Cypriot entrepreneurs: Be outward looking
Business tycoon Theo Paphitis has decided to set up a commission to study ways with which the private and public sectors can join forces to alleviate one of the most difficult challenges facing Cypriot business – lack of funding.
Paphitis who appeared at various functions hosted by the Institute of Directors of Cyprus told the Financial Mirror in an exclusive interview that Cypriot entrepreneurs face two main challenges – raising funds for their ideas and projects, which for people who do not come from rich families is a major obstacle, and the relatively small size of Cyprus.
“I intend to come back to Cyprus by October to spearhead a campaign and with some help from the government to address the funding problem faced by most Cypriot entrepreneurs,” Paphitis told the Financial Mirror.
He will lead the effort by providing cash as seed capital for promising ventures, but subject to the state and others joining in.
He has a simple message, “be outward looking, be ready to take risks, but do your homework right, otherwise the chances of success will diminish fast.”
Born in Cyprus, Theo went to England when he was six and ran the tuck shop at his north London school at 15. In no time he was helping businesses in trouble and this soon became a full time role. He has turned Ryman, Contessa, La Senza and Partners the Stationers into successful and profitable retail businesses.
He now heads up a 350-store chain and a group turnover approaching GBP 250 mln.
His latest ventures include Red Letter Days, the company he salvaged out of administration with fellow Dragon Peter Jones.
“Cyprus is a great place to do business, but because of the relatively small size, entrepreneurs need to be outward looking and generate business from abroad.”
GOLDEN TIPS
Theo built his reputation on turning around failing businesses. His five golden rules for start-up success are:
1. Cashflow is king
If you dream of starting your own business, remember what Theo's mother used to tell him. "A lack of profit is like a cancer, but a lack of cashflow is like a fatal heart attack." Always make sure you have enough cash to trade. If you're making a profit, but doing more business than your cashflow can support, you need to look for finance.
2. Planning
You build up small and simple steps as you go in order to reach your ultimate goal.
3. Common sense
You don't have to be a genius to see the sense in Theo's guiding principle, 'Kiss', which stands for 'keep it simple, stupid'. Simple communication means everybody buys in to what you're trying to achieve – including staff, financiers, suppliers and customers. "If one party on that list hasn't bought in, you're already handicapped; if two parties haven't, you're in trouble; but if it's three, you haven't got a business."
4. Technology is key
Technology is absolutely vital, says Theo, because it gives you the information you need to stay on top. "Be sensible with your systems, but don't scrimp on them. If you're going to ask people to support you and buy in to your ideas, you've got to give them something tangible for them to understand. That means you need the information available on a regular basis so that you can share it with everyone."
5. Don’t let things stagnate
"A business that stands still is a business that goes backwards. You've got to be constantly looking at being ahead of the game, putting in new initiatives, keeping everybody busy." Set new targets each year, says Theo, and your staff will get more experience – and the business will stay fresh and move faster. "You should always work to the lowest common denominator. Don't assume anything." Give incentives, weekly, monthly or annual and you will see that staff get motivated and in the end they will exceed their targets.
DRAGONS' DEN
Theo is a member of Dragons’ Den, a popular venture capital TV programme, now in its sixth series on BBC. The show is based around would-be entrepreneurs pitching their money-spinning ideas to gain financing to a panel of five "dragons", all formidable business thinkers with the money to make things happen. However, the entrepreneurs need all their powers of persuasion, reasoning and presentation to convince the five Dragons that their business is worth investing in.
If they can convince one or more of the Dragons to meet a specified amount (in exchange for shares), the entrepreneur walks away with the cash. If they are short of the funding, they lose it all.
MAKE DECISIONS
Theo says entrepreneurs need to make decisions fast, even if some of them turn out to be wrong. “Don’t be afraid to make decisions, since by doing so, you set the agenda. Learn from your mistakes and apply the lessons from your previous experiences.”
He admits that making GBP 100 mln is relatively easy. The difficult part is making the first million.
But above all, Theo tells entrepreneurs through the Financial Mirror that if they don’t have passion, if they don’t love what they are doing, then they will not succeed.
“I was Chairman of Millwall Football Club for eight years and though as a business, it was not successful, I loved every minute of it. Playing against Man United in the Cup final was the best part for me,” says Theo.
CUSTOMER EXPERIENCE
Once you get the staff motivated, happy and eager to outperform, the next important issue, which is also true for many Cypriot businesses is to make the customer experience the best in the market.
“If by improving the packaging, you will get repeat customers, then do it. If by changing the sizes of clothing for example, your female customers feel better, then do it. The objective is to please your customers, make shopping at your place a wonderful experience and at the same time offer the public good quality products at affordable prices.
DUE DILIGENCE
Flanked by his CEO, Kypros Kyprianou, Theo says he does not take financial statements or due diligence reports at face value, but instead gets more valuable information by visiting the stores, talking to staff, customers and doing lots of research.
“My team tracks target companies that we identify as suitable for our needs for many years and when we strike, many times we know more about the business than the company executives sitting at the other end negotiating the price with us.”
At any one time there are up to 25 cases of potential companies that Theo and Kyprianou like and which keep fed with new information that one day may come in handy when they make their move.
FLEXIBLE
Theo and his team review strategy all the time and make changes depending on market conditions. “In 2006 I decided to sell my lingerie businesses because I felt that the economy was at its peak, asset prices were richly priced and expectations were running high as people felt property prices would keep on gaining and nobody was ready for a down-move.”
By summer of 2007, the Northern Rock bombshell hit Britain hard and since then asset prices have tumbled sharply lower. Theo says asset prices have more room to correct lower and feels that the best time to buy will probably be in the first half of 2009.
As for his retirement plans, Theo says he will retire when he dies or stops enjoying his work.
