Entrepreneur, investor, author and TV personality James Caan seems even more enthusiastic than usual, perhaps partly because work has finished on a new seven-part TV series he is fronting called The Business Class, which will soon be hitting our screens in the UK on CNBC.
Caan is joined by experts from various sectors who help him to advise seven British SMEs, each facing different challenges, each at different stages of growth, from start-up to those looking to raise finance, expand internationally and considering flotation or selling their business.
“Making the programme was incredible – it really was a joy,” he beams. “It’s been a while since I’ve done TV, so it was great to get back to it. Helping entrepreneurs is what I enjoy most. I came into contact with some amazing businesses and people. It’s fascinating when you come across something new. I’m inspired by the sheer creativity and innovation of those who find new niches or opportunities. The passion, drive and motivation of such people wanting to build successful businesses seemingly from nothing – well – it’s great to see,” he enthuses.
“The passion, drive and motivation of such people wanting to build successful businesses seemingly from nothing – well – it’s great to see” – James Caan
Mann on a mission
Super wealthy Caan has been there and done it himself, of course. He left school with no qualifications and decided against working for his father’s leather goods manufacturing business in the East End of London. He really found his feet in the mid-1980s, when he started recruitment agency Alexander Mann, which he grew to a £130m turnover business with 30 offices worldwide.
Then in 1993 Caan co-founded executive headhunting business Humana International, which grew until there were 147 franchisees operating in 30 countries. Caan has started, developed and sold many hugely successful enterprises. He is the founder and current CEO of Mayfair-based private equity firm Hamilton Bradshaw.
“When I launched Alexander Mann the biggest challenge I faced was raising money. I had a great idea and presented it to the bank, but because I didn’t have any experience or collateral, I couldn’t raise any finance. I remember going in there with a two-page business plan,” he smiles.
“My biggest personal challenge was overcoming a fear of failure. And for the first time in my adult life, I didn’t have a regular salary” – James Caan
His other key challenges focused on people. “When you’re a start-up it can be enormously difficult to attract talent. You’re competing with more established employers who can offer better pay and working environments. Because I was starting out, I was trying to do it on a shoestring and my premises were very modest.”
Caan admits that attracting customers was a major challenge, too. “As a new business, you’re seen as a risk and potential customers wonder whether you can actually deliver. My biggest personal challenge was overcoming a fear of failure. And for the first time in my adult life, I didn’t have a regular salary.”
“I worked hard, had total belief in my vision and people bought into my passion. You have to be highly motivated and inspire others” – James Caan
Belief and passion
So how did he achieve such phenomenal success? “I worked hard, had total belief in my vision and people bought into my passion. You have to be highly motivated and inspire others. You’ve got to create the type of environment that people want to be in. When you walk into Google’s London offices and you see a hammock and beanbags it’s not a gimmick, it’s because Google recognizes how important it is to create an environment that enables them to get the very best out of their people. You’ve got make it a pleasure to work for your business. People are a business’s greatest asset, but you must inspire them.”
“People are a business’s greatest asset, but you must inspire them” – James Caan
Caan is honest enough to admit that he didn’t get everything right. “I made mistakes, sure, but I learned from them. Some are common, such as believing too much in your monthly management accounts. Typically, businesses do accounting on an accrual basis. They say, OK, our sales this month were £50,000, and our costs were £40,000, so we’ve made a profit of £10,000 and they make important decisions based on that assumption.
“But cash is the key factor. It’s not what you’ve invoiced – it’s how much cash you’ve been paid, which might only be £30,000, which actually means you’re short by £10,000. You can’t pay wages with debt. That was the biggest lesson I learned early on and it’s always stayed with me – you can’t run a business without cash.”
“You’ve got to realise you’re not there to subsidise your customers. If your payment terms are 30 days, make sure your customers stick to those terms” – James Caan
But what is the key to successful cashflow management? “Firstly, you must control your costs. Then you’ve got to realise you’re not there to subsidise your customers,” Caan stresses. “If your payment terms are 30 days, make sure your customers stick to those terms. Chase all unpaid invoices as soon as they’re overdue. Small businesses simply cannot afford to offer 90-day payment terms. When you win a new customer, as well as agreeing a price, make clear your payment terms. What I say to all my businesses is this: I don’t care how great the customer is, they’re not a customer if they don’t pay you.”
Caan is also eager to stress the importance of retaining customers. “Too many people these days communicate solely by email. But if you want to stay close to your customers, get back to basics – make the effort to speak to them face to face. If you haven’t seen your customers for three months you’re just making it easy for a competitor to steal away that business. Apply the same thinking to communicating with your staff – speak to them face to face. There’s nothing more powerful than seeing an owner in there working closely alongside their employees.”
“There’s nothing more powerful than seeing an owner in there working closely alongside their employees” – James Caan
What if my business is really finding it hard to make enough sales? “Perhaps your business model no longer works,” Caan replies. “Markets change, which can affect your margins. You’ve got to regularly assess what you’re doing to ensure your business model is still functioning well. Some owners hold off until it’s too late and they go bust.
“Often you have to change, which can mean evolving or diversifying. I’ve faced tough times in the past and the answer has been to diversify and go after higher margin sales. That might mean launching new products and services or targeting different customers or territories. As you must have heard, one of the definitions of insanity is to keep on doing the same thing and expect a different result.”
Caan says businesses in the UK need to fight negativity, not allow it to limit their ambitions. “It’s so important for entrepreneurs, business owners and managers to stay positive and lead by example. Don’t talk things down: talk them up. Times are lean for many businesses, but there are still many opportunities out there.”
“It’s so important for entrepreneurs, business owners and managers to stay positive and lead by example. Don’t talk things down: talk them up” – James Caan
Caan believes SME owners and managers will learn many valuable lessons from The Business Class. “It’s not scripted, it’s how real business is. Because of my background I can get to the heart of an issue and provide advice. Being able to make a real difference was fantastic.
“When you look at business TV in the UK, there really is only one product – Dragons’ Den. It’s real life; people turn up with a real business; they’re looking for investment; the Dragons are sitting there prepared to risk their own capital. The Apprentice is not really about business, you’re just giving young people the opportunity to find a job. The Business Class isn’t a game show; there are no prizes; it’s about providing real businesses with real business advice. There really is no other programme like it,” he concludes.
- This piece was written for John Brown client, Royal Bank of Scotland, ahead of the launch of CNBC TV programme, The Business Class.