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Entrepreneurship masterclass from Dragon’s Den’s James Caan

JAMES CAAN, who through the BBC show Dragon’s Den has become one of the most recognisable faces in business, visited us at Biznews today for an interview with Alec Hogg. It turned out to be a masterclass in entrepreneurship as the man whose innovative joint venture with the UK Government has led to the creation of 19,300 new businesses in that country. In this deeply personal interview, James shared pearls of wisdom and lessons everyone will be able to apply to their lives. He is candid in retelling his trials and warns of the reality of
becoming an entrepreneur with generous anecdotes of his experiences. If you are looking for inspiration and guidance, this interview is unmissable. James Caan’s humanity, honesty and passion shine through.  – LF
(Lucienne Ferreira)

ALEC HOGG: This podcast is brought to you by Sanlam Investments. We’re in the biznews.com studio with James Caan, an international entrepreneur, and author. I loved your book, James, that you had for sale last time you were in South Africa – ‘Start a business in seven days’. How long did it take you to write?

JAMES CAAN: Sadly Alec, it took me longer than seven days, actually. It was interesting, when I was thinking about writing the book, what crossed my mind was that the good Lord built the world in seven days. I thought ‘why can’t an entrepreneur start a business in seven days’, so I really broke the book down into very specific components of what the seven key fundamental steps are, which an entrepreneur has to go through to build a business. I’m delighted to say the book was a bestseller in the U.K., so it really did resonate so much with the entrepreneurial community.

ALEC HOGG: It’s a lot of your own story as well.

JAMES CAAN: I think there’s obviously a huge element of some of the mistakes I’ve made and the book is really more about failure, than it is about success. When I was writing the book, one of the key things that was very prominent in my mind was that 90 percent of businesses fail. What is far more important is to share the journey of failure with the entrepreneur, to make him aware of some of the roadblocks he’s likely to come across, and how you overcome those roadblocks. The one thing that I find – certainly, in South Africa – the big elephant in the room is failure and it’s the one thing we don’t talk too much about and it’s the one thing I don’t think we teach. Because there’s such a vacuum and an absence on the subject, more and more people fail in their first attempt at business.

Listen to the full interview:



ALEC HOGG:
There are lots of lessons that one can get from the book. As an entrepreneur myself, and having had businesses for decades, there was much I could learn from your experience. The one thing that came through very strongly, aligned with what you’re saying now about failure, is that you don’t lose your temper. You keep calm and you suggest to others that perhaps they don’t get as emotional as people sometimes do when they think about starting businesses.

JAMES CAAN: One of the reasons I feel very passionately about that is as an entrepreneur, you’re a leader and when you’re running a business, everybody looks to you for guidance and for inspiration. One of the things I feel very strongly about is if you as the leader of your business are demonstrably showing that you’re losing your rag or you’re losing your cool, what signs are you sending to the people who work with you? Therefore, I think you have to be somebody who has to be quite considered and quite composed, because if you are showing that you can’t cope, then what chances do the people have around you in dealing with the challenges the business throws at us every single day.

ALEC HOGG: Are you naturally like that?

JAMES CAAN:Yes, I am.

ALEC HOGG: Your background is fascinating: your dad coming to England from Pakistan, and knowing no English, reminded me a little bit of Rose Blumkin in the United States. She knew no English either. She was a great entrepreneur – great success. From your perspective, not really seeing too much of your father presumably, during the day time…

JAMES CAAN: Clearly, yes, very much so. I think that my father absolutely played a key role in some of the success I’ve achieved and the one thing that was so prevalent in my life was the work ethic. The one strong characteristic of entrepreneurship is that there are no part-time entrepreneurs. You’re in it or you’re not, and if you’re in it, you’ve got to win it. What he demonstrated to me was the only way to succeed is if it’s a 24/7 existence. If you’re not up for that… If that’s not what you’re really about, then entrepreneurship is probably not for you. The one that is absolutely certain is that if anything can go wrong, you almost certainly know it will go wrong.

ALEC HOGG: What about balance? It’s such a new age…

JAMES CAAN: It is new age. For me, balance is about quality of life. It’s about making sure that there is a balance in your life. I’m not sure how many entrepreneurs I’ve met that could really put a hand on heart and say they’ve cracked it. I am certainly not somebody who would say I’ve cracked it because unfortunately, you become so much on the treadmill and along the way, you make a lot of sacrifices. You sacrifice family time, quality time, and your own time for the needs of the business. As I was building my business I had two daughters and sadly, I didn’t see them as much as I would love to have done, but I think it’s a sacrifice that you make because you almost become married to your business because the business lives because of you. You are the breath that the business needs to exist. Sadly, it is 24/7. You can’t really control that.

