by Real Business - Thursday, 30th August 2007

This is the page

Last year, John Timpson, chief executive of Timpson, sat down to compose a letter to his 27-year-old son. James, he knows, will ultimately run the 133-year-old shoe repair, watch repair, key-cutting and engraving chain. It will not be an easy task. The nationwide group has in the past five years doubled sales to over £40m and tripled profits. John hoped to impart some of his experience. The private letter began as a cautionary tale of the cyclical nature of small business. It became a book-length history of the turbulent life of the family firm full of timeless business advice. John kindly allowed us access to his personal thoughts. Here are some excerpts.

During 25 years running a business, I have seen plenty of good times, but I have had many bad years as well. You, James, have only known the business growing rapidly. During the past five years sales have gone up from £20m to over £40m and our profits have risen from under £lm to £3m. It will be difficult for you to contemplate anything other than an unbroken future of success. But there will be setbacks. There may even be times when you despair that things will never get better. That is when these observations will become most useful to you.

Please remember this is only a guide. Put your own personality across, add your own ideas and be your own man. When you inherit my role you will be taking on considerable responsibilities. Your guidance will determine the future of the business and the prospects of the people who now work with us.

You, as chief executive, are the company's role model. You don't win over the workforce by stamping your authority on the business. An incident that occurred 30 years ago still sticks in my mind. At our head office, there was one car park close to the front door. Parking bays were numbered one to 35; the lower the number, the nearer your car to reception. The number of the parking bay was as precise a measure of status in the company as a golf handicap.

One day, a branch manager was called into the personnel department. Unaware of the parking system, he selected bay number two. Twenty minutes later, Geoffrey Noakes, the deputy chairman, arrived and found that his bay was occupied. He parked his Rolls Royce directly behind the car and stayed in the office until 6.30pm. The poor shop manager who had made a special journey on his day off had to stay all day waiting for his car to be released.

Lots of factors will determine the future progress of our business. The choice of people, making the right decisions, and luck. These all play a big part, but the quality of your leadership will be the single most important influence on the future of the company. Your enthusiasm will be infectious.

With 1,000 people in 315 places throughout England, Scotland and Wales, we have to work hard to keep in contact with everybody. I make about 450 shop visits a year, meet 30 or 40 branch staff a week and hope during the course of the year that I will have met up with every one of our 1,000 employees.

I don't normally warn the staff I am coming, but news soon spreads. A lot of people expect me to carry out a meticulous inspection and point out anything that is out of line. I don't. I am there to find out about the business.

If you really want to be approachable, you have to make the first move. Staff will only open up their hearts to you if you start the conversation and learn to be a good listener, especially when you are listening to criticism. School masters taught me the benefit of a calm reaction to criticism. With five children of our own, and ten times as many foster children, we have made countless visits to the headmaster's study. They have an excellent response to angry parents. They listen, thank the parents for coming in and are absolutely non-committal as to what they are going to do about it.

You can't keep your private life totally away from a family business. Talk about your holidays and your children. The employees are interested in your lifestyle, who you are and what you do. When the business discovered that Alex and I are foster parents, I formed a special relationship with a significant number of employees who have been fostered or adopted.

In a family business, it does no harm for the employees to feel part of the family. If you take an interest in people's lives, they are more likely to show an interest in your business. You will find that we have employees with fascinating hobbies - a female boxer, a ferret breeder, a channel swimmer and an Olympic weightlifter.

I like to keep up with the gossip in the business. Since the introduction of our weekly newsletter, I can now read about the weekly events of Timpson, which are just as colourful as Coronation Street. The newsletter is a thermometer to measure morale.We should take an interest in employees' personal problems, but I do not think the company should interfere in people's home lives. Their divorce, their drink problem or a bereavement is their own personal difficulty - as long as they don't bring it into the shop. We should at least be aware of the problems that surround people's lives. It may be a clue to their current performance and in the end they may well turn to us for help. The most important way you can look after the people who work for you is to help them make more money.

