A Conversation with John Caudwell, Entrepreneur & Philanthropist

In 1983, Motorola released the DynaTAC 8000x, the first commercially available handheld mobile phone.  Fast forward 20 years later, and by 2013, the world had close to 6.5 billion mobile subscriptions. Today we have close to 100% penetration of this incredible technology into human society, and the profound changes mobile telephony and the smartphone are capable of delivering are only just becoming apparent.

In the mid-1980s, John Caudwell was operating a successful car dealership in Stoke (United Kingdom).   He’d heard about mobile phones, but knew little about them. He researched, and approached one manufacturer to buy one. The price was £1,600. He asked if they would do a deal on two – and they said £1,350. He said that he’d take two, they said only if he became a dealer, he asked what that entailed, they said he had to buy a carton of 26.  It took him nine months to sell them.

By the time he sold Caudwell Group (which included Phones4U) in 2006, the business was selling 26 phones a minute. It employed 10,000 people in the UK and abroad. It was turning over £2.25 billion.  He sold the business for £1.5 billion in 2006 and while he has remained involved in business, with interests in marine, aviation, property, and wealth managementhis prime focus has been charitable and philanthropic work.

John is one of the UK’s most celebrated entrepreneurs and philanthropists, and I caught up with him to learn more about his career, his views on entrepreneurship, and his work changing lives.

Q: What does entrepreneurship mean to you?

[John Caudwell] In line with most highly-tuned talents, I absolutely believe that entrepreneurship is a genetic gift that you’re born with.  What you do with that gift depends on your upbringing, opportunities and inspirations; you either make them massively better or neglect them.

If you don’t have those genetic talents from birth, it’s difficult to be really, really, successful.  For anybody to get to the top of anything- whether that’s a 100-metre sprint or business, you have to be genetically gifted and then work like fury to achieve.  That combination of genetics and sheer hard work is the ‘secret’ of getting to the top.

Let me be clear however, I don’t want anyone to be misled into thinking that without that genetic gift they will not be successful! That’s clearly wrong.  You may be born without any gift at all, but that doesn’t mean you can’t work very, very hard and get to the top.  That genetic-gift factor is the difference between being good, and being a world champion.  You’re never going to be a world champion runner, cyclist or entrepreneur without it.

Q: What are the challenges of building a high-growth business?

[John Caudwell] The challenges of a high-growth business are utterly endless.

To grow, a business needs to be filled with the very best people- but for young businesses in their infancy or startup phase, attracting these people can be extremely hard.  The people you attract to your business are part of its evolution; as you become more successful, you are able to get better people, which in turn makes you more successful, and so on.

For some businesses, those that have a very unique selling proposition, like a Dyson vacuum cleaner, the commercial aspect of running the business is made a lot easier by having a desirable proposition right from the start.

If you don’t have a desirable product, and you’re a ‘me too’ player like we were, your differentiator comes down to the skill of your people to operate with honesty, integrity, with high levels of service, while achieving the best value possible.  To achieve the very best price, while remaining profitable and giving people great value does, in itself, present challenges.  You have to negotiate the best deals you can with manufacturers… you have to have very slick internal operations to keep your cost of sales and operation down… but you have to still pay your people really motivational salaries and bonuses!  This last piece is important.  You cannot run a business without great people, who are incentivised to be great; and so, you must protect them, and pay them appropriately.

There were times when we were recruiting thousands of people in a year, and the stress and pressure that places on everything and everyone is immense.  Growth puts your management systems, operational systems and accommodation under pressure.  How do you start a business with one or two people like I did and grow to a hundred? One of the many challenges, for example, is accommodation. Where is it going to come from? And then when you go from a hundred to a thousand, where do you put all those people!? Then there are all the other challenges like management systems, HR, IT systems, culture, cash flow and so many more.  These are all huge dilemmas for growing businesses.  Just keeping the infrastructure of your business scaling and running efficiently is a formidable challenge.

