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Hundreds of different businesses make a festival a festival. | 0:00:13 | 0:00:17 | |
From poncho sellers to ice cream vendors, | 0:00:17 | 0:00:20 | |
they all started as someone's money-making bright idea. | 0:00:20 | 0:00:24 | |
You see, it's all about spotting a gap in the market | 0:00:25 | 0:00:28 | |
and then using your head to make a bit of cash. | 0:00:28 | 0:00:30 | |
Do that and you'll be well on your way | 0:00:30 | 0:00:32 | |
to becoming a full-on entrepreneur. | 0:00:32 | 0:00:35 | |
Matt Pickup and his friends | 0:00:35 | 0:00:37 | |
spotted an opportunity in 2004 | 0:00:37 | 0:00:40 | |
and have never looked back. | 0:00:40 | 0:00:42 | |
He might look like any other festival-goer, | 0:00:42 | 0:00:44 | |
but the tent we're pitching is one of | 0:00:44 | 0:00:46 | |
350 we've got to get through. | 0:00:46 | 0:00:49 | |
This could take a while! | 0:00:49 | 0:00:51 | |
Matt is a co-owner of tent hire company Tangerine Fields. | 0:00:52 | 0:00:56 | |
Here at Reading, their 350 tents | 0:00:56 | 0:00:58 | |
can be rented for up to £90 per person. | 0:00:58 | 0:01:01 | |
Last year the company turned over | 0:01:01 | 0:01:03 | |
one million pounds. | 0:01:03 | 0:01:05 | |
It's a classic tale of spotting and seizing an opportunity. | 0:01:05 | 0:01:09 | |
Myself and my business partners were at the Big Chill Festival. | 0:01:09 | 0:01:13 | |
We were really tired and just wanted to get home on the Monday morning | 0:01:13 | 0:01:16 | |
and had noticed that others were obviously in the same frame of mind | 0:01:16 | 0:01:20 | |
but they just couldn't be bothered to take their tents down | 0:01:20 | 0:01:23 | |
so they'd bought and pitched them and left them. | 0:01:23 | 0:01:25 | |
And so we thought, if people are willing to do that, | 0:01:25 | 0:01:28 | |
they'd be willing to not buy the tent, not pitch it and leave it. | 0:01:28 | 0:01:31 | |
As simple as that! | 0:01:31 | 0:01:32 | |
Er, yeah. It was a simple idea that took off. | 0:01:32 | 0:01:36 | |
How did it go from the idea to becoming a proper business? | 0:01:36 | 0:01:39 | |
We took a risk and invested some money in buying some tents. | 0:01:39 | 0:01:42 | |
Spoke to the Big Chill Festival and laid out our idea to them. | 0:01:42 | 0:01:45 | |
It seemed quite popular and from there it doubled | 0:01:45 | 0:01:48 | |
and doubled in size each year and | 0:01:48 | 0:01:50 | |
now we've moved up to 26 festivals this summer. | 0:01:50 | 0:01:53 | |
If Matt needed any more inspiration, he need look no further | 0:01:57 | 0:02:00 | |
than some of our most successful entrepreneurs. | 0:02:00 | 0:02:03 | |
You're fired. | 0:02:03 | 0:02:05 | |
Scary Lord Sugar began his business life trading out of a van, | 0:02:05 | 0:02:08 | |
and is now worth £770 million. | 0:02:08 | 0:02:12 | |
Levi Roots charmed the Dragons in the den | 0:02:13 | 0:02:16 | |
and within a year was shifting 40,000 bottles | 0:02:16 | 0:02:19 | |
of his Reggae Reggae Sauce a week. | 0:02:19 | 0:02:21 | |
And let's not forget Posh Spice, | 0:02:21 | 0:02:23 | |
whose clothing range has helped push brand Beckham's worth | 0:02:23 | 0:02:26 | |
up to an eye-watering £165 million. | 0:02:26 | 0:02:29 | |
What those guys have got, apart from a big bank balance, | 0:02:31 | 0:02:34 | |
are some special qualities that make them top entrepreneurs. | 0:02:34 | 0:02:37 | |
But what exactly are those qualities? | 0:02:37 | 0:02:39 | |
Confident and good at talking to people. | 0:02:42 | 0:02:45 | |
If you're shy I don't think you're going to get anywhere. | 0:02:45 | 0:02:47 | |
Smart and well presented. | 0:02:47 | 0:02:49 | |
Yeah, dress well, good first impression. | 0:02:49 | 0:02:53 | |
Guts, I think. I think you have to be really brave | 0:02:54 | 0:02:57 | |
because it's all about taking chances | 0:02:57 | 0:02:59 | |
and working out whether gambles are worth doing. | 0:02:59 | 0:03:01 | |
