Thursday, 30 August 2007

Vanity vs Sanity

Some comments just come back to haunt you - and none more so than my 'I think it's a ridiculous idea' comment on Series 1 of Dragons' Den, made of course in relation to the 'StableTable' anti-wobble device which has just been back in the news in the past week, allegedly having won a 'million pound order' from the States.

What has been interesting about all the stories, lead by an initial piece in the Times by Steve Hawkes, is that they all focus on the topline figure - yet nowhere has anyone bothered to ask the fundamental business question of how much profit has been made along the way.

It reminds me of the time Red Letter Days won a deal 'worth £2.6million' with Sainsbury's to supply them with a bespoke experiences range. We PR'd that one from the rooftops too, and yes we gained lots of great PR coverage. When the consignment (which had been supplied on sale or return) winged its way back to us less than 12 months later - and we had to issue a refund cheque for £2.3million - we were a little less mouthy in the Press.

Once all the bespoke manufacturing/fixture/design costs were totted up, we were sitting on a loss of c£250k, not to mention a skip full of unusable scrapped merchandise.

It all goes back to the old business adage 'Turnover is Vanity, Profit is Sanity'.

However, to me what is most scandalous is that here we have an apparently leading business journalist creating an article for what is still an influential, opinion forming leading business title, who didn't even ask basic screening questions in researching his piece regarding these small factors of manufacturing/supply cost, deal terms and underlying profit. I know because I directly asked him when he called me for a statement on the story - on which I was also misquoted. Here's the statement I actually issued:

"Re: Stable Table, from memory we recorded the piece back in September 2004 and Andrew was asking for something like a c£100k investment in return for a 25% stake in the business (which would have valued his business at that point at c£300k). While it is great that Andrew has persevered with his invention and just received a £1million order, in business terms over a three year period that is still not a huge amount of revenue for an angel investor to see materialising in return for £100k, especially as the figure represents turnover and not underlying profitability (after manufacturing costs and overheads)."

It may help readers to know that the journalist in question formerly worked on the business pages of The Sun (not normally known for its thoroughness or integrity of reporting); the worrying thing is that it sends the message to businesses to keep chasing splashy headline number deals without understanding that big retail deals can be very expensive to service as well as low margin, and often also come with a huge sting in the tail - if you don't look after the sell through.

Anyway, just to end on a positive note, I received a really sweet email from Andrew today (the inventor of the StableTable) to apologise for the negative comments in the Press and to say how he had also been misquoted...

Par for the course when it comes to mainstream media I'm afraid Andrew.

Perhaps that why sales of newspapers are declining - while the amount of news circulating via blogs and open forums (comments made by real people with real experience, and no editorial axe to grind) are mushrooming exponentially.


Ian said...

In your bio on the left,
"Red Letter Days went on to generate over £100million in turnover in the 16 years that she ran it"
Everyone judges a business by turnover, I usual find that only those who have been there ask afterwards what the margin is/was.
Maybe instead of bringing back national service everyone should be told to run a business for 3 years. I bet that would change attitudes in the workforce, the media and even(dare I say it) local and national government.

julesbrad said...

I am just about to relaese a product which will be in direct competition to the StableTable and was wondering which way to go :-
1. Ask Rachel to invest
2. Sell patent to StableTable business
3. Go for it myself

Ian said...

Hi Jules,
I can't speak for anyone else, but I think you only have one option in that list, and it's the one that involves hard work.
I will explain my thinking:
1: Why would Rachel want to do this, she had no interest in the original, and second to market is always in a catch up position. Add to this the coverage that the original is getting in free publicity and a competitor is going to have a real fight. Is that kind of battle really worthwhile for the investment? Secondly Rachel cant do this as she is currently being over quoted for putting the product down. There is nothing but bad press if she turns about with a competitor product.
2: They will have the stable table product patented or pending. Knowing how long a patent takes I would be surprised,(but very impressed)if you have a full worldwide patent so soon. In that case all you do with your approach to sell to them is make them aware of your patent and they slow it down. If you do have the patent they still wont worry as they are already first to market and have a huge lead on you.
3: Go for it mate, you will have lots of fun and frustration.

time said...