I wish I had read this 20 years ago instead of writing it today. I would have saved a lot of time worrying about things that didn't matter and agonising about decisions I never made. Avoid difficult decisions. Just make the obvious ones. Don't rush into decisions and don't let anyone else create false deadlines. New facts emerge and other more important things arrive on the scene.

As I go around the branches, shop staff want snap decisions. 'Don't you think we should close on Good Friday?' or 'Can you upgrade my key-cutting machinery?' Avoid these decisions. It's not your job to make snap judgments that will undermine the person with the real authority to decide.

Buying Automagic, a shoe repair rival, was the only decision we made in a hurry. The receiver sold the business within three weeks and we had 12 hours to make our final bid. Still, we had been looking at the Automagic business for seven years and had been their major shareholder for five years before the acquisition.

Always be on the look-out for good ideas. They can appear in the most unexpected places. In 1986, we were desperately searching for a new shop design. We wanted to upgrade the traditional cobblers' image to become a modern, high-quality, multi-service business.

Six months' work and several thousand pounds-worth of design fees failed to provide a satisfactory solution. Then one day, I was visiting our shop in Bath when I suddenly realised that I was surrounded by good fascia designs used by other businesses on a quality high street. I took a photograph of every fascia I liked. We stuck the resulting pictures on a board and selected our current design.

In the seventies, it was fashionable for a company's management team to disappear on a retreat to a luxury hotel or a sun-drenched resort where everyone was given the space to come up with new ideas. These expeditions often occur as a response to poor trading and can succeed in making matters worse. The most likely source of inspiration lies within the business - in our case by going around branches.

Several ideas found on shop visits have had a profound effect on our business. In 1990, I saw that the manager of our Cheadle shop, John Higgs, was displaying a whole line of leather shoes on his rack above the machinery. He repaired more leather-soled shoes than anyone else in the business and his shop was in a small suburb of Manchester. Within a year, every branch had a similar display of leather shoes. In the next eight years, our leather business quadrupled.

Don't expect everyone to welcome your good ideas. To many people, a new idea is tantamount to criticism. New ideas threaten the status quo and inevitably entail hard work. People will often produce a string of reasons to demonstrate why your new ideas won't work.A prime example of resistance to change occurred in our former shoe retail shop in Windsor in 1975. We were starting a closing down sale and the manager made a last-ditch attempt to hang onto his traditional values. Our closing down sale had been so successful elsewhere that a queue usually formed before we opened. To cope with the crowds, all the shoes were put out on racks. The chairs and fitting stools were hidden behind the scenes.

Our Windsor manager was not happy. He could not contemplate selling shoes without providing a proper service using a shoe horn, sitting on the fitting stool and lacing up the shoes for the customer. He even argued on behalf of one-legged folk. His area manager ignored him, cleared the chairs and filled the shop full of shoe racks. By 9.30am, a large queue had formed under the shadow of Windsor Castle. The first person in the queue was a man with one leg.

If you have an excellent idea that has been rejected, keep planting the seeds until someone else in the business comes up with the idea for you. Very often it's the person who is the biggest critic who adopts your idea as their own.

If you can't get the agreement of the people in the business, ideas usually won't work. It has taken us years to develop our engraving business. We knew there was a healthy market and we made several attempts to improve our displays. We produced lots of special leaflets and we improved the quality of our machinery, but still something was holding us back.

The real problem was that our shop staff lacked enthusiasm for the engraving service. They didn't believe they could earn enough extra bonus to justify the effort involved. A debate about how we could best deal with a declining shoe repair market encouraged life-time shoe repairers eventually to take on the new tasks of key-cutting, engraving and more recently watch repairs. They approved of the new direction, because they felt part of the decision.

