Dragon's Den or Dirty Den? TV Hero James Caan Shares His Secrets

'Observe the masses and do the opposite,' said James Caan as he opened this year's Executive Recruitment Conference at the Business Design Centre, Islington yesterday. This has been his personal recipe for success, but for those of us in the audience the burning question was why on earth did he invest in the dog-walking treadmill, 'Fur for life'?

The founder of recruitment firm Alexander Mann in 1985 which he eventually sold for, well put it this way, a lot, is now a household name but remains perhaps the most unassuming of the characters on TV's Dragon's Den and yesterday's talk reinforced it. He was relaxed, funny, engaging, answered all questions and stayed behind later to talk to a waiting throng but he just could not resist getting his gratuitous plug in for his new book, 'From Brick Lane to Dragon's Den'. Ah well, scratch the unassuming part and hence my reference to Dirty Den.

James Caan's 5 Tips For Business Success

For all in business, James' tips are worth knowing:

1) Vision - have vision which is transportable to a brand

2) Create a Partnership culture which allows people to share in success

3) Attract great people

4) Hire people better than yourself

5) Encourage Intrepreneurship rather than entrepreneurship to create depth and diversity in your company

It's worth exploring a few.

Creating vision requires clear leadership and good leadership provides a strong cause which allows people to buy in. He uses the example of Ronald Reagan touring a NASA facility and coming across a guy sweeping the floor he asked the rather redundant question of what did he do. The guy replied, 'I send people to the Moon.' That is a hugely powerful force in an organisation when such a lowly employee is joined into the common cause.

He also points out that over the years he has searched and recruited for many senior executives, most of which have joined big companies but few of which were given equity in the business - not just stock options. He asserts that sharing more of the fruits of success creates a far more vigorous company and develops creativity.

In attracting great people and recruiting better than yourself he gives the great example that having started Alexander Mann in 1985 he had built after 7 years a £15m a year revenue company. So he recruited a new CEO and went into business development himself. The new CEO took the company from boutique recruiter to mainstream and the first tranche of the business was later sold for £130m because James had realised he was not the person to have done this.

Intrepreneurship was for me the best tip. He gave the great example of a young girl in her twenties who had only been at Mann for 8 months, who had previously run a nanny business, came to him with the idea that major companies would outsource their recruiting. James initially could not see why companies would do that or how the model would work but they decided to give her a new legal vehicle, a small office, some equity in the new company and within a short period she had closed the deal with Vodafone. The Company was recently sold to Private Equity Firm Graphite for £93m. His assertion is that don't let people have to be entrepreneurs and start their own business to realise their ideas.

The State of Recruitment Industry

For many in the audience some of James' points were not welcome - I loved them. He bemoaned the state of the Recruitment business and that recent developments had brought 30% fees into sharp focus. Was a phone conversation and an hour's meeting to get a job brief all that was needed to recruit for a company? His maxim was that you needed to spend a minimum of 2 days with a Company to understand expectations, culture, management style and more before you could possibly be able to spot individuals who could do the job. Hurrah for someone in the industry and so prominent to argue in the face of 'Transaction Recruiting'. I will keep this independent but he also highlighted that 30% fees are justifiable when the process is executed with diligence because the cost of getting it wrong is not only lost recruitment fees, it is the rolled up cost of the executive's salary consumed before leaving and then the ramp time to find a replacement plus the missed opportunity cost - an equation I have replayed to many hiring executives and HR people who still simply choose the cheapest. When I posed that question to James that the industry is responding to the requirements of clients, he rightly was adamant not so - this was the recruitment industry conditioning business that it is all about quantity of CVs produced and getting a fast buck. Clients, if sold to properly, would always choose to pay 30% fees for proper diligence to avoid the cost of bad recruiting.

More Serious Matters

So why did James Caan invest in the dog treadmill, much to the derision of his fellow panellists? The story goes, James arrived for his first shooting of the TV series and did some rehearsing before they went live. A short way into the filming, a wave of panic came over him - where were the documents and business plans for the participants so he could read up before they came on? Fellow panellist Duncan Bannatyne put him right - the person gets 20 minutes to pitch an idea, you have your money and 20 minutes to decide based on what you have heard. This is television and reality show business. After 5 days of filming James had not made an investment, remembering they film the entire series in one hit, because his conservative approach could not allow him to make a decision based on the model. So as he got up for another day of filming his wife asked him how it was going and he replied that it wasn't going as planned - he couldn't make a decision. She reminded him he could not go an entire series without making an investment, he would hardly be invited back if he did that. So when James got on set that morning, he backed the first person who was filmed, Sammy French and 'Fit for Fur'. I like that story.

The roaring success was Peter Moule's Chocbox. This guy had been in business a while, had sold more than £1m of his invention, made £350k profit and had £250k in the bank. He wanted £150k for 10% of his business. The other panellists scoffed and wondered why the guy wanted an investor, he had a business. James Caan was intrigued. Amongst all the wannabes who came on the show with the merest slip of an idea, no sales or proof of concept, no track record of success, no money of their own and just a vain hope of success, here was a professional guy who had the product, sales, track record and cash of his own. It was a gift horse. Peter Moule, meanwhile, had a plan.

James beat him up to get 40% of the company for £150k and they horse-traded so that 1% of equity would be given back effectively if Peter sold £1m more. By any measure it was a good deal and having seen the episode myself, I thought Peter was daft. Not so. James Caan's connections brought in a huge wholesale electrical distributor who negotiated an exclusive deal on the product in return to buy 5m units each year for 5 years. Peter Moule was nobody's fool. Overnight for 40% equity he had transformed a bumbling, profitable business into a multimillion pound success and market leader.

The corollary to the story was this. Some months later, Peter Moule called James and bemoaned the fact his entire month's work was receiving a single order from the distributor for hundreds of thousands of units, forwarding the mail to the factory and then creating one invoice. Success had made his role redundant. Further he had not touched a penny of James' money so there was £400k plus interest in the company doing nothing. So James, who received thousands of hopeful business plans a week many with 'electrical' in the heading, decided to set up a joint venture investment vehicle with Peter, 60-40 in Peter's favour. James would forward 'electrical' business plans, Peter would investigate them and together they would decide to invest or not. Peter Moule, from 20 minutes of TV in which 4 out of the 5 panellists poo-poo'd him, had become a real life Dragon.

Summing Up

I like James Caan. He is not just a hard-nosed businessman; he has true, ethical values in an industry that has forgotten them. In the era of web-based recruitment, his deep belief that reducing the cost of recruiting will ultimately cost hiring companies millions in poor recruits being jettisoned and reloaded is right on the money. The figure at senior level is 40% of all executives will fail in the first 18 months. It really pays hiring Companies to choose recruiting partners who understand them and share their pain when it goes wrong.

You know, I even think his book will be a good read.