means they must have costings for manufacture and distribution, projected sales and profit margins. These figures are every bit as important as the gadget they are usually cradling lovingly in their arms. The same advice about making sure you have your numbers ready stands for anyone thinking of going into business for themselves. If you can’t show me the calculations for long-term predictions, a suitable exit point, a healthy margin and an idea of your total investment and return then you can’t call yourself an entrepreneur. If you’re unsure about finance then don’t worry, help is at hand in Chapter 6.

It’s not rocket science, but failing to get to grips with the figures is one of the most fundamental ways of failing to understand your own business. As a result it is also one of the main reasons why people with good business ideas end up filing for bankruptcy.

There are lots of reasons why people don’t do the numbers properly. Some people are afraid of the figures themselves. Chapter 6 will give you an idea of what you need to be able to master. If, after reading it, you’re still sure that you don’t have the necessary skill or temperament to master the finances then you’re going to need to find a partner whom you can trust absolutely to help you with the financial side of things.

Too many would-be entrepreneurs fail to fully address the issues of finances and plunge ahead with a vague feeling that somehow the finances will take care of themselves. That could be because of blind self-belief or an overpowering enthusiasm for the business idea. Either way it’s a trap. There is a list as long as my arm of smart people with great ideas who don’t find business success because they didn’t take into account the likely expenses or the plan for the necessary cash flow. Don’t be one of those people. If you don’t have what it takes to minutely plan your money then get help from someone who does. You wouldn’t let your family go short of food for poor financial planning so why would you want to let your business down that way?

How well do you know your markets?

We see this a lot on Dragons’ Den: our would-be entrepreneurs have ideas and spend a lot of time thinking about them. Then they go out and ask their friends or family what they think. Family and friends don’t want to hurt their feelings so they say that it’s great. Now our wannabe entrepreneur is firmly convinced that they’re on to a winner and the idea becomes an obsession. Even when their family and friends finally beg them to stop (usually because our entrepreneur is about to re-mortgage the house), they’ve convinced themselves by this time that they are right; there is a huge untapped market out there for their idea. What they haven’t done, for a minute, is think about or carry out any market research. The result is that a lot of the ideas we see are frankly ludicrous. They would never work, there’s no way anyone would buy them and no investor is ever going to back them. Whatever the wannabe entrepreneur has spent so far has been wasted money but they feel they can’t back down now. The next chapter goes into more detail about knowing when to pull out.

There’s a fine line here. I said earlier that you have to believe in yourself and not be too willing to please others. But that doesn’t mean that you shouldn’t find out what others think, just that you have to make the call about what to do with that information. I would say to a lot of the would-be entrepreneurs on the show that instead of talking to family and friends they should first explain their idea to a hundred people they don’t know and listen to what they have to say about it. In the days of internet blogs and Twitter, this shouldn’t be as hard to do as it may sound. Of course it could be that you have an idea that’s ahead of its time and people will struggle to understand its implications. In which case you’ll need the strength of character to push forward and make it happen but you will at least now know what kind of obstacles you are up against.

Coming back to the importance of knowing your market: a woman I was mentoring decided to take the market research thing very seriously. She wanted to open a shop on a busy street in a city. She wanted to check the footfall of passers-by going past the premises she was thinking of renting. She sat in her car for most of a day and then noticed something really interesting – it was much busier on the opposite side of the street than on the side her shop was located. She then realized that the busy side was also the sunny side of the street. Acting on that research she rented a shop on the sunny side. Now that’s what I call dedication and thank goodness she went to that trouble; customer footfall is of paramount importance in the retail business.

So, market research sounds like it’s about consultants and flow charts. However, just pounding the beat like the punter is often the simplest way of seeing things from their point of view and understanding their spending habits.

Are you eternally watchful?

Dominic Byrne, radio DJ and presenter of Dragons’ Den Online, once asked me what I did to ‘switch off ’ – whether I kicked a ball around in the park or went to the pub like everyone else. I do the kinds of things that other people do, but I told him I didn’t understand what he meant by ‘switch off ’. Because I don’t, and I can’t. I analyse things all the time.