I am still very unsure why you think you are an Entrepreneur as you have failed at all ventures and did not even invest in any of the Dragon's Den opportunities. Is this because you had no money!!
It comes as no suprise that you one and only large venture failed as your maths is very poor as in this topic you state that the value the person was trying to raise was £100k and willing to give 25% of the equity. You state that this values the business at £300k. Based on Basic maths the value would be £400k not £300k. Not suprised you could not run a business.
Stick to being a marketing/brand manager!!

Rachel Elnaugh said...


Not really quite sure where you get your facts from (do you even bother with facts I wonder?) - just to correct you, I did make investments in three Dragons Den ventures (Grails, Le Beanock and Snowbone); I offered to invest in Bedlam Puzzles but Danny Bamping declined the offer post-show.

As regards my Maths, I think it is your understsnding of basic investing that is poor - a business which is asking for £100k in return for 25% new issued share capital is worth £400k post investment, thus values the business at £300k pre-investment.

I think it is you that should return to (prep?) school !!!

By the way, have you ever achieved anything yourself I wonder? Apart from slagging off others via anonymous blog comments of course.


julesbrad said...

Good to see that you read the comments on here Rachel (not so good that you have to respond to simple abuse)

Rachel, do you presently invest in businesses ? and if so, what is the best way for people to contact you about pitching an idea ?

Rachel Elnaugh said...


After my experiences with the investments made via Dragons' Den I would now only invest in a business in which I had both a direct executive involvement plus a significant equity stake.

I am currently developing my website to include contact details of all the various funds which specialise in angel/seed/start up funding - so watch this space.

Meantime you can probably find most of these organisations yourself via Google.

However, I always maintain that most people who think they need funding actually don't. If your product is indeed an alternative to StableTable (and that wasn't just a wind up!) then all you really need is a prototype + a deal to supply a major retailer (a bit like Andrew, and actully that was what we also told him on the Show). You can then use the deal to raise trade finance (to fund the manufacture) through a specialist like Davenhams in Manchester - and you're away!

By the way, as regards my response to 'time', I think it was positively restrained!!!

And just to respond to comment #1 from Ian - It's a fair cop guv!

But anyone who has ever run a business will know that sales generation - particularly when starting from scratch - is THE most difficult thing to pull off.

So I am afraid I am still quite proud that one simple idea managed to generate so much response from so many thousands of customers over the years, not to mention sparking an entire 'experiences' sector.

julesbrad said...

I was being serious about a new invention which will be in competition with Stable Table - do you think it is a good idea to go to an existing business like StableTable to offer a new invention rather than starting up a new business to start in competition ?

Also just realised that if someone clicks on my username, they are taken to my business blog - didn't realise that so have just been to add a couple of updates (very new to this blog world)

Rachel Elnaugh said...


I would be very wary of trying to market your invention via your competitor. They are not yet established enough to have any number of serious retail accounts, and as your product is in direct competition to theirs (and therefore they are likely to make less margin on any sales from it as there are two 'mouths to feed' from any deals) why would they give it priority?

There is no mystique to selling via retail. You create your prototype product, get on the phone to a retail buyer, get a meeting and try to sell it in.

You don't need StableTable's help to achieve exactly what they have done to date - and in the process retain 100% of the profit from the deal.


julesbrad said...

Thanks for your comments Rachel.
I have placed an initial order for 5,000 units of my invention with a manufacturer which I will use to send out with press releases and visit retailers. There is also a 'Meet the buyer' event to meet buyers from my local council in a few weeks which I have registered with. Also, just done a video for YouTube which shows the device in action - if a picture is worth a thousand words, how many words is a video worth ? lol

p.s. When I receive them I will post some to you for your help you have freely given - thanks