The bank balance is our best barometer of the business. Before producing a profit figure, accountants adjust for depreciation, contingencies, extraordinary items and sometimes use acquisition accounting. In contrast, the bank balance is untampered fact. We have a great advantage. Most of our sales are in cash. We have low working capital with little stock fluctuation from month to month. Our major expenses are wages, which are paid weekly or monthly - and rents that are paid quarterly. Fluctuations in our bank balance almost entirely reflect profit and capital expenditure.

I look at the cash figure every day. We designed a simple report seven years ago and have been using it ever since. The secret is to compare today's bank balance with the same day last year. The seasonal pattern of our payments and receipts is almost identical from one year to the next. A comparison with 12 months ago eliminates all seasonal differences.The change in the cash should reflect profits less capital expenditure. Most days I look at the cash report for 15 to 30 seconds and then throw the piece of paper away. I just need to ask two questions: "Why has it changed since yesterday?" and "Why the change since last year?" Usually, I know the answer; if I don't, I go and ask Martin, my finance director.

When I was a 17-year-old shop assistant, I was still living at home with my mother and father. One night after they had gone to bed, I found a copy of the board meeting minutes which father had left lying around. I couldn't resist reading them. I was amazed to find out that the business was opening ten new shops, developing computer systems (this was in 1960), and our new head office was due to have a royal visit from Prince Philip. I didn't have a clue what was going on in the business - and I was the chairman's son! Many businesses are paranoid about information falling into the hands of their competitors. In my experience, there is little need to worry. Most company news, plans and ideas are of little interest to anybody outside the company. In most cases, competitors don't understand the information, don't believe it, aren't interested and don't know how to use the facts for their advantage. Another source of paranoia is the worry about staff knowing too much: bad results could result in a loss of morale and good results will lead to excessive wage demands. It just doesn't happen like that. Being open about the bad times gives your staff the opportunity to come up with solutions. Sharing good results creates staff loyalty, which is the long-term strength of the business.

Make all the facts common knowledge. Report on turnover every week - not just the company totals, but also allow every shop access to the turnover figures of every other shop. It gives them a true idea of how they are doing and stimulates healthy competition. Provide a regular update on profit performance, reporting company results on a quarterly basis. Every six months, give each branch their detailed profit figures. A regular supply of information stops rumours, while ignorance will stimulate the prophets of doom. Whenever you try to hide the facts, the workforce will fear the worst.

Don't forget your suppliers. Contrary to popular belief they won't put up prices if they think you are doing well; they are more likely to offer you attractive quantity discounts. When we needed a period of extended credit shortly after purchasing Automagic, I got 100 per cent support from our suppliers. I am sure they trusted me, because I had been consistently open with them about our progress.

Everyone who works in the business has the right to know what is going on and they want to hear about the company from the boss.

The business plays a very important part in my life. It is my number one hobby. You seem to have a similar view, but don't forget what you are doing all this for. You don't have to put in more hours than anyone else in the business. There is no need to feel guilty if you are playing golf when everyone else is working. If you are fit and happy, you will do a better job.

I first suffered from stress in 1976, but in those days you did not talk about it. If you openly admitted to a stress problem, you were labelled as a person who would buckle under pressure.

The stigma of stress made the condition worse. You tried to hide your affliction from the rest of the business by working harder, just at the time your body was asking you to take things easy.

The symptoms are now familiar. I couldn't concentrate for more than two minutes, but at the same time, I couldn't get my mind away from the business. Half the time I was terribly nervous and twitchy; for the other half I was depressed. I became forgetful too, which further undermined my confidence.

For six weeks, I hid the problem from everyone at the office and at home. It soon became obvious to your mother. I talked to her about it and she sent me straight to the doctor. The doctor told me it's the body's way of saying enough is enough. Too much adrenaline and too much tension will, in the end, produce a breaking point. I had learned a lesson. Stress is not something you can beat on your own. You should never be too proud to ask for help. As soon as I recognise the signs, I tell those nearest to me - wife and secretary - that I am not on top form.

