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Into the Dragons' Lair: Theo Paphitis on Loss, Gain, and the Dragons' Way
As an avid viewer I had always been troubled by the name Dragons' Den. Other than its obvious alliterative qualities, the powers that be at the BBC were, in my humble opinion, mixing up their animal-mythical and factual-domiciles. Surely a dragon dwells in a lair, while a lion lives in a den?
As I enter the modest office block in Wimbledon, the home of Theo Paphitis, one of the longest-serving dragons in the television series, the name seems more elusive than ever. I feel strangely vindicated that Paphitis is the former chairman of Millwall Football Club-the Lions, which played home games at the Den.
This feeling is short-lived as I suddenly find myself surrounded by the paraphernalia of a seasoned entrepreneur. The desk at which he now stands to greet me is a former aircraft wing, the coffee table is a glass-mounted gear box from a classic Triumph TR6 (he has a love affair with cars), and the chairs he gestures me towards are demobilised supermarket trollies, a telltale nod to the retail empire that he has built from Ryman to Robert Dyas and Boux Avenue lingerie.
The furniture is all fashioned by Max McMurdo, a Bedford-based upcycling sculptor who was one of Paphitis' successful investments during his nine years on Dragons' Den. Followers of feng shui would suggest the result helps create the visual impression of the entrepreneur's acquisitive personality while also welcoming the visitor into what really is a den and somewhere that puts the "fun" into functioning office while also doubling as a creative work station.
As befitting this rather mercurial dragon, the metal chairs are also, by their very nature, uncomfortable as you sit before him in pitch mode. Visitors, rather like the contestants on Dragons' Den, need to "be brief, be brilliant, and be gone."
The Golden Rules
According to his twelve golden rules of business, this entrepreneur puts risk reduction and getting his staff on board at the top of his priority list; however, he has a realistic approach to loss prevention. He accepts that there will always be people who will steal, but he is not about to weaponise his stores with LP technology and guards that inhibit the customer experience.
"There are unfortunately always people who will steal from you, but you can't button everything down. People are your business and you have to have a level of trust.
"Of course, it is disappointing when people let you down, but we are a family business and rely upon trust. People work for us because they are wanted, happy, and valued, and you have to treat them with respect."
Paphitis is a big believer in incentives to keep staff "on side" - a lesson he learned when he ran the school tuck shop, his first real taste of retail. According to his autobiography, he would provide a free bag of crisps for the pupils who cleared up food wrappers in the playground as an incentive to reduce litter - an early example of staff motivation and corporate social responsibility (CSR). Today, the Theo Paphitis Retail Group (TPRG) incentives are bigger than a bag of salt and vinegar crisps, and he takes well-performing staff on annual exotic holidays as part of his work-hard, play-hard philosophy.
The incentives work. According to the TPRG website, the brands, which represent over 260 years of serving customers, generated more than £350 million in sales last year through the 340-plus stores and online channels and employ more than 4,000 colleagues.
Like his general approach to business, Paphitis believes in reducing the risk - his first rule of business according to his autobiography Enter the Dragon. But he happily delegates power to his able lieutenants and allows them to make decisions - and mistakes so long as they learn from them.
Humour, albeit with a serious edge, is part of the mainstay of his personality. He is well known around the business for asking staff looking to invest in new technologies such as loss prevention, "What is it you want to spend my grandchildren's inheritance on?" In other words, if you are going to spend money, it has to count and "wash its own face" in terms of return on investment (ROI).
He is also a big believer in the power of technology that looks after stock accuracy and allows his staff to look after customer service. RFID is one such example. TPRG is looking at establishing a trial, although plans are in their early stages. As an enthusiast for new ideas, he sees the benefits of being able to measure what he has as well as what he is losing and why, as well as the added benefits of RFID's ability to manage availability and customer expectation.
"Stock systems drive our business. It is the old adage of having the right product at the right time. In terms of RFID, we are working to get a plan together."
However, the delay could be in part down to getting the right partner. Here, Paphitis spares his dragon's fire and ire for those nameless suppliers who he believes view RFID as a get-rich-quick scheme. If those seeking to pitch it to this seasoned entrepreneur were to stumble into the dragons' den, they would get a lot more than a gentle grilling, and something akin to a commercial roasting.
