Thursday, 24 May 2012

Enterprising North East

I had a most enjoyable evening last night at one of the Entrepreneurs Forum Members Dinner.

This is the first EF event I have attended since I have joined.  Over the past 6 months I haven’t been able to attend events due to diary commitments usually because I am not always in the North East during the week.

However on this occasion I had the chance and decided to go along.  The dinner was for a small group of about 20 people who where there to listen to Jonathan Eldridge who was the founder of the Gadget Shop in the early 90’s.

For those who have read my blog previously you will be aware that I am really interested in business stories.  Jonathan’s story is great.  From very ordinary beginnings in Hull he built a retail business with a value of over £60 million which employed 750 people at its peak.

Things then started to go wrong.  He had cash flow problems for a very short period of time and made one miss-judged call to the bank asking them to extend his facility.  They got nervous and called in the debt.  He had nowhere to go and had to bring in external investment.

There was some serious infighting between the investors which landed him in the High Court.  Cutting a long and interesting story short the business fell into administration largely due to the board being distracted by the legal issues.

From having shares worth millions he ended up with nothing.  He has since brushed himself off and started again with Red5.  What struck me was how balanced he is and how he carried no baggage from what had happened previously.  He was very philosophical about life and wouldn’t change anything which I found inspiring.

I encouraged him to write his story because I thought it has the good, the bad and the ugly.  He said he was waiting until the story was finished and wasn’t sure if anyone would be interested in the down side of his history.  I think it is the down side which makes his story particularly interesting.

Across his whole story it was obvious there was the lack of support from banks.  I always think it is difficult for banks to support entrepreneurs who have passion and drive.  Sometimes this is not tangible and we know in the current climate banks are unwilling to take risks.  His support generally came from private investors when he needed it.

Currently the Government seem to be focussing on encouraging the banks to lend money and we all know this is not working.  The Government should therefore incentivise private investment and acknowledge the importance this support plus the risk investors take plays in the ability to deliver growth.

The other interesting aspect of the evening came from the cross section of the other guests.  All ran North East businesses and all were realistic about the current market.  Everyone is finding it tough.

The interesting thing to me was that probably 70% of those around the table were from family businesses.  I have not decided why this is yet but wondered if this “keep it in the family” approach to business is preventing growth outside the region.  The other thought is do businesses retain ownership because there is a lack of talent beyond their small circle.

It is one to think about and discuss…

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