Theo Paphitis' 10 rules for 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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