‘Dragon’ helps entrepreneurs scale heights
TV’S Den maven has tips for SA start-ups
JAMES Caan is best known to South African TV viewers from Dragon’s Den, in which entrepreneurs in the UK who have developed successful businesses are approached by budding entrepreneurs who pitch ideas in the hope of winning backing for them.
It is a tough — and entertaining — process as the Dragons find flaws in business models, products and plans before they decide whether or not to invest.
The BBC credits Caan with a £65million (R1-billion) fortune. He started his first company, recruitment firm Alexander Man, from a broom cupboard in 1985 and sold it in 2002, having grown it into a global business. It was sold again a few months ago for the equivalent of R5-billion.
Caan was in South Africa to share his insights into building businesses.
A key aspect to being a good entrepreneur was knowing what your strengths and weaknesses are and acting accordingly, he said.
“If there is an area in which you are not particularly strong, that’s where you hire somebody who is. For example, I wouldn’t say I’m an absolute genius when it comes to spreadsheets, but I have people in my business who are.”
Regarding what he wishes he had known before going into business, it is that anything that can go wrong, will.
Caan believes in the value of mentor- ship, one of the key aspects of the UK government’s Start Up Loans Company, of which he is chairman. It has funded more than 15 000 businesses and every loan recipient gets access to a mentor, “which I think is every bit as valuable” as the loan.
One of the key things Caan — who has more than 40 companies in his portfolio — tells his CEOs is that there is nothing wrong with making mistakes. In fact, it is something he almost encourages because it means they took risks and are learning.
Does he suggest going to study first, or going straight into business?
“I left school at 16 and within a few years I was running my own business. However, I always felt there was a gap in my life without that education, which is why I went to Harvard at the age of 42.
“Personally, I think education is a hugely valuable tool and it is something I would recommend to everybody, because that platform of knowledge can make you a better entrepreneur.” He advises entrepreneurs to:
Focus on the people in your business — products and services will not go to market without passionate and talented people. Get your recruitment right and you are halfway to success;
Keep an eye on your cash flow — cash is king. Many good businesses have failed because they did not have enough cash in the bank. Negotiating good payment terms is critical — it does not matter how big an order you have coming in, if you are getting paid too late then you will struggle. Remember that you cannot pay your staff and bills with an invoice;
Get feedback — rather than being paranoid and afraid to share your ideas, actively ask people for their opinions. The more people you ask, the more you can ensure that your business evolves and is a success;
Stay in tune with your customer needs — this means speaking to the people at the coalface of your business. They know better than anybody what customers are thinking, so get their opinions. Technology, particularly social media, also allows you to do this, so there is no excuse for not understanding your customers;
Have self-belief — if you do not believe in yourself and your business then no one will. The best en- trepreneurs are the ones who are truly passionate about what they do.
On the other side of the scale, do not be overambitious if you do not have the orders to justify it. Everything comes down to how much of a demand there is for your product or service, so only take the next step if you have a solid customer base.
One business, Chocbox, stands out from his days at Dragon’s Den. It is essentially a plastic box that makes electric cables a lot safer to connect. The entrepreneur behind it realised that the Dragons did not only provide capital, they provided experience and contacts as well.
Before he came on the show he was generating a million orders a year — clearly, his idea worked. What he needed was the ability to scale it up and within weeks of receiving investment he ended up with a lucrative deal with an electric retailer.
Dragon’s Den investments followed the typical venture capital model: about a third survived, a third flourished and a third failed.
The worst idea was from a couple who claimed to have the solution to the problem of one person encroaching on the other’s side of the bed: a white bed sheet with a black line down the middle.
“It was hilarious, but they’d spent three years working on it.”