A Conversation with Theo Paphitis, Serial Entrepreneur, Star of Dragon’s Den & Philanthropist

A Conversation with Theo Paphitis, Serial Entrepreneur, Star of Dragon’s Den & Philanthropist

Theo Paphitis is one of the UK’s most successful entrepreneurs. Born in Cyprus, Theo Paphitis has a business empire that spans retail, property, and finance. He left school at 16 with no qualifications due to his dyslexia, but soon discovered his passion for retail working for Watches of Switzerland – and the rest is history.

He has been in retail for over 40 years and in that time bought and revived the fortunes of the likes of Ryman, La Senza, Contessa, and Robert Dyas and launched global lingerie brand Boux Avenue in 2011. In 2016 he added The London Graphic Centre to his portfolio. Theo is also known for his 8 years as Millwall Chairman, as well as many TV appearances, including most notably as a long-standing Dragon on the BBC’s Dragons’ Den. He supports several charities, through his Theo Paphitis Charitable Trust, and is also Chancellor of Solent University. Theo launched his small business initiative #SBS Small Business Sunday network in 2010, which now has an annual event and over 4,000 small businesses. In 2023 Theo became the British Dyslexia Association’s first Dyslexia Empowerment Patron, and also joined forces with the Helen Arkell Dyslexia Charity to launch the Theo Paphitis Dyslexia Bursary. This helps to fund specialist courses for teachers and teaching assistants, helping them to identify and appropriately support young people with dyslexia.

In this interview I speak to Theo Paphitis, Serial Entrepreneur, Philanthropist & Star of Dragon’s Den. We discuss his incredible career in entrepreneurship, his learnings on what it takes to build successful businesses & brands, the future of retail, and the realities of what entrepreneurial life is really like. 

Q: What do you think it really takes to be an entrepreneur?

[Theo Paphitis]: I don’t believe in a magic solution or that there’s just one thing that makes everything work, and I’m pretty sure many others have echoed this sentiment to you. It’s about a myriad of elements coming together; circumstances undoubtedly play a significant role too. Add a generous dose of enthusiasm and passion into the mix, and then, just a sprinkle of luck on top. A little luck is essential, after all. And trust me, everyone experiences luck at some point. Whenever I hear someone claim they’re unlucky, I often counter by saying, maybe you haven’t encountered as much luck as you’d hoped, but you’ve surely had your moments of fortune along the way. It’s inevitable. There’s this saying, I believe it’s credited to Gary Player, ‘The harder I work, the luckier I get’. This could easily be rephrased as, ‘the more opportunities I pursue, the more I discover’. Essentially, it boils down to the same concept. Thus, trying to encapsulate it all with a single adjective or description simply doesn’t do justice. It’s a complex blend of various factors.

Initially, my goal wasn’t to become an entrepreneur; I was simply aiming to earn some money. That was it. In doing so, I inadvertently embraced entrepreneurship. Given my dyslexia, the academic path was not an option for me; there were no A-Levels or university in my future. My choices were stark: acquire a skill or venture into entrepreneurship. Naturally, I gravitated towards entrepreneurship.

Interestingly, most accomplished individuals who continue to work well into their later years seldom wake up thinking solely about the day’s earnings, despite such financial motivations often sparking their journeys. Instead, their motivation lies in pursuing a passion, dedicating their lives to something they genuinely love. For them, money becomes more of a metric—a way to keep score. At the year’s end, the accountants tally up, allowing for reflection and planning. Did we do well? Could we have done better? After taxes are paid, it becomes clear that money isn’t the sole measure of success.

Beyond the financials, there’s an “off-balance sheet” aspect to entrepreneurship, as I like to call it. It’s about the joy and satisfaction derived from your work, from being engaged and passionate about what you do. These sentiments are not unique to me; many entrepreneurs I’ve spoken with share this perspective. They value the intrinsic rewards of entrepreneurship just as much, if not more, than the financial outcomes.

Q: What does it take for businesses to scale?