I scaled the business from just me, to 10,000 people some 20 years later.  Scaling and keeping control of that business was practically impossible- I failed many times, but managed to succeed overall through sheer determination, hard-work and having very, very good people.

As my business was growing, I looked at the failures more than the successes (which are easy to take for granted).  As a business owner, I was probably criticised for being somewhat failure-focussed.  I used to say to all my people that yes- we can celebrate our successes, and we have to succeed, but the failures are what will sink the business or hold it back.  You have to take a balanced view, appreciate that you’re doing well and growing, but also appreciate that there will be failures and problems in the business, and until those are put right- you cannot celebrate too much!

Q: What are the characteristics of a successful founder or CEO?

[John Caudwell] The best founders and leaders have extremely sharp commercial senses and abilities, and an absolute drive to produce value, minimise cost and maximise profits.  This has to be done however with absolute integrity, morality, honesty and truthfulness.

Without truthfulness I would never have been able to grow anything of any significance, I would have been ‘found out.’  Having truthfulness and ethics within a business creates trust among employees at all levels and is critical.  Being realistic, you will always recruit people who turn out to be dishonest- it doesn’t matter how hard you try to avoid it- and you need to remove them very quickly, and also encourage a culture of honesty.

Just as a very small example… none of my employees were ever allowed to take a present at Christmas from any suppliers or customers, nor were they allowed to give any.  If people were given presents, we’d gather them altogether and auction them off for our charity!  Instead of creating favour as a result of gifts, we created something good.

I had to lead this from the top.  I led the company with an approach of complete honesty.  That didn’t mean I told people everything; in a lot of cases, I kept a lot of information to myself and managed things on a need-to-know basis, but when I did tell people things, it was always based on the truth.  If I couldn’t tell them the truth, I told them I couldn’t tell them and they had to trust me….

So many people make false claims.  They promise jam tomorrow, and while a very small number deliver huge rewards, the vast majority fail.

Q: How did you know the right time to exit?

[John Caudwell] Exiting the business was quite an easy decision for me as there were several significant factors that came together.

From around 2004, I saw the UK heading for a massive recession and started preparing the business for sale.  We were extremely lucky to sell the business given the recession started very quickly around 2006, and the world economy had begun to unravel.

The mobile phone market had also reached such a state of maturity, that while there would always be opportunities it would become more about consolidation- meaning that the shareholder value built on 15 years of growth would be lost overall.

The growth to come in mobile telephony was not going to be as a result of the trading business that I ran, but rather because of applications, software developments and other areas which are not my expertise.  I am not a software developer or application designer; and even if I was- the risks to stay in the business were very big.

An effective recession within the cellular phone marketplace caused by maturity, saturation and consolidation combined with a UK-wide recession set the scene for my decision to prepare the business for sale.

I’d had 20 years of the most indescribable intensity and focus; and not many people can appreciate what that means, because there are very few people that have grown a business organically from one person to over 10,000.  Most people had acquisitions along the way, but I did the whole thing organically from 1 to 10,000 and the pressures and stresses were intense.  After 20 years of that, and 10 years in a previous life with similar stresses, I had sort-of ‘had enough.’

The sale of my business came at a time where I was also focussing a lot more on philanthropy, and was not as interested in making money anymore.   If the sale of my business went right, it was going to be well over £1 billion, and how much money does one man need?

As a very successful businessman and entrepreneur, and having made that money, I decided that the right and proper thing to do was to pay roughly the right tax, and not to disappear- having had all the benefits of the country you love, without paying the dues of that country felt wrong.  I decided that paying the right amount of tax was important.   I didn’t want to be a mug and that meant putting in reasonable tax planning to be sensible… but fundamentally, that I was paying my taxes!

The small amount of tax planning that was done I could share with all.  Not only am I very comfortable with my whole tax situation, but I am actually proud of it.

Q: How do you approach your philanthropy?