"The whole approach is in need of professional development. I am personally disappointed with what I have seen to date because it is not a get-rich-scheme. The businesses pushing it are not looking at it in the right way. People think that they know something about RFID, but they put an unrealistic and inaccurate value on that knowledge. Rocket science it isn't.
"Consequently, some of their prices are ludicrous. In fact, it would be better to take the loss than pay that kind of money. I could have a lower conversion, not have the stock in the right place, and still make more money! RFID is the future, but not at the price points people currently want to sell it at."
Early Days
Paphitis came to the UK from Cyprus in 1966, the year of England's World Cup success. He grew up in the shadows of Old Trafford, the home of Manchester United, and later Highbury, Arsenal's former stadium, so it is little surprise that football played an important role in his personal and business life. Like Alan Sugar, the famous host of The Apprentice who went on to be chairman of Tottenham Hotspur, Paphitis played a key role in turning around Millwall's fortunes on the other side of the river as its chairman for eight years.
A dyslexic with a well-documented personal struggle in his academic years, Paphitis overcame his condition in part due to a dictionary and calculator purchased by his wife, Debbie or Mrs. P, from Ryman, which he serendipitously went on to purchase out of receivership in 1995, a business formula he repeated with lingerie brand Contessa.
His expertise with lingerie and a new kind of customer experience attracted him to purchase La Senza, which he sold in 2006 along with Contessa, but not before he had put a large enough hole under the water line of Marks & Spencer, which had up until that point been the go-to retailer for ladies underwear.
In April 2011, Paphitis launched Boux Avenue, a lingerie label and his only stand-alone start up, but this time it was primarily aimed at the burgeoning online market.
"Retail is evolving at such a rate that most things we learned are now redundant, so it is hard to stay ahead and keep up with peoples' buying habits and how they are changing. Gone are the days of the IT mainframe. Now it is all about the cloud and agility. This was why Boux was launched as an online business with stores rather than the other way around. Online is now our fastest-growing business."
Rule 5 of the Theo Paphitis guide to success is to embrace change. In his autobiography he describes the Internet as the place where everyone can be a shopkeeper and the customer is better informed than ever before. Money and technology are cheap, he maintains, despite the best assertions of some IT suppliers Paphitis refers to as "half wits with an etch-a-sketch" harking back to pre-Internet times. However, his success speaks louder than words when it comes to the launch of Boux Avenue.
But this new departure has not prevented him from keeping his hand in traditional retail, and in 2012 he bought ironmonger Robert Dyas from the majority shareholders Allied Irish Banks and Lloyds Banking Group.
Red Letter Days, the experiential gift packages of Formula 1 driving or hot air ballooning, form another strand of his retail portfolio, although not commonly recognised as part of the TPRG. He co-owns the company with fellow dragon Peter Jones.
Outside of TV and charity work, he is recognised across the UK as the "turnaround king" who built a reputation for rescuing failing businesses and converting them into money-making ventures whether the end product was pencils or pants.
But dragons are restless beasts, and Paphitis is constantly looking at ways to challenge himself. After leaving Dragons' Den, he focused his attention on the growing world of social media and Twitter in particular where he has created Small Business Sunday (#SBS), a weekly chance for six small businesses who tweet Paphitis to be given a boost from his 500,000 followers. #SBS is also a chance for the #SBS winners to network and support each other, including via an annual free-to-attend event held for all winners. He has launched a website and what can only be described as a form of entrepreneurial TED talk to keep the heart of new business and innovation pumping. It all goes to prove that just because he is no longer sitting in the dragons' den handing out advice and investment does not mean he is away from the front line of helping fledgling businesses to succeed.
Living Wage
At the time of our meeting, it was a frenetic time of change for business. The UK government was in the middle of a febrile pressure cooker of EU referendum campaigning. With his Cypriot roots and successful UK migrant heritage - arriving in the UK with a few pounds exactly fifty years ago this year and now heading a multi-million pound business empire that has helped create thousands of UK jobs - one would have reasonably assumed Paphitis was a "Bremainer." However, as a man with a cool head for figures and an even cooler attitude to the Westminster political class, his blogs and Twitter feeds paradoxically suggested more of a leaning towards Brexit because he wanted the UK to be more ambitious and have global trade agreements. Indeed, his "Theo EU-oMeter," as he described it, suggested the economic claims of the Bremain camp verged upon over-inflated scaremongering.