[Theo Paphitis]: The reality is, not every business model is designed for scalability. That’s a fact. Some businesses don’t necessarily need to scale to be successful. Take the case of software engineering, for example. It’s inherently scalable, as evidenced by some of the largest software companies in the world becoming behemoths in the global market. The key lies in intellectual property (IP). Once you’ve developed a piece of IP, the cost of distributing it to one person versus a million is remarkably similar, making such businesses inherently scalable.

Contrast this with a service-based profession like window cleaning, which depends heavily on physical labour—my effort, your effort, regardless of whether it’s measured in man hours or woman hours. Scaling in such industries becomes significantly more challenging. Sure, you can hire additional window cleaners, but this introduces a new set of complications, from increased labour costs to managerial challenges. In essence, these businesses might offer a sustainable, even lucrative, livelihood, but they’re not designed to scale in the same way a tech company might.

On the other hand, there are businesses that thrive on scalability, leveraging the efforts, hard work, and creativity of others. This could involve hiring staff to expand your operational capacity or possessing an IP that holds substantial scalable value. However, it’s crucial to recognize that the landscape of scalability is vast and varied; it’s never about just one thing. Some ventures are lifestyle-oriented, providing a means to a decent, sometimes exceptional, living without necessarily being scalable. Then, there are those with the potential to scale, reliant on leveraging external efforts or valuable IP.

Q: And with retail businesses, is shared service efficiency the key?

[Theo Paphitis]: You’ve touched on a topic that coincidentally mirrors the discussion from a recent meeting I attended. You referred to it as “shared services,” while we used the term “consolidation” to describe essentially the same concept. This trend, I believe, is what we’re going to witness in the retail sector over the next decade. From my perspective, this shift towards consolidation might not be entirely positive. Given the current economic climate and the stance of the present government—and, frankly, there’s little optimism that the next government will fare any better, despite their promises—the challenges facing retail are formidable.

There will be exceptions, of course. There’s always room for innovation and new ventures that break the mould. However, the stark reality is that the majority of existing retailers, if they persist with their current strategies, are likely to face extinction. They will need to adapt and evolve. And part of this evolution, I foresee, involves a movement towards consolidation. We’ve already observed a significant amount of this, but I anticipate an even more accelerated phase of consolidation ahead.

Q: It feels the changes in high street retail will leave us culturally worse off as a society?

[Theo Paphitis]: Society has undoubtedly faced setbacks, but clinging to practices from 100 years ago isn’t a solution. The world has evolved, and so must we, finding our purpose in the new landscape. It’s easy to fault external factors—be it greedy landlords, outdated business rates harming retail, or local authorities with their restrictive parking policies. Yes, we can spend our time complaining about these issues. But, as I often emphasize, it’s crucial to introspect and work with the hand we’re dealt. We might strive for change, yet we must navigate with the resources available to us.

Take for instance Ryman, a brand with a 130-year legacy, and Robert Dyas, celebrating 150 years. These aren’t just numbers; they’re testaments to enduring heritage. However, as I reminded our management team recently, longevity doesn’t entitle us to a permanent spot on the high street. We must continually justify our existence. Without a compelling reason, even the most storied brands can fade into obscurity, joining the ranks of those that didn’t adapt.

Innovation is key to staying relevant. Look at the Ryman app we launched last week—a prime example. In a world where apps are commonplace, what sets the Ryman app apart? It’s a disruptor, offering services unmatched by any other high street retailer or app. This novelty grabs attention, signalling that we’re not just another retailer but a unique player in the market.

Consider the app’s capabilities, such as the personalized greeting card feature. While personalized cards aren’t a novel concept, our approach is. Customers can design a card through the app and pick it up from their local Ryman store within an hour—no waiting days for postal delivery, no shipping fees, all for just £2.99. This service not only draws customers into our stores for a highly personalized product but also reinforces Ryman’s relevance and adaptability.

Beyond traditional offerings like business stationery, we’ve diversified. Now, Ryman stores provide a suite of services—printing, DHL parcel drop-offs, Western Union money transfers, among others. These additions are not just services; they’re reasons for customers to visit, and reasons for Ryman to thrive in a rapidly changing retail landscape. We’ve moved beyond our historical focus to embrace a future where our uniqueness and adaptability define our reason to exist.