Things go wrong and you as the founder/entrepreneur are probably the only one that is able to resolve the challenges or deal with those issues, and you can’t necessarily predict when they may or may not happen.

ALEC HOGG: So, now what you’re getting into. James, your father… In your book, you say that he left home at 7:00am and he got back home at 11:00pm. Do you work that hard?

JAMES CAAN: Unfortunately Alec, I do. I’m normally in the office by 7:30. I finish work at around 7:30 and pretty much five nights per week I have either an event or a dinner engagement. I have a wardrobe at the office, so I literally finish work, get changed, and I’m out. Normally, I’m home by 11:30/12:00.

ALEC HOGG: I hope you love what you do.

JAMES CAAN: The only reason I do what I do Alec, is because I absolutely love what I do. I don’t think you could do what I do at the pace that I do it, if you absolutely didn’t love it. I’m in a very unusual and unique position in that money isn’t the driver for me anymore. If money isn’t your driver, then there must be something that makes you want to do that. For me, there is no question that I absolutely adore what I do but also, because what I do, I truly believe makes a difference. Making a difference and transforming the lives of other people is a sensation… It’s a reward that is absolutely irreplaceable.

ALEC HOGG: Is that what drives you now?

JAMES CAAN: Absolutely.

ALEC HOGG: It’s to do with others.

JAMES CAAN: Yes.

ALEC HOGG: Service in the best way you can.

JAMES CAAN: In addition, what I’m doing is I’m using the thing that I love the most. I’m using the thing that I’m most passionate about, which is the journey of entrepreneurship. I’ve seen and I’ve recognised that by giving people the opportunity to create their own business – to start their own business – absolutely transforms their lives, and actually transforms the communities that they live in. Therefore, if you’re able or privileged to do that, it’s an amazing achievement and I think if I look at what I’ve been doing in the U.K. with Start-up Loans: in two years, I’ve started 19,300 businesses and have literally created thousands of jobs every month. The sensation, the feeling, and the achievement of being able to do that, is better than any deal I’ve ever done in my life.

ALEC HOGG: Your own story, James… People look at you now. You’re on Dragon’s Den. You’re highly recognisable in most countries of the world, but you left school at 16. Do you ever feel that you should have perhaps stayed a little longer, perhaps done the undergraduate/graduate route?

JAMES CAAN: It’s the one thing that, when I look back on my life, I always regretted because I do believe that entrepreneurship is no certainty and it’s no guarantee. If you are fortunate enough to have had a good education or maybe have a degree, at least you have something to fall back on in the event you decide entrepreneurship is not for you. When I look back on my life, it probably wasn’t the smartest decision I made and as a consequence of that, when I got to the age of 42 and I sold my business, the first thing I recognised that I needed to address, was the balance of education. At the age of 42, I therefore went back to school, went to Harvard Business School to do a degree there, just so that I could feel that I hadn’t lost out on probably what everybody else around me had, which is the importance of having that educational platform.

ALEC HOGG: So with youngsters now at the age of 16 wanting to leave school, seeing an opportunity, and wanting to be the next James Caan, you might suggest they take a different route.

JAMES CAAN: What I would say to them is they have the rest of their lives ahead of them. Life is not a race and being an entrepreneur is not a race. Given the opportunity in a balanced environment, my advice would be is to get your education, get the platform that you need, and on the back of that, go ahead and build a business. However, to give yourself an opportunity where you’re depriving yourself of a solid education is probably not something I would recommend.

ALEC HOGG: Your education has come in many different ways as it has with many entrepreneurs. I love the story about the £65,000.00 cheque in your book that was outstanding, and meant you wouldn’t be able to pay the staff at the end of the month. It’s something that I think many other entrepreneurs would not think that you would have gone through, but they see it fairly often.

JAMES CAAN: Yes, I think that’s really the point of the journey Alec, which every business goes through those difficulties where, to be a successful entrepreneur, you have to have lived through some of those traumas and some of those dramas. As with a lot of entrepreneurs, I found myself in a position – on a Friday – where I couldn’t pay my staff. We were expecting one of our big clients to have paid us that week. They promised the cheque was coming. It didn’t arrive and there I was, facing my whole team and not really knowing how I go and tell my workforce that unfortunately, I can’t pay them. I was thinking of all sorts of creative ways of communicating that message. Eventually, I concluded that the only way that was right was actually just to tell them the truth and just to say ‘listen, I’m really sorry. I absolutely value all of you dearly. I fully understand.

