Theo Paphitis is chomping at the bit. Since adding Stationery Box to his stable of brands in January, he hasn’t done a deal and is getting restless. Sitting in his temporary offices in Wimbledon, chosen in order to be close to home – he hasn’t even unpacked the cardboard boxes that litter his room.
This state of disarray is partly because he is waiting for a delivery of new office furniture and partly because this is a man who expects to be on the move soon. For someone who admits that much of the thrill is about the chase, he seems to be finding the lack of a deal frustrating. However, while he readily admits to being impatient in his personal life, he insists that he isn’t when it comes to business and won’t accept a deal unless the price is right and the company salvageable. “While I’m a hugely impatient person, I’m massively patient when it comes to business,” he says.
Having turned around numerous retail businesses including Ryman, La Senza, Partners and Contessa, Paphitis’ reputation precedes him. Despite his wealth, he has to be strict with himself over how much to pay. “I have to pull back. Success does prove a barrier, because it gives other people the confidence to overbid,” he says, referring to a recent deal that he lost out on because the price exceeded his limit. However, the deal in question isn’t causing him too much concern. “I might get it back in a couple of years,” he says. In fact, Contessa is the only company that he has bought the first time it came on the market.
He may be confident, but he isn’t cocky. “I must be overdue for a failure in the retail sector,” he says. He is also choosy. “Some companies cannot be turned around. I have been offered some recently that looked very attractive on paper and the people that brought them to me couldn’t believe I turned them down,” he says.
Paphitis learnt his trade by working in the finance industry in his twenties. “I would end up specialising in hospital cases – those in dire need of financing. That was my original formal training. I would understand the business, why it got into trouble and put together a credible story to persuade the bankers to lend me the money,” he says.
“It took me by surprise how easy it was. I worked out business was 95 per cent about common sense; that it was all very logical. But common sense isn’t common,” he says. “If it was, everybody would be doing what I’m doing.
“I eventually got to the stage where I could do it for myself and found I had a flair for it,” Paphitis continues. His first big deal, turning around Ryman, demonstrated his talent. “Everywhere I went to raise the money, people kept telling me it was an old dog. I kept hearing that paperless was the future. Luckily, the receivers felt that way too and that brought the price right down,” he says.
Paphitis believes he won the business because he went in as “a brash 30-something”. However, he proved his mettle as soon as he took control. “The business was losing about£8 million a year. There wasn’t a lot of time to sit back and self-congratulate, because we’d have been back with the receivers quicker than you could think,” he explains.
“Something quite drastic had to happen, but I didn’t know what it was. I had an idea, but I wasn’t quite as confident as when I was doing my pitch to the banks,” he says. “That was part of my learning curve. I spent an inordinate amount of time looking for the answer. There wasn’t a holy grail or a eureka moment, but what I did find was a huge amount of commitment, goodwill and knowledge of the business from the store staff.”
Team spirit
One of his many Paphitisisms is KISS: in other words, Keep It Simple, Stupid. Like Sir Terry Leahy at Tesco, Paphitis is of the opinion that staff have the answers. Ryman staff, who had rarely seen their previous bosses, were taken aback by this new leader, who not only wanted to be referred to by his first name, but would also go for a drink with them. “Once word got about that I was approachable and would listen, I was pleasantly surprised to be receiving some incredible information about the business,” he says.
That attitude, mixed with common sense and what Paphitis describes as “a little bit of bullshit detector” helped reinforce his original plans. “It endorsed my thoughts and gave me new ideas. While I was pretty confident about what needed to be done, the way it had to be done came from the staff,” Paphitis says.
Investing in staff paid dividends. “Things like putting microwaves in staff rooms and paying for tea and coffee – it doesn’t seem important to you or I, but when you are working in a shop, they are big. It was little wins like this that started to bring the staff together,” he says.
“In the first year, we turned an£8 million loss into an£800,000 profit,” Paphitis recalls. “By making sure staff feel they are the most important people in the business, it answers the natural question about the customer – because they feel good, they will undoubtedly give the customer good service.”
Similar turnaround successes have followed. Many retailers must be dying to know Paphitis’ magic formula. He believes that identifying whether a business can be turned around is largely a gut instinct that, in 90 per cent of cases, is right. “It’s not about looking for the Austin Powers mojo,” he laughs.
Paphitis isn’t planning to give all his secrets away, but he says that picking the right deal is hugely important and that strength of brand plays a big part: “If you look at the ones I’ve bought, they have been ailing brands that have been mismanaged.” He adds that other key ingredients are good management, motivation of staff and tight cost control.
Sharing a passion for the product is also essential, in order to be inspired by the business and therefore inspire his staff. “I can only exude that passion to the people if I believe in the product myself,” he says.
The man behind the deals
Like a true retailer, Paphitis is a man that loves shopping. Unfortunately, though, his over-analytical approach to browsing makes him the shopping companion from hell. So what interests him on the high street at the moment? He says on a recent weekend he spent 45 minutes in a store he particularly liked, but couldn’t see how it could make money. “The question I asked myself was: ‘What is it on the high street that I would like to own?’ The only shop I thought I’d love to own, I spent 45 minutes in, but I’d eat my hat if that shop makes any money. The thing I liked and what gave me the passion and would excite me, I was struggling to do the numbers for,” he says.
Paphitis says his drive is personal rather than monetary, although he admits the money side is relevant as a way of keeping score. “It tells you how well you’ve done,” he points out.
“I love what I do. I love to find the deal and I love the thrill of the chase.” What’s more, he adds, once the deal has been completed “the most magical experience that anyone in business should have, begins. When you get into a business, dissect it, take it apart and put it back together again.”
Being able to accept if a mistake has been made – and change strategy if necessary – is also key to success. “You have got to be entrepreneurial, but to be entrepreneurial you’ve got to be able to adjust what you are doing; to have a strategy, but know that you can change it if there is an opportunity,” he says.
Paphitis claims that if Stationery Box turns out to be his only deal this year, he won’t mind. In reality, this doesn’t seem to ring true. Having sold La Senza earlier this year, when he passed the reins to former Monsoon chief executive Rose Foster – who, he laughs, has painted his old office “girlie pink” – you get the feeling that this is a man itching to get involved again.
He says that the sign of a good manager is one who makes himself redundant. “That’s what I say to all my key senior staff,” he says. “In doing so, you keep all staff fresh and challenged.”
Yet, Paphitis admits that making himself redundant is a challenge. “It’s at that stage where it gets a bit sticky, because I’m one of those people who want to be in the middle of things,” he explains. “The painful thing is letting go.”
Paphitis’ involvement these days is a weekly board meeting with Ryman and a monthly board meeting with La Senza. Consequently, non-business interests such as sailing – which he took up last year – and his role on Dragons’ Den, returning for its fifth series this autumn, provide welcome distractions. “I find something to keep myself busy,” he says.
Paphitis is also working on a book, due to be published next summer, which presently has a working title of “My name is not Theo Paphitis”. “It’s not what you’d expect,” he says mysteriously.
So, while he has proved himself to be a turnaround specialist, would he not like to create a business, too? Although he helps to mould and shape new businesses via his role on Dragons’ Den, he concedes that his strengths do not lie in coming up with new concepts. “I’m very good at seeing what’s good and what’s not good, but I’m not creative. I’ve taken other people’s ideas,” he admits.
Instead, Paphitis will continue the search for his next target. “The next deal is out there. It’s for me to manufacture it, or find it,” he insists. So, retailers beware. If you spot Paphitis in one of your stores, it may be your business he is after next.
No comments yet