Why a blend of prudence and adaptability is as important as a willingness to take a risk when growing a business.
Peter Cullum recently attacked the cult of the entrepreneur which eulogises qualities such as “passion, determination and commitment” while ignoring the core skills that are required to do the job. He probably could have added “risk taking” to that list; while an appreciation of risk is an enviable quality, it’s not the same thing as a proclivity for taking audacious punts. You’d be forgiven for assuming some of our most celebrated business builders are blind gamblers in light of the way their stories have often been portrayed.
It might be a side effect of the recession, but I’ve increasingly been hearing owner-managers talking up the value of caution. We used to be consistently regaled with tales of ‘sheer guts’and ‘embracing risk’, but, like Peter Cullum and Daisy’s Matthew Riley before him, Jaeger boss Harold Tillman is our third consecutive major interviewee to emphasise the virtues of prudence. “I invest cautiously,” he told me when I spoke to him in December. “We could have been more profitable and more worried. If you go with other people’s money, great, quadruple your EBITDA, service the debt and hope it keeps going up. If it doesn’t, people start blaming each other.”
That’s not a bad approximation of what happened to Cobra founder Karan Bilimoria last year, when his firm entered a pre-pack administration after ambitious growth plans backfired. Bilimoria eventually secured a joint venture with the giant Molson Coors, maker of Carling, but creditors lost out to the tune of £70m. It’s an experience that’s clearly shaken the genial Lord’s confidence.
We recently spoke to him about his plans to regenerate the brand. Perhaps unsurprisingly, rather than attempting to make more costly inroads into pubs and bars, this partly involves focusing on its original strength in the Indian restaurant market. He’s unrepentant about a growth strategy which saw bottom line profits sacrificed for headline grabbing growth, but he too has caught the caution bug: “There is no plan to do a Green and Black’s and Cadbury and treble the sales in three years. If that happens, great, but profitable growth is the key,” he said. The Cobra boss essentially blames the global banking crisis for Cobra’s downfall, and, not unreasonably, points out that “Nobel-Prize winning economists” failed to predict it. He does however espouse an “adapt or die” mantra which implies an acknowledgement that the days of gung ho growth are gone.
Rather than “risk embracing”, maybe “change embracing” is a better defining quality of successful owner managers. Our main feature in our March issue attempts to help you think about change management in your business. Plenty of millionaires boast about having never written a business plan. For some, planning is somehow anathema to the passion and creativity entrepreneurs like to emphasise. Other business owners write a plan to secure investment and then file it away and forget it. And yet the evidence suggests that owner-managers that have dynamic business plans that are agents of change rather than prescriptive, rigid and intimidating ‘road maps’ are more likely to be successful. As Peter Cullum put it, “markets disappear and emerge. The trick is to spot movement and not to become addicted to old and declining markets. You have to be passionate about change.”