If in time you find that business has become a treadmill you can't get off of - and at the same time you have run out of ideas to make the profits grow - you should look around to see whether there is another family member to take over your role. If there is no one left in the family to run the business, then you should sell it. Just in case you are wondering, I hope to be available until the year 2013.

For 30 years, my best critic and advisor has been your mother. Only she can really understand where our true priorities lie. You married a similar talent. Listen to what Roisin says about the business. She is both close enough to what is happening and far enough away from the detail to give the advice you need. The one thing more important than your family business is your family.

The Timpson history

Following in the footsteps of my father and grandfather, I joined the company that my great-grandfather founded in Manchester in 1865. By age 26, I became a director. William Timpson had 250 shoe shops, 150 shoe repair factories and a shoe manufacturing unit making 22,000 pairs of shoes a week. Just after your second birthday, everything suddenly changed.

Timpson had been jointly managed by my father and his cousin Geoffrey Noakes. Father was not the strongest of managers, but he knew the business and was a nice chap. Geoffrey was ex-army, a great one for issuing orders. In the early seventies, Geoffrey gathered the support of a majority of directors to ask for my father's resignation, splitting the board and the family. We threatened to make the family shares under our control available to any potential bidder. Father still got voted out. Four months later, we sold our shares and the business became part of the UDS Group.

Back on top I spent the next six months floating around the UDS Group, another family business. On the day I went to resign, UDS asked me to manage a 60-shop business, which sold suede, fur and leather clothing. The business was experiencing a dramatic fall in turnover and making a significant loss. I ran the business by following father's example. I visited the shops. The staff soon told me what was wrong and I responded to what I learned. Then I had a stroke of luck. A shop caught fire. We put up a notice: "Fire sale starts next Friday." We took in more money the first day than in the past two months. Out of the blue, I received a telephone call from UDS, inviting me to succeed Geoffrey Noakes as managing director at William Timpson. It was a magic moment.

The reverse take-over I was fortunate at UDS. There was always another business that was doing worse than mine. With such a consistent record of company failure, we were able to increase the size of our chain by taking on some of the properties occupied by the failed businesses. Such an existence was good for Timpson while it lasted, but it could not last for long.

Early in January 1983, UDS was taken over by Hanson Trust. Two months after Hanson acquired the UDS Group, we agreed to our own management buy-out of Timpson for £42m. As you can imagine, it was a dream come true. The company that I thought had disappeared forever had suddenly become a family business again. I was walking on air, hardly able to believe what had happened. When I woke up from the dream, I found that an independent life was not as good as I'd expected.

Selling out Twelve months following the buy-out, sales stagnated and profits declined. The buy-out had been a wonderful dream, but for the company to then fail would be a personal nightmare. The more I faced that possibility, the more stressful life became. Two years later, I handed over the running of the business to outsiders.

The change of management did not help. Sales grew worse and the business was heading for a loss. The only reason to continue selling shoes was my personal pride. It took three months to break my emotional ties and put the shoe shops up for sale. The deal was done in a daze. It was like selling a house you've lived in since childhood. Even worse, a lot of people I knew well would lose their jobs, because I had failed to find a way to make our shoe shops profitable.

Looking back, selling Timpson shoe shops in 1987 was the best decision I ever made. The sale brought in a profit of £15m and Timpson Shoe Repairs excelled for three years. We acquired three businesses, grew to 225 shops and bought a 26 per cent stake in our next largest competitor, Automagic. Everything was fine until a depression hit the high street and slim heels went out of fashion.

Profits dropped. I was increasingly being criticised by my directors. When two minority shareholders wanted out, I sold every investment I had, took out a £1m mortgage on our house, and bought every share we didn't own. It was an expensive deal but well worth it. For the first time in my life, I truly was working for myself.

Contacts
You can contact John on 0161-946 6225.

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