It’s better to start off with nothing than to fret about money
First published in The Sunday Times on 27th August 2017.
Starting a business doesn’t have to be complicated. Sometimes, making it simple works better.
To begin with, you don’t need a breakthrough idea. Lots of businesses start by chance rather than design. I discovered my calling by accident, at the age of 18. I was hosting riotous parties for fun in my university digs. The authorities threatened to kick me out. So my co-host and I persuaded the local nightclub, which was normally shut on Monday evenings, to let us use it that night to throw parties for our student friends, who would pay for drinks.
We then realised we could charge money on the door — and our student parties became a business. Consequently, my medical career started to fade from view. There had been no commercial plan — just a desire to meet more girls and avoid getting thrown out of university.
You don’t need lots of capital, either. In 1980, when we started our parties, we had no money at all. Obsessing about raising money can slow you down, and often leads to waste. Moreover, lots of would-be entrepreneurs use a lack of capital as an excuse to defer taking the plunge. Anita Roddick, the founder of the Body Shop, said in her book Business as Unusual: “Every element of our success was really down to the fact that I had no money.” That included the concept of recycling bottles, because she couldn’t afford to buy enough new ones, and painting the walls of her first shop dark green; it covered up the damp patches. Having no money forces you to be both creative and frugal — valuable skills for any entrepreneur to possess.
In 2017, a physical location is no longer a requirement for many types of enterprise, thanks to the digital revolution.
For example, WordPress, the software behind about a quarter of the world’s websites, is run by a 400-strong team who are mostly working from their homes scattered across 141 cities in 28 countries. This means the company never discriminates against potential recruits just because of their location. It can hire the best people from anywhere in the world. Big headquarters buildings are history; the most dynamic companies operate in a distributed manner, rather than via a traditional command-and-control model directed from the centre.
Another thing entrepreneurs don’t have to be endowed with is experience. Everyone starts somewhere, and from time to time those who don’t know what they don’t know can break the rules and succeed. Simon Mottram, founder of the cyclewear brand Rapha, which was recently sold for £200m, said: “I had no track record of creating clothing or building an ecommerce business. I had zero cycling experience, aside from over 30 years as a customer.”
You can always hire experts and obtain advice — and besides, when you’re starting out, making mistakes is how you learn.
Entrepreneurs don’t need to have received lots of qualifications, or come from privilege, in order to do well. This newspaper’s Rich List is packed with high achievers who lack university degrees, including the jeweller Laurence Graff, Mike Ashley of Sports Direct, the housebuilder Tony Pidgley, Phones 4u billionaire John Caudwell, Simon Cowell and Sir Richard Branson.
Others from humble backgrounds who are now billionaires include François-Henri Pinault of Kering, Leonardo Del Vecchio of Luxottica, Howard Schultz of Starbucks and the designer Ralph Lauren.
I have met plenty of business founders from modest beginnings who have an essential fire in their bellies partly because they came from nothing. By contrast, an awful lot of rich people end up with spoilt children who are entirely lacking in ambition.
Meanwhile, not every business founder wants to start an airline.
Huge ambition is not always appropriate; thousands are content to develop a niche operation servicing select customers, generating a decent living and making the owner proud.
There is a lot of focus in the start-up world on “scaling” businesses and becoming the next Facebook.
Yet that journey is only available to a minuscule number — and, anyway, it doesn’t suit the vast majority of entrepreneurs. As David Ogilvy, the legendary ad man, put it: “The pursuit of excellence is less profitable than the pursuit of bigness, but it can be more satisfying.”
What you must possess, however, if you want to build a genuine business is commitment, numeracy and enthusiasm. In a way, these personal characteristics — emotional and intellectual qualities — are the magic ingredients.
It is no coincidence that almost all of the best venture capitalists say management is the most important element of any business proposition — rather than the concept, or the financial circumstances. Ultimately, human capital matters far, far more than any physical assets.