When we checked into the hotel we were staying at for the programme shoot, the service was a bit slow. As Dominic said himself, all he wanted to do was get to his room, but I wanted to know why nobody was offering to valet park my car. There were three staff members in sight who weren’t helping us. Dominic still laughs and accuses me of being permanently engaged in time and motion studies, but I don’t see it that way because it’s a purely unconscious reaction. He saw some slightly unhelpful staff . I saw several key (and expensive) business resources that happened to be in human form. Those resources were not being used, which meant a huge waste of manpower when they could have been engaged in offering services for the business’s customers. If that had been my hotel there would have been a few choice words.

True entrepreneurs don’t switch off because they’re always looking at businesses they come across (from shops to hotels, from car dealerships to cafes) and asking if they could make them better. It doesn’t matter what kind of business it is and what kind of business you are in, they just can’t help but analyse other businesses and look for ways they would make them more efficient, more profitable, bigger or leaner. If you don’t have this kind of constant curiosity about how other businesses make money then you’re probably not going to be able to maximize the return from your own. If you’re not interested in other businesses then you should ask yourself if you are really interested in business at all, or whether it is just your own idea that you like. In which case you are, like Alex and his Ladder Buddy, more of an inventor than an entrepreneur and you should seek out someone who is more entrepreneur than inventor in order to make the next step.

Can you balance long-term thinking and planning with short-term action?

In the next section, you will have the opportunity of assessing your own suitability for going into business on your own. I have first to report from my own observations, and from conversations with people who have started businesses successfully, that the top person in a new and growing company needs to have ‘two heads’. That can either mean a second head in the form of a partner or, at the risk of developing a borderline split personality, it can mean constantly looking at the business from a different point of view.

The problem is the common one of balancing the pressures of doing business today against the longer-term thinking required to build the dream.

Without a long-term strategy, companies run the risk that the decisions they are making today will have a negative impact on results in the future.

But we have to stay real; business people are always under pressure to carry out urgent day-to-day tasks. They have to meet today’s objectives and overcome short-term problems. They have to respond to their customers, deal with staff issues, address an online problem and so on. Everyone is at some time involved in this day-to-day operational work or short-term planning. In a fast-moving environment it is little wonder that planning for the future tends to take second place.

If these statements are true for all organizations, they are all the more so for start-ups and small companies. A terrific-sounding long-term strategy is nothing short of disastrous if it runs the risk of running out of cash in the short term. Cash flow is lifeblood for a company and for a small business with smaller cash flow it is much easier to run dry than for a large organization with cash and credit lines sloshing around all over the shop. On the other hand, diverting cash away from strategic projects just to fund the day-to-day may cripple any hope for expansion. The two needs must be weighed up to decide where the biggest threat lies, but bear in mind that you only have the luxury of worrying about long-term problems if you survive the shortterm ones.

So, we come back to the need for two heads. The top of any startup company needs someone with a ‘can do’ and ‘do it now’ attitude – it needs someone who will discuss a problem, find a solution and immediately pick up the telephone to start implementing it. As for the solutions themselves, expect to need some fancy footwork at times, just to keep the business afl oat. No one has solved the particular problems you are about to face; there is no precedent as to the outcome of your particular situation, so one of your two heads has to spot solutions or activities that would be described by some managers in large companies as completely ‘off the wall’.

And yet, no one built a business without thinking about the future and how the future impacts on what we do now – the second head.

Some people, many of them entrepreneurs, can simulate the two mindsets inside their one brain, reacting, ducking and weaving with the best of them but also from time to time checking that they are not mortgaging the future or taking short-term measures that endanger the long-term goal. Others find themselves a partner and form teams of two where one person is clearly the
‘let’s do it’ go-getter, and the other is the more reticent, ‘just a minute, let’s think this through’ person. So, think on. Can you accommodate both mindsets simultaneously, or do you need a partner or a right-hand man or woman to balance your business?
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