The last year has been one of the toughest I can remember for business in my 40 year career. Fear gripped the City last autumn, as RBS and the Lloyds Banking Group were forced to take on hefty Government bail-outs; stock-markets around the world plunged on worries of a long global recession and business confidence fell off a cliff.
The mood in Britain was very bleak and most of the media and some of the economic experts were predicting the end of capitalism as we knew it. Bank bail-outs, job cuts, rising unemployment and business failures became mainstream news items probably for the first time in almost 20 years.
12 months on, the mood around the world is very different. Stock markets have bounced back; countries such as China, Brazil and Australia are growing strongly once again and there is much talk of 2010 being a year of good growth for most of the world.
The feeling in the UK however is still cautious and confidence seems fragile. Unemployment remains high, many of our big banks are still recovering from the trauma of last year and credit remains very tight, but I do believe we are seeing the first signs of consumer confidence coming back.
I am more often than not a “green shoots without roots” kind of guy – as the natural entrepreneur’s enthusiasm and optimism often gets the better of me. But this time I think we are seeing those first modest roots. Indeed, across the Virgin group of companies we have evidence of that recovery. People are booking plane and train tickets further out; they are reserving next summer’s holidays, customers are upgrading their accounts with Virgin Media and our gym business is doing well.
But enough of what has happened over the last year. I am often asked about the key lessons I have learnt from my 40 years of setting up and running businesses. Frustratingly for those looking for a formula – I say there is no substitute in business for actually running a business. Throughout my career I have been instinctive and made decisions using my gut, but as I look back there are a few key patterns that keep re-emerging.
I believe that you have to really love the business you are running and need to surround yourself with trusted and talented people. Setting up businesses takes an enormous amount of time and energy and you have to be prepared to make big commitments. It is easier to do that when you are surrounded by people you trust and like. I have been very fortunate in my career to have had so many good CEOs and MDs running my businesses – keeping them happy and finding new ones to start the next ventures is one of my full-time jobs.
But if I had my time again I would look to set up more businesses during recessions, when almost everything costs 50 to 90 percent less than it’s worth during the good times. There is often a lot of highly skilled staff on the market and it is also a time when most big businesses have their eyes on their own operations and issues. The current climate is a perfect time for young, enthusiastic and nimble companies to set up and thrive.
During the recession of the 1970s we expanded Virgin Records and in the early 1990s we expanded Virgin Atlantic while our established rival airlines were recovering from recession and the Gulf War. Without the legacy issues of a large existing operation and high cost base, Atlantic was able to buy new and more efficient planes and open up exciting routes.
The same opportunities exist today for new businesses in sectors as diverse as food manufacturing and recruitment; through to more cutting edge ones such as renewable energy and even space.
People often blame the economic conditions and the lack of finance from the banks as the key reasons for the failure of more small businesses to thrive in the UK. There is no doubt that banks need to keep the flow of credit to our emerging companies and the Government needs to ensure we keep the bureaucracy and red tape down – but I also feel entrepreneurs need to take responsibility and keep driving their businesses on. A good business idea needs determination and guts to get going and a bit of luck to succeed.
The need to overcome early adversity reminds me of the first days of Virgin Atlantic and how our inaugural flight almost brought the group down. We had worked like mad for six months to get the first flight off to Newark and it had been a resounding success– fuelled no doubt by 70 crates of champagne. On my return to London I was met by our then bank manager sitting on the steps of my house. He had come to tell me that my bank Coutts was not able to extend my overdraft – as I had asked – to help finance the new airline.
Instead if we went over our £3 million overdraft they would have bounced our cheques. This was almost certain doom for an airline – as soon as people heard that we had no credit, they would stop supplying food and fuel and passengers would not buy tickets. I had to move fast and that weekend I pulled in money from our overseas businesses to shore up the bank account and as soon as I could moved bank.
It was a sobering lesson and I have sought to protect the downside on my ventures ever since then; but it also taught me that a good entrepreneur and business looks for solutions and not excuses and we have been doing that as a group ever since. I would e ncourage entrepreneurs to do just this and get out and start up those businesses. As the old Chinese adage goes, fortunes are made in good times; empires are built out of tough times.
RICHARD BRANSON PROFILE
BORN: 18 July 1950
NATIONALITY: British
POSITION: Chairman of Virgin Group
SALARY: £365 million
CAR: Saab 9-5 Biopower
FUN FACT: Branson has played himself on a range of TV shows, including Friends,
Only Fools and Horses, Birds of a Feather and The Day Today
(Interview with Branson conducted in April, 2010)