Theo Paphitis' 10 rules for business success
The Dragons' Den investor presents 10 tips to become a business success.
Our lives are ruled by rules. If you want to play the game,
whether it's football, cricket or even bridge, you have to learn
the rules and play by them.
In my business life I have followed my own rules: here's
your chance to find out my ten steps to business success and why
they've been so phenomenally successful for me.
Never underestimate the strength of the opposition. You only
have to look around the high street where some of the biggest names
are no longer with us.
1. Reduce the risk
I'm a great believer that risk should reflect reward. My whole
business philosophy is based on a risk-reward ratio. But it's got
to stack up. If it doesn't, don't do it. You might as well go to a
casino.
If you think you've come up with the business idea to end all
business ideas, ask yourself two things: what are the risks,
and what are the rewards? I never take ridiculous risks. I am
the most conservative person you will ever come across, and that's
because I'm good at reducing risks while leaving the potential
rewards high.
You've got to make sure that you've got all the information and
you know more about what's happening than the next guy.
2. Don't fool yourself
If you have a business idea, honesty is very important. I'm fed
up of hearing people say, 'everybody I have asked thinks my idea is
fantastic'. People say they believe in their ideas. That's because
they have conditioned themselves to believe in them. You have to be
honest with yourself about what you're doing.
Ask yourself how commercial your idea is. "Everyone is going to
want one," they tell me. Well, I don't want one, so not everyone
wants one. "I have given this to twenty people and they all said
they would buy one." How much did they pay you for it?
"Nothing." That's why they took one. "I've done my market
research," they say. No you haven't - you've given things away.
Beware of all these ways people delude themselves.
3. Know cash is king
Cashflow is king. Profit is sanity. Turnover is vanity.
A lack of profit is like a cancer. If it carries on for a long
time it will eventually kill you. But a lack of cash is like a
heart attack. If you can't pay the rent you shut down. You're
finished. If you can't pay the wages, it's all over. Don't be
without cash. You can live without profit but not without cash.
It's very basic and simple advice.
4. Embrace change
The retail environment is changing very rapidly at the moment,
partly because of the internet, which opens up a vast world at the
touch of a button. Internet selling means you don't need to pay
vast high-street rents and employ lots of shop assistants. You can
trade on eBay, you can have a lock-up and keep your products there
- it's fantastic, everyone can be a shopkeeper. The amount of
business being done on the web now is shifting the balance of
power. The internet has unshackled the business world.
5. Make decisions
One of the things I preach to all my staff is never be
frightened to make a decision. If one of those decisions turns out
to be wrong, identify it quickly and deal with it if you can. Don't
let that bad decision cause the business to bleed to death.
If you can't deal with it yourself, scream as loud as you can
so your colleagues can hear you and realise you're in trouble
and ride to your rescue. There's no shame in asking others to
help you. The shame is in keeping quiet, trying to cover up your
bad decision. Rest assured, it will come back to haunt you. Helping
each other is what teamwork is all about.
6. Weigh up the opposition - and
yourself
Never underestimate the strength of the opposition. You only
have to look around the high street wheresome of the biggest names
- household names at one time - are no longer with us. One of the
problems for these high-street giants is the nature of their tiered
system of management, where strategy and communication often get
misinterpreted and lost en route to their recipient - a bit like
Chinese whispers.
7. Start small
If you're an entrepreneur and want to start a business, start
small. You can start a business on your own or just with a partner
or assistant. It's only when you take on your first member of staff
that you're more than likely to encounter other problems. All of a
sudden you're managing the people as well as the businesses.
But remember, just because you have a good business idea that
looks like it's going to work, it doesn't mean you've suddenly
acquired staff-management skills. Legislation is now so watertight
- as well as being complicated and restrictive - that you have to
consider everybody's feelings and requirements.
8. Get your staff on board
In any business I buy, I get as many of the staff together as
soon possible. The first thing I ask store managers when
addressing them at such an event is who they think is the most
important person in the business.
I'm never surprised by the answer, it's always the same - the
customer. Not so, I say. Then they point to me. Wrong again, I say.
Eventually, I have to tell them the answer - and I point to all of
them, the workforce. They are the most important people in the
business.
Motivating staff is not just about making them feel wanted.
Tangible rewards are equally important, if not more so. Incentives
go a long way to help staff focus on the work they do.
9. Capitalise on other people's ideas
I'll let you into a little secret - despite having made a
fantastic living from my business ventures, I've never had an
original idea in my life.
Always remember that because something is innovative or uses
cutting-edge technology doesn't necessarily mean it's going to make
pots of money. Many inventions that were thought to be
technologically brilliant and ideas that seemed to have enormous
merit never made their inventors a penny.
Just as the road to hell is paved with good intentions, so the
road to bankruptcy is paved with good ideas. There are many good
ideas put to us on Dragons' Den that we don't invest in purely
because they ain't going to make anyone any money.
I'm often collared in the street by people asking why I didn't
invest in such and such a project. I have to explain that while the
idea was good it could not be translated into a money-making
venture. There is always the danger in business of making ourselves
into what I call 'busy fools' - taking a project, devoting time and
resources to it, and ending up with no financial reward. But when I
do find an idea - always someone else's - that I think will work, I
get off my backside and do something about it. That's the
difference between me and so many other people.
10. Turn your dreams into reality
There isn't much difference between a fantasist and a visionary.
We all have dreams - without dreams in business I don't believe you
can be successful. The trick is to turn those dreams into
reality.
You have to have passion for that dream. It's got to be something
you're going to enjoy, otherwise it's highly unlikely that you will
achieve your goal.
You must not, however, fall into the trap of ignoring the facts
and deficiencies in your idea. That's where a lot of people trip up
- they lose sight of the bigger picture and ignore the failings of
the idea.
Making £100m is easy. Making your first £1m is the difficult part.
You have to be passionate about your idea. If you can go to the pub
and bore your friends senseless about your dreams you're halfway
there.
It's imperative that you have an idea you really believe in, and
you also have to be absolutely determined you can make it work. But
if you don't attempt to do it, it will never happen. Don't let your
idea be the one that got away.
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