Q: What is the magic of physical retail?

[Theo Paphitis]: When I first embarked on my journey in retail, one of the earliest lessons I learned was about the significant cost of altering consumer habits. The mantra was clear: give the customers what they want because changing their habits is an expensive endeavour. However, the advent of the internet has ushered in a new era where consumer loyalty is fickler than ever. Customers today are incredibly promiscuous in their shopping behaviours, readily switching from one brand to another, influenced by various external factors. One day Google might direct their attention to me, the next to my competitor, and then to the competitor of my competitor, making the market highly transactional and fluid.

Yet, this is where the true magic of physical retail shines through. It’s not merely about presenting a screen filled with words and images. The essence of physical retail lies in the ability to genuinely engage with consumers, something that digital platforms can’t replicate in the same way. The importance of service delivered by store staff cannot be overstated, nor can their deep understanding of the local community. This understanding underscores why we place such a strong emphasis on our corporate social responsibility initiatives. It’s not just about philanthropy or doing the right thing from a social conscience perspective—though these are crucial—it also makes sound business sense to support the communities where we operate.

Our commitment extends to supporting national charities, but we always strive to connect these efforts with local initiatives and our store colleagues. Currently, we’re collaborating with the Helen Arkell Dyslexia Charity, sponsoring the training of a teacher in every town that hosts one of our stores. Our goal is to fund the training of 200 teachers as a starting point. This initiative allows us to engage with local schools and communities in meaningful ways beyond mere events, reinforcing our role as a local entity and a community member.

However, this deep-rooted community engagement doesn’t automatically entitle us to business. If we fail to offer a service that people desire, their goodwill towards us, no matter how generous, won’t suffice. The bottom line remains we must continue to provide value and meet the needs of our customers to maintain our relevance and existence in the marketplace.

Q: What do you look for in brands to invest-in and grow?

[Theo Paphitis]: Revitalizing an existing brand, one that’s already embedded in the public consciousness, is inherently easier than launching a new one from scratch. However, not every brand can be resurrected. We’ve witnessed countless examples where a brand’s purpose has simply evaporated over time. While I hold a nostalgic affection for many of these brands, their relevance has faded. The key to revitalizing a business often lies in strategic actions, such as leveraging shared services or consolidating within an industry or retail category. This approach can significantly reduce costs that would be unsustainable for individual brands operating independently. This strategy has proven successful not just for me but for many others, underscoring why I often emphasize the importance of consolidation given the current economic pressures.

Transforming a loss-making entity into a profitable venture isn’t about my vision alone; it hinges on insights from those who operate within the business. Before considering the acquisition of a business, I invest considerable time in dialogue with its employees. Admittedly, gaining candid insights has become more challenging as my public recognition has grown. In the past, my anonymity afforded me valuable, unguarded conversations with staff members.

One memorable encounter involved visiting a competitor’s store, dressed in a suit, which was my habit back then. I engaged the store manager, addressing her by her first name as indicated by her name badge, and inquired about the day’s trading. Our conversation, which spanned about 20 to 25 minutes, provided me with a wealth of insight into her perspectives on the business’s challenges. While discerning between local, personal grievances and broader business issues was necessary, this interaction was particularly enlightening.

Her realization towards the end of our chat that I wasn’t from their head office, followed by my subsequent ownership of the business, marked a remarkable moment. When we met again, I expressed my gratitude, half-jokingly advising her to perhaps inquire more about the identity of her interlocutors in the future. These experiences underscore the invaluable insights frontline employees offer, insights crucial to understanding and navigating the intricacies of revitalizing a business.

[Vikas: talking to people in and around businesses at all levels is so important for leaders]

[Theo Paphitis]: For me, engaging directly with the people in a business is invaluable. Despite all the due diligence my accountants and team can perform, analysing numbers and reports, my personal approach to due diligence involves immersing myself within the company, listening to the employees’ concerns, their praises, and their criticisms. This hands-on method offers me a deeper, more nuanced understanding of the business’s inner workings.