His antipathy to Government intervention in business also stretched to the National Living Wage and the apprenticeship levy to re-skill the UK workforce, which will be launched in April 2017.
"The living wage was a good thing for the Government to do, but they have screwed up the implementation of it. It should be staged, as should the apprenticeship levy. There has been very little consultation with business on this because the Chancellor is looking to balance the books. He is Mr. Spreadsheet.
"The apprenticeship levy is another cock up, which will put the burden on business, but they don't think about the broader question of the jobs it will potentially cost."
Paphitis is prepared to speak his mind and use his voice and talent for good. He recently commentated on the EU referendum through a blog on his website, although as illustrated, he is not beyond upsetting a few politicians in the bargain. He does this because he is passionate about business, and #SBS through Twitter has become a mouthpiece.
"SBS is my way to reach small businesses and reminds me of my time starting out and how I would have liked advice. Twitter gives me access to so many people, and it offers them a leg up. So far we have more than 1,800 small businesses who have taken advantage of #SBS. We also organise events and awards, and it is all free and great fun. It is a big thing, and I love meeting these people as it reminds me of when I started. It is a fantastic journey that has snowballed from Mrs. PÕs kitchen table, where it all started."
What's Next?
Theo Paphitis is not short on offers to keep him away from boredom. He keeps his hand in with Comic Relief & Sport Relief where he is a director, and two years ago he took part in a documentary where he moved in with people living on the bread line, an experience that informs his approach to this day.
"It makes you remember how people struggle and how they get into those kind of situations in the first place. Fortunately we have been able to curtail the excesses of payday lending companies who are parasites and a blight on society."
His latest passion however is vintage car racing. He is chauffeur driven around his business empire, but he now lets off steam racing around in a souped-up Ford Anglia, the type of car driven by the Weasleys in Harry Potter and the Chamber of Secrets, hence its name "Potty." He also has investments in a Ford Escort Mark II and an Austin A35, classics of a bygone age.
"I love what I do. It keeps me fresh. I can't go home and plant myself down in front of a TV. The day I retire is the day that I die!"
He is still full of ideas. Famously impatient, like most entrepreneurs, his approach is like that of a personal trainer trying to motivate and inspire their clients to shape up as well as keep up - a breathtaking feat in its own right. As he said, "There are simply not enough hours in the day and I am appallingly impatient."
It may be asking the impossible, the power to clone or morph himself, but his management style is both exhausting and empowering, as well as rewarding for the candidates with the right level of stamina to stand the pace.
Rule 7 of the Theo Paphitis mantra is never to be afraid of making decisions, even if they turn out to be wrong. But if people get it right more often than they get it wrong, then they are doing OK in his reckoning. They have been bold enough to take a stance and, harking back to rule number 1, have effectively managed the risk in the first instance.
Theo Paphitis is the consummate salesman who started his love affair with retail when he was selling watches at Watches of Switzerland in the West End in the 1970s, but he is also a master of inventory management - hence his desire to explore RFID at the right price, which has over the years given him an end-to-end advantage in managing loss and risk across all of his businesses.
Mix this with a healthy dollop of common sense and never being afraid to capitalise upon other peoples' ideas - rule 11 - and you have the raw ingredients to survive in a business world accelerated by the omnipotent power of the Internet.
Like his vintage car racing, the vehicle may have speed and agility, but the passenger is likely to feel every bump in the road in much the same way as people who sit in his shopping trolley seats in his Wimbledon lair. Indeed, if you are sitting comfortably, you are probably not working hard enough or pulling your weight.
Working at Theo Paphitis Retail Group is not for the pedestrian-minded or feint-hearted, but the approach instills great loyalty from the staff, many of whom have been part of the longer journey. This is because they know they will be listened to and may even have their ideas adopted by the former dragon whose door is always open, even though his chairs are somewhat less inviting.