[John Caudwell] I’ve helped a lot of charities over the years, but I found the best way of making certain that I could the biggest success possible for the people I was trying to help, was through the creation of my own charity, Caudwell Children.

Caudwell Children helps children across the UK, with any illness whatsoever.  The only qualifier is that parents would not be able to afford or get help any other way.  I founded that charity with a view to making it super-efficient.  My company, right from the beginning, committed to paying all the operating expenses and this is something I’ve carried on personally since selling the company.  This year, we’re building a new centre specialising in autism- and we’re hoping to make a big improvement in the lives of autistic children over the next few years.  I’ve also founded a new charity called Caudwell Lyme Co which looks at Lyme and infectious diseases; our aim is not just to transform Britain in this regard, but to transform the world because so little is understood about Lyme and co-infectious diseases which are causing long-term chronic illness and disability across increasing percentages of the population.

It’s very easy to donate money to charities and become demoralised when you feel the money isn’t being used properly, or that it isn’t achieving the outcomes you had hoped.  By founding my own charities, I solved that problem.  Charity occupies around a third of my life, it’s a big challenge and a big responsibility.

Around eight years ago, I decided to donate at least half my wealth to charitable causes during my lifetime or upon my death.  That takes the pressure off; there will be a team of people including my family members and other trustees, who are responsible for carrying on my work after my death- so whether I give the money away within my lifetime, or after my lifetime, the money is there to make a difference.

I don’t believe in handing vast sums of money down from generation to generation.  You need to encourage your children to be successful in their own right, and that may not be financial, it’s whatever they- themselves- deem that success means to them!  One of my daughters is going to be a psychologist, she won’t make huge money but it doesn’t matter as long as she’s successful and changes people’s lives.  Another daughter, I’ve been able to help into property development in New York, and she’s now independently wealthy in her own right.  Encouraging your children to be successful and happy whilst also encouraging them to have   a humanitarian outlook is the best any parent can do, and leaving them vast sums of money is probably the worst thing they could ever do!

Philanthropy gives me way more satisfaction than most things in life.  I like going on my boat with my friends, and going to my ski home, but nothing gives me the same feeling as helping people, and changing the lives of people who needed help.

Q: What would be your message to the next generation of entrepreneurs?

[John Caudwell] Before you set-up in business, analyse how much you really want it.

There are six critical factors for success.

Ambition sits like a shining beacon that sits in the sky that tells you where you want to go, and stops you from resting until you’ve achieved it.  Without ambition you’re not going to go anywhere, and if you want to be successful on a big scale, you have to have ambition.

Drive is absolutely fundamental to success.  You have to be capable of driving yourself beyond the limit that most people can go to.

Resilience is important.  With all the ambition and drive in the world, if your body and mind are not resilient enough to cope with the stresses, you won’t be successful.  Your health and your brain have to hold-out no matter what the world throws at you.

Passion matters.  That’s the inspirational component, and helps you to win with suppliers, customers and employees.  People love passionate people!

Commercial intellect is a huge factor to success.  You have to be able to weigh up a commercial situation, and be able to find ways and angles to turn it to your favour- to add value to your business smartly.

Leadership abilities are the real differentiater  between growing a business, and growing a business at real scale.  The leadership ability you have allow you to manage people, motivate them, drive them, keep them honest, keep them loyal to the cause, keep them fighting and keep them motivated.  This is a rare and difficult skill.

If you want to be an entrepreneur, you have to evaluate yourself honestly on your ambition, drive, resilience, passion, commercial intellect and leadership ability.  You also have to be willing to potentially sacrifice a big part of your life.

Entrepreneurship is fantastic, and if you do it right? It gives you the wealth and power to do what you wish; and in my case, that’s been about changing people’s lives.

About the Author

Professor Vikas S. Shah is an award winning entrepreneur, strategist and educator who has built businesses in diverse sectors around the world for almost 20 years. He is also a consultant and advisor to numerous entrepreneurs, business and organisations globally.

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