In one acquisition, a retail business, I adopted a unique approach to gather insights. I would gather all the managers in a conference hall, with the entire Head Office team present on stage. It’s important to note that these individuals from Head Office were not my hires but part of the inheritance of the acquisition. Initially, there’s a silence, no questions asked until I initiate the conversation. I encourage them by stating, “This is your chance. I’m here to improve your work life. Tell me three things that would make a significant difference for you, and let’s discuss if I can commit to implementing these changes, including the timeframe.”

One of the first issues raised was the cost of tea and coffee during breaks. “Would having tea and coffee funded by petty cash improve your morale?” I asked. The answer was a unanimous yes. Then, the conversation turned to the lack of fridges for storing milk, which I also agreed to address. Before we knew it, the discussion hadn’t progressed beyond the staffroom. Yet, these seemingly minor grievances were significant to them. They’re dedicating countless hours, working tirelessly for a business facing challenges, and these staffroom inadequacies were a source of frustration.

When microwaves were mentioned, it was clear to me that their staff rooms were not serving their needs. “So, if I were to provide 100 microwaves, 100 fridges, and ensure you have access to tea and coffee, would that be a positive start?” The scepticism was palpable. “But will you actually do it?” they questioned.

This interaction highlighted an essential truth: the workplace is a second home for these employees, where they spend as much time as they do at their actual homes. My aim was to alleviate any additional stress from their work environment, not by encouraging idleness, but by removing unnecessary obstacles. Making the workplace more comfortable and accommodating doesn’t mean lowering expectations but rather creating an environment where employees feel valued and understood.

Transitioning from addressing the immediate comforts of the staffroom, the atmosphere shifted significantly. A modest investment had not only enhanced morale but also opened the floor for broader discussions. I could sense the discomfort of the Head Office team seated behind me, as they were directly confronted with feedback from the frontline employees—voices they had seemingly ignored for far too long.

This moment was pivotal. I urged the Head Office team to take accountability, asking them, “Why hasn’t this been addressed? Can we implement these changes? If there’s a reason to disagree with the suggestions from our staff, I’m all ears. Remember, I’m the newcomer here.” This dialogue was crucial for me to understand the dynamics and constraints of the business from an insider’s perspective.

While not every suggestion was feasible, many ideas presented were both possible and potentially transformative for the business. This open forum for feedback has been a cornerstone of my approach throughout my career. Fostering an environment where employees feel comfortable sharing their thoughts, whether positive or negative, has been invaluable. It’s important to acknowledge that not all feedback is glowing, but it’s all crucial for growth and improvement.

Q: What does legacy mean to you?

[Theo Paphitis]: Wow, when you ask what it all means to me… well, I see myself as just a humble shopkeeper. But when it comes down to it, as we each approach our final moments, ready to leave this earthly existence, there’s a profound question to ponder: Did my presence make the world a better place? That’s sufficient for me. It’s a question that doesn’t discriminate by the magnitude of impact.

And, you know, this applies universally, whether it’s someone you’re sitting next to on the tube or the bus. The essence is the same: Was the world improved because they were here? The scale of impact, in my view, is secondary. After all, we’re all born into different circumstances, with varying abilities and characteristics. Yet, this fundamental question should hold true for everyone. Did your existence contribute positively to the world? If the answer is yes, that’s all that really matters. That, to me, is enough.

Thought Economics

About the Author

Vikas Shah MBE DL is an entrepreneur, investor & philanthropist. He is CEO of Swiscot Group alongside being a venture-investor in a number of businesses internationally. He is a Non-Executive Board Member of the UK Government’s Department for Business, Energy & Industrial Strategy and a Non-Executive Director of the Solicitors Regulation Authority. Vikas was awarded an MBE for Services to Business and the Economy in Her Majesty the Queen’s 2018 New Year’s Honours List and in 2021 became a Deputy Lieutenant of the Greater Manchester Lieutenancy. He is an Honorary Professor of Business at The Alliance Business School, University of Manchester and Visiting Professors at the MIT Sloan Lisbon MBA.