James Caan is founder of private equity firm Hamilton Bradshaw, and a former star of Dragons’ Den. Having founded the recruitment firm Alexander Mann, and built up a portfolio of more than 40 businesses, Caan is ideally placed to advise emerging entrepreneurs on the formula for business success.
When you’re looking at a company to invest in, what sort of attributes and qualities do you look for?The most important attribute, for me, is the people running the business. Ultimately, it’s people who run businesses; companies don’t run themselves. It doesn’t matter how great your product is – someone has to market it, somebody has to sell it, you need relationships with people.
Whenever I’ve made a successful investment, it’s because I’ve backed the right management team. My entire focus is always around making sure I believe in the people who are behind the idea.
When you’re analysing the progress of your investee businesses, what metrics do you use?Productivity, performance, turnover, profitability… generally each of our businesses have key performance indicators, and we typically have five or six drivers that instantly tell me what the health of that business is.
What’s the biggest challenge faced by entrepreneurs today?Finding capital is still probably the biggest challenge, but there are others, such as attracting the right talent. Writing or coming up with a business plan is one thing, but executing that plan can only be done if you have people with the expertise and experience needed to successfully implement and execute the plan.
The key question, whenever I meet entrepreneurs, is – who have you attracted that’s going to help you execute that plan? Getting the right team on board, always for me, is the most important point.
Do you think that entrepreneurs’ business plans are typically quite unrealistic in the way they’re put forward and the financial projections they contain?You see a lot of business plans which assume the world is a merry-go-round. The reality is, it never works like that. Entrepreneurs need to do far more due diligence, and understand and challenge the assumptions they make, because you can’t just put in a business plan “this market is worth £20bn, and I’m going to do 1% of that market, so I’m going to do £200m”. It’s not that simple.
There’s a whole market out there, there’s competition out there, there’s pricing out there, there’s logistics out there – you need to take into consideration substantially more assumptions than just a percentage of the market, or “I’m going to grow by 20% a year.”
Based on your role on Dragons’ Den and what you’ve seen, what advice would you give an aspiring entrepreneur putting together their first pitch?Make it realistic, do your homework, understand your numbers and absolutely demonstrate your passion, your belief, and your conviction as to why the investor should believe in you to deliver this plan.
On a personal note, where do you go for advice?Probably still friends and family – the people that are nearest and dearest to you, people you trust, that you’ve grown up with, that you know very well and will always give you an honest view when you have a situation on your hands.
What’s the best piece of advice you’ve ever received?Observe the masses – and do the opposite!
Do you recommend people of today leave school at 16, as you did, if they’re passionate about entrepreneurship?No I don’t. I have two children, and I’ve encouraged both of them to continue on to university, simply because business is a risk. Before you start on that journey, you need to have a foundation, because if it doesn’t work out, you need a plan B, something to fall back on. If you’ve got a solid academic foundation, at least you can then develop a corporate career. But if it doesn’t work out and you’ve got nothing, you’re taking a far bigger risk than you need to.
You recently launched your Business Secrets app, offering advice to start-up entrepreneurs. What sort of skills do you hope to impart through it?The app was an idea provoked by thousands of people constantly e-mailing me for advice on how to start a business, how to raise finance, how to attract the right people, how to market a business, how to use social media.
Consistently, almost every day, there are hundreds of people facing challenges as to how to maximise their opportunities as an entrepreneur. The app gave me the opportunity to communicate some of my secrets and the things I’ve used as an entrepreneur to give people the edge they were looking for.