by Real Business - Thursday, 30th August 2007

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Mark Catlin sells CDs for £9.99. He sells computer games and the new big seller, DVDs. He works to a trusted formula: stack 'em high and sell 'em cheap. His business, Music Box, has grown from a stall at Romford market to 17 shops, stretching from Liverpool to Swindon, from Hammersmith to Basildon. From sales of £400,000 in 1996, 1999 turnover (the latest figures available) just topped £6m. It is, without question, a success story.

But as the company has grown, so Catlin's problems have increased. As these have mounted, so Catlin's enthusiasm has waned. Today he stands at a crossroads: whether to hang in there, battle through the hassles, learn new "business" (rather than entrepreneurial) skills, or whether to pack in the whole thing and move onto pastures new. Whatever he decides, Britain can ill afford to lose natural entrepreneurial talent such as his.

Catlin's first shop was in Romford's shopping centre. Although he had to fork out three months rent in advance, sales were good because the customers from his market stall remained loyal. Overheads were kept low because friends and family all chipped in to help. But over time, things have changed. The Sainsbury's, which was next door to Music Box, recently pulled out in favour of a huge megastore down the road. And with it went a lot of the centre's customers. The Romford centre did certainly have a bleak feel to it. But then it was Tuesday afternoon.

That's just the beginning. Music Box is limited to selling CDs, DVDs and computer games. Shopping-centre rules mean that Catlin can't diversify into potentially higher-margin goods. Other shops sell books. Other shops sell mobile phones. Catlin's choices are constrained.

As we left the Romford shop, the store manager called Catlin back to tell him he'd been offered another job. "Another headache," says Catlin, forcing a smile. "He's a good manager as well. A few months ago I could have closed that shop but I didn't out of loyalty to the staff. He gets offered two grand more and he's off. No one sees things from my point of view... Employees have all the rights. Employers have got none..." He should really close the Swindon branch too, says Catlin, but he likes the staff so much and they try so hard that he's keeping it going.

Music Box now has 70 staff. This is one of Catlin's biggest headaches. It never used to be like that. The company was built on camaraderie, loyalty and instinctively shared goals. But as it's grown, it's become ever more difficult to control all the disparate parts of the business. Some store managers constantly over-order, others run out of top-selling CDs; others just fail to grasp the importance of hard-sell on the most popular titles. Catlin's main problem is imparting his mentality - the ability to "sell the public what they want" - to the staff. Is he really the only one seeing ways to improve, to innovate - and to sell?

Catlin's work ethic is simple: work hard. The more you put in, the more you get out. He starts early and works when work needs doing. But his staff, he says, increasingly work to rule. "They start at nine and finish at 5.30 and that's it. And people now expect a bonus as a matter of right." It's perhaps unreasonable to expect your nine-to-fivers to have as much commitment to the business as you, the owner, but Catlin finds it distressing that his staff don't all at least share his work ethic. He appreciates that, to some of them, it's just a job, but many of his people want it both ways. "You volunteer sick pay only to find the same staff claiming for one extra hour's work, or trying to shut up shop before the last customers have finished," says Catlin.

Another day, another problem. Although he's not in debt with the banks, Catlin warns against giving personal guarantees. Even if he sells the business, and it all went wrong in a couple of years, he'd be liable for a hefty chunk of it. "I'm constantly living with the threat of losing my house." Add to that his sense of responsibility to the various family and good friends that rely on the company for their salaries, and you've got a lot of sleepless nights.

Music Box has expanded rapidly over the past few years. But at £100,000 a pop to open a shop, Catlin says he's currently "consolidating." Originally, he wanted to build an empire. Not now. Now it's all just more hassle. He's bogged down in the detail.

Such as chasing money. This takes up much of his days. Sure, he has brought in area managers, but "they bring their own problems", mainly that they don't replicate how Catlin wants the business to be run. He often visits shops and spots things that require more promotion or more prominence. Things that, really, the area managers should be picking up.

Music Box has succeeded on the back of low prices. That and the fact that everything was done from a poky back-office. Margins were low, overheads were lower. But with more staff comes more cost. Overheads edge up, jobs split in two, new people are employed. Detail, detail.

One positive is the internet. The internet is good business for Music Box, mainly because of the control it offers. An order comes in, Music Box takes the money and sends out the goods. Online sales are good and the company is involved with online auctions of CDs, DVDs and games, selling them at dealer prices. From this activity, Music Box obtains e-mail addresses of clients or potential clients. And with that ever-growing database, Music Box boosts sales through the likes of Lastminute.com, Freeserve and QXL.

The company doesn't do much mail order overseas, mainly because it "had its fingers burnt" with dubious credit-card transactions emanating from India. "We sell some to Guernsey and Northern Ireland," chipped in the company web wizard from across the office. "That's over the sea, isn't it?!"

Catlin admits that the internet could obliterate shops such as his. EMI and Virgin were the first major record labels in Europe to sell music downloaded through the internet, via Swedish company Buylando. This follows an agreement enabling renegade US music file-swapping company Napster to license music from 150 European independent labels.

It's only a matter of time before Music Box begins to suffer. The £9.99 price tag, for so long an impressive selling point, is beginning to lose its appeal.
Catlin rummages around his in-tray, thick with a variety of coloured bills. "I feel like a bird," he says at one point. "Like a bird flying with ten suitcases strapped to me. I suppose being an entrepreneur is like being a bird. Both free spirits." He pulls out a form from the Performing Rights Society, which collects money on behalf of the various bands whose music he sells. "There's a new scheme, though, asking for money on top of that!" It's another new threat to his already thin margins. "Hardly a day goes by without a new bill coming through the post. There's no end to it. I'm fed up."

Suppliers are another headache. He always seems to owe suppliers money. The situation only really gets corrected over the critical - and very busy - Christmas period. But then he has problems of stock, because he needs £2m-worth.
What about raising some money to give him the cash to build the business and take some of the weight off his shoulders? This suggestion was greeted with a curt "no thanks." He did go and see some venture capitalists once, but was soon put off by their insistence that he start with a financial director, something he sees as an additional burden rather than any help. He was also unsure what they would make of his long-time mate and business associate Martin. Loyalty is everything to Catlin and he wouldn't take kindly to anyone coming in and telling him who was surplus to requirements.

Catlin is confused about what to do with Music Box, and he doesn't mind announcing it in his open-plan office, even checking with the staff to see if they agree. They understand what he's saying.

A career change would be very difficult, says Catlin, because he feels he is inextricably tied up in the business. But you can see that he's not quite finished as an entrepreneur. Catlin would love to take his skills and use them in another business. "I'd love to go into Marks & Spencer, take over a shop and turn it round...

"It's a double-edged sword, being an entrepreneur. On the one hand you're free, but on the other, completely constrained."

If it all collapsed tomorrow, he'd just get on and do something else, says Catlin. But perhaps that's what makes him an entrepreneur. The word itself doesn't pass Catlin's lips easily. We walked through his Basildon shop and he proudly explained how he had put up the shelving himself. As we stood out the front, he pointed towards the huge luminous cut-out stars plastered all over the insides of the windows announcing the miraculous "knock-down" prices. "I did those," he smiled.

Jamie Oliver is associate editor of Real Business.

What should Mark should do next? E-mail your ideas to jo1@caspianpublishing.co.uk

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