The 1980s shakeout sorely tested businessmen's attitudes towards risk. In the 1990s a new fearless breed of risk taker is emerging. By Shirley Skeel.
Witnessing failure is frightening - and yet, in its own way, dangerously inspiring. When we see a colleague launch into a risky but ambitious venture and then fall flat on his face, the first reaction is mixed sympathy and relief (that it was him and not us). But close behind this trails an odd niggling urge to try something just as adventurous. This is partly logical - we have learned what not to do; partly emotional - the competitive spur to do it one better; and partly crazy - we suddenly have a strong sense of how boring life is if one takes no risks.
Rod Aldridge, chairman of The Capita Group, describes his own launch into mortgaged self-employment, after a safe 23 years in public service: "Once we made up our minds that was what we wanted to do, I put everything into it. It really was stimulating."
Though not strictly comparable, British Venture Capital Association figures for new financing of start-ups, buyouts and buy-ins show a sixfold increase from 126 in 1984 to 776 in 1989. Undoubtedly managers confident in their professional ability will continue to abandon their jobs to go it alone - if only, as Cranfield School of Management professor Paul Burns says, "because people now do not expect to have a job for life". How will the risk takers of the 1990s differ from those of the 1980s? And how will they proceed? People always tell their own stories best.
Between puffs on a Marlboro Gold and the incessant ringing of three telephones on his desk, Philip Green, chairman and chief executive of Amber Day Holdings, is trying to describe his mode of management. The clues are already thick. "Time is running out," one breathy caller is overheard. "See to this joker," Green calls out to his secretary exasperatedly, hanging up. "Excuse me a moment," he apologises, and then is on a party line to five of his managers. Finally he stops and looks up. And the phone rings again.
Tanned, bullish and flamboyantly hairstyled, Green has the manner of everyone's favourite cavalier entrepreneur. But he runs his business with a keen eye on costs, and brushes aside worries that this is a one-man band, claiming reliance on a close-knit team. Having left school at 16 ("They tell me I wasn't a good student"), he was running his own business by the age of 23. Since 1988 he has transformed the once tiny Amber Day into a £80 million valued stores group, including discount retailer What Everybody Wants (WEW).
Green took on £20 million of debt to buy WEW, but only "because its operating costs were one of the lowest in the sector. It had freehold properties and a strong cash flow." The Sock Shop style retailing nightmares of the '80s do not worry him. "Life's a risk," he says. "We were the only quoted UK retailer to do a deal in 1990. But I only do a deal if I am 95% confident I can make it work. And I have a very strong belief in this business - in consumers going for value for money, for a long time to come."
His strategy is a simple one. He buys discounted consumer goods on an ongoing basis. He can then move with trends - his cash output is ongoing rather than lumpy - and he can bargain with manufacturers who need mid-season sales. "We make instant decisions, there are no big committees and we'll take a view," he says, chomping on his third cigarette. Profit and loss accounts are run weekly and financial controls are stringent. "I don't like surprises," he stresses, leaning forward with a frightening smile.
Timing is a critical element. "I bought at the top of interest rates. And if I can make it work at 15%, I can certainly do it at 10%." In the next two years Green would like to double WEW's 45 stores. Too fast? He does not think so: new sites are at rock bottom prices. Timing, after all, IS critical.