Rachel Elnaugh Interview

Three years on from the loss of her first company Red Letter Days on 1 August 2005, entrepreneur and original star of BBCTV's Dragons' Den Rachel Elnaugh talks to Million Impossible about her business experience...

Ever since I was a girl living above my father's shop I wanted to be in business, and I think I always knew that when I started it would be the adventure of a lifetime. When I was young there was always a drama or two and great experiences to be had with my dad's business – from a thief trying to grab the takings from the till, to gypsies shoplifting from the shop, to wonderful Christmas parties at home for my dad's workmen (with lots of party atmosphere and cigar puffing), to lifts to school in the back of one of the work vans.

My childhood was one big adventure, and it was like a business apprenticeship for me.

So when I finally took the plunge and went into business at the age of 24 I thought it would be easy, like turning on a very large tap out of which money would flow out and everyone would quickly become rich.

How wrong I was!

My first business was of course Red Letter Days, the idea being to sell 'experiences' – like trips in Hot Air Balloons or Champagne weekends – as luxury gifts for special birthdays. But after six months of hard graft we'd managed to persuade very few 'experience' venues to sign up, and our first catalogue was a very pathetic collection of just 25 different Red Letter Days.

I vividly recall everyone telling me to just give up on my idea, and I must admit many times I did wonder whether they were right. But I think once you are 'invested' in a business idea –– physically, financially and emotionally –– the stakes are just too high to give up.

After many dark days spent in an office from home with a phone that never rang, getting more and more depressed, finally I had a break through. And it came when I finally put ego aside and admitted to my boss (I was still freelancing in accountancy at the time) that I was really struggling to get my business idea off the ground. My boss Barrie Dunning (now a partner with the accountants Vantis plc) suggested I go see a client of his who was a designer.

He was a guy called Barry Davis, and he took me under his wing and taught me the importance and value of creating a proper brand.

Barry redesigned our logo and brochure, and we re-launched the business in December 1990 with funds raised from both my first husband and from selling my first car.

As soon as that brochure hit doormats the business took off.

That was an incredibly euphoric experience and we were taking money so fast it was unbelievable! After an 18 month long struggle, every sale was like a drug, a little fix, and I was soon addicted to making money (which I think happens to a lot of entrepreneurs).

After that it was just a case of how far and fast we could take the company and we literally grabbed every opportunity we could and ran with it and as a result grew much bigger than any well thought out strategy or business plan could ever have predicted. Such is the power of 'going with the flow' and allowing in what the Universe has to offer you!

After a decade of this heady growth (although there was of course a lot of pain in between, as we struggled with taking on staff, issues with logistics and general bursting at the seams) by 2001 we were making £1 million profit a year.

Yes, you read that right: ONE MILLION POUNDS PROFIT A YEAR !!! It had taken a helluva long time and blood and sweat and tears - but we had actually achieved the 'Million Impossible'!

Looking back, why oh why I couldn't turn the handle of the sausage machine and just churn out £1million a year I'll never know. It would have given me a fantastic lifestyle and we would never have really needed to float the company or even expand any further.

But entrepreneurs never know when to give up do they?

And at about this time, my thoughts began to turn to my next big business venture – always a big mistake – as an entrepreneur focussed on pastures new has little energy left for running their existing (if by now somewhat boring) 'Big Money Machine'.

Plus, of course, business awards £ TV offers were beginning to flow, ego was becoming inflated and all the attention was far more sexy than dealing with day to day issues, fire fighting and dealing with difficult staff.

Our 'Annus Horribilus' was 2002.

I'd parachuted in a 'proper' CEO to take over from me, stepped back from the business and saw the business over-expand and over-spend. Crucially, the Board didn't have a strong enough Finance Director to control what was going on.

I vividly recall waking at 3am one December morning and telling my husband I 'had to go to the office' – which I never normally did – because instinctively I knew there was something terribly wrong. When I arrived I met my PA (who I shared with the new CEO) and when I told her my concerns she just said 'Rachel you're right' - and then gave me the passwords to his email system. An hour of investigation revealed that, having decimated my company in value, this guy was now plotting a management buyout against me.

There followed a terrible downward spiral of sackings and re-financing and corrective action, but deep in my heart I knew my business was doomed. We'd gone from making £1million profit to a £4.7 million loss. It was like Titanic had hit the iceberg and the damage was so bad there was no doubt that the ship would sink.

The fateful day eventually but inevitably came on 1 August 2005, when – despite having £3.3 million cash at bank which Barclays Bank refused to let us touch – we had to put the company into administration to protect it from its creditors and to at least save the staff's jobs.

It was a very sad day for me having given birth to that business 16 years earlier and having given my heart and soul to it for 16 years. But it's a story many entrepreneurs are familiar with.

Worse is probably to see the spoils of your efforts bought out of administration for peanuts by third parties waiting in the wings.

But in business you live and learn. That being an entrepreneur is a rollercoaster ride; and no matter what happens at the end of the experience, at least you can always say you enjoyed the ride.

And at least, although the experience was incredibly painful, I have survived to fight and live again!

These days I work in the small business sector, inspiring, motivating and helping entrepreneurs to achieve personal fulfilment and success. I speak regularly at business events, undertake consultancy and mentoring assignments and have just launched a series of Entrepreneurial Masterclasses. My first book 'Business Nightmares' was published in May 2008. Full details of all my services are at my website www.rachelelnaugh.com - including a free entrepreneurial profiling test where you can discover what type of entrepreneur you are!

To read the first edition of Raw Business please click here

Rachel Elnaugh
1 August 2008