Because I can’t pay you at the end of the month, if you need to find something else, I would not hold it against you. I would fully understand, but please support me through this very difficult journey. I believe in the business. I believe we’ll get over this issue, but right now – today – we are in a position where we’re not going to be able to make payroll on Monday’. To my amazement, because I was open and I was honest with everybody, everybody supported me. Fortunately, within the next ten days, the cheque had come through. The first thing we did was make sure that everybody got paid. Just to illustrate our satisfaction, the following month we decided to pay them a week early, just to demonstrate the importance of what they had shown us. I’ve had many circumstances Alec, where I’ve not been able to make the payroll.

I’ve wanted to hire somebody, but I couldn’t because they wanted a company car and the company wasn’t old enough to get a lease to be able to give a company car. I’ve been in a position where I’ve wanted to move offices, but the accounts at the company were not strong enough in order for us to get a lease. Like every entrepreneur, I face pretty much exactly the same challenges, but what entrepreneurship teaches you is that there are going to be barriers along the way. However, the strength of any entrepreneur is to find solutions to those problems because if you think hard enough, and if you work hard enough, there is always an answer. Generally speaking, it’s finding a compromise that may not be exactly what you thought, but it will certainly get you through that particular period.

ALEC HOGG: And don’t panic.

JAMES CAAN: Absolutely. Don’t panic.

ALEC HOGG: What other lessons did you learn from that particular experience? You’ve already explained ‘be honest, tell people what’s really happening’. The other thing was ‘don’t panic’ and you didn’t. I guess many other people would have rushed around, tried to find a loan somewhere, and run out of ideas. What other lessons?

JAMES CAAN: A lot of people at that moment in time would probably have gone out of business, which is more the convention that actually happens. I think the other thing that’s probably more important to me and the key lesson that I learned, was that one thing that a lot of entrepreneurs do – and let’s be honest. A big issue for me… What I did afterwards – and I think this is one of the key lessons you learn as an entrepreneur – is we always learn more from our failings than we do our successes. At the end of the day, when I got home that evening, I had failed my business because I wasn’t managing the business correctly, because I was working with clients who were not good at paying me. The reason why is when I was winning business, I was so concerned about winning the deal…I was so concerned about protecting the margin, that the one fundamental mistake I made is that I didn’t spend any time with my customers, talking about what their payment terms were.

In this particular example, when I look back, if I’d said to that client ‘we’d be delighted to work with you. We’d be happy to work on that margin. However, our payments terms are x. Are you comfortable with that?’ Maybe at that time they would have said ‘well actually, no we’re not, because we pay 90 days’. ‘Unfortunately, 90 days doesn’t work for me because my staff get paid at the end of 30 days, so how can I do that huge piece of work and get people to work on that, but knowing I haven’t got the revenue to cover it?’ Subsequently, after that bad experience I made it absolutely clear that every time we won a piece of business, the one question we never forgot to ask is ‘what are the payment terms’. If they were 90 days, I would negotiate upfront and say ‘in the event we were to give you a small discount, is it possible we could be paid within 30 days?’
I would either negotiate the payment terms, provide a discount or if I had to reduce the margin, because the one thing I couldn’t afford to do, was get to a position at the end of the month and not have enough money to pay my overheads.

ALEC HOGG: It brings us full circle, doesn’t it? When one starts a business, you get enthusiastic. You look at the upside. You don’t think about the potential obstacles like cash flow etcetera, but if you go in with your eyes wide open as you advise in your book and advise when you’re talking to entrepreneurs, sometimes you might find that that’s not a business opportunity to go into.

JAMES CAAN: Yes, and the key thing for me on that particular issue, is recognising that a lot of business ideas are actually never going to work. One of the key lessons that I can share with people is the first thing to accept and understand when you are an entrepreneur, is to understand that your first idea does not have to be your best idea. If it doesn’t work out, then please have the opportunity to come back and have another go. The only way you can do that, is to be very careful at the outset when you try to implement your plan. If it’s going to fail, then make sure it fails quickly. What I really mean by that is try and understand what those pitfalls are, and get to those pitfalls very quickly.

ALEC HOGG: Scramble out of your mistakes.

JAMES CAAN: Absolutely. Otherwise, all you’re going to do is end up taking a year to work out that it’s not going to work. Unfortunately, by the end of that year, you’ve run out of money and therefore, you don’t have the opportunity to come back and fight another day.

ALEC HOGG: It’s been a privilege. James Caan from the Dragon’s Den, bestselling author, and of course, the man who hosts Business Class with James Caan on CNBC.


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