There's no magic formula for being an entrepreneur, | 0:03:01 | 0:03:04 | |
but there are qualities which could help. | 0:03:04 | 0:03:07 | |
Creativity is essential | 0:03:07 | 0:03:08 | |
for transforming an opportunity | 0:03:08 | 0:03:11 | |
into a real business idea. | 0:03:11 | 0:03:13 | |
Guts - starting up a new business is always a risk, | 0:03:13 | 0:03:16 | |
so you need to be daring to be successful. | 0:03:16 | 0:03:19 | |
Drive - getting an idea off the ground isn't easy, | 0:03:19 | 0:03:22 | |
but with determination you could hit the big time. | 0:03:22 | 0:03:25 | |
Even some of the world's most successful entrepreneurs | 0:03:29 | 0:03:31 | |
have had failures in the past. | 0:03:31 | 0:03:33 | |
So it's all very well having a great idea. | 0:03:33 | 0:03:35 | |
The key is putting that idea into practice, | 0:03:35 | 0:03:38 | |
like the traders are doing here. | 0:03:38 | 0:03:39 | |
Once you've had your idea, you need to think about the practicalities. | 0:03:39 | 0:03:43 | |
Before starting, think about whether you might be able | 0:03:43 | 0:03:46 | |
to legally protect your idea against copying. | 0:03:46 | 0:03:48 | |
Where are you going to base your business? | 0:03:48 | 0:03:50 | |
If you've got an ice cream van, | 0:03:50 | 0:03:52 | |
don't park it on a quiet country lane. | 0:03:52 | 0:03:54 | |
Instead, go to a festival | 0:03:54 | 0:03:56 | |
with loads of people with cash to spend. | 0:03:56 | 0:03:58 | |
Finally, what sort of business model best suits your idea? | 0:03:58 | 0:04:02 | |
Should you act as a sole trader? | 0:04:02 | 0:04:03 | |
Or do you need to form a limited company? | 0:04:03 | 0:04:06 | |
But one of the most important things to think about is the big R. | 0:04:10 | 0:04:13 | |
And by the big R I mean research. | 0:04:13 | 0:04:15 | |
and I don't just mean buying a few books and surfing the web! | 0:04:15 | 0:04:19 | |
To find out more, I've ditched the wellies | 0:04:22 | 0:04:24 | |
and left the music behind to meet | 0:04:24 | 0:04:25 | |
a man who spotted a - how can I put it? | 0:04:25 | 0:04:27 | |
An "interesting" opportunity at a festival | 0:04:27 | 0:04:30 | |
and backed it up with some hefty market research. | 0:04:30 | 0:04:34 | |
This is Richard Wharton, | 0:04:34 | 0:04:36 | |
and the cardboard box he's putting together | 0:04:36 | 0:04:38 | |
is his solution to an age-old festival problem - | 0:04:38 | 0:04:42 | |
yes, going to the toilet. | 0:04:42 | 0:04:44 | |
I'm at my festival, | 0:04:44 | 0:04:47 | |
I've got to go, so I whip this out and just sit? | 0:04:47 | 0:04:50 | |
-Yeah, absolutely. It'll take your weight. -It'll take my weight? | 0:04:50 | 0:04:53 | |
Yeah, that'll take up to 20 stone in weight. | 0:04:53 | 0:04:56 | |
-And then do my business? -Yeah. | 0:04:57 | 0:04:59 | |
Festival lover Richard came up with the idea | 0:04:59 | 0:05:02 | |
in 1989 after visiting the toilets | 0:05:02 | 0:05:04 | |
at Glastonbury. | 0:05:04 | 0:05:06 | |
Once you had the idea, what did you do in terms of market research? | 0:05:06 | 0:05:10 | |
We made up just short of 300 and gave them away | 0:05:10 | 0:05:13 | |
to mates, festival-goers to trial out | 0:05:13 | 0:05:17 | |
and what we found from that was | 0:05:17 | 0:05:19 | |
we had a Marmite product. | 0:05:19 | 0:05:20 | |
Some found it embarrassing to use in their own tent, | 0:05:20 | 0:05:23 | |
other people didn't care at all | 0:05:23 | 0:05:25 | |
and at 3 o'clock in the morning at a festival, it was a godsend. | 0:05:25 | 0:05:30 | |
Sending out samples as Richard did | 0:05:32 | 0:05:34 | |
is one of many market research methods. | 0:05:34 | 0:05:36 | |
The other options include... | 0:05:36 | 0:05:38 | |
Field research. | 0:05:39 | 0:05:40 | |
That's asking people their opinion - | 0:05:40 | 0:05:42 | |
in person, on the phone or online. | 0:05:42 | 0:05:45 | |
Desk research. | 0:05:46 | 0:05:47 | |
Gathering information related to your idea | 0:05:47 | 0:05:49 | |
from books and the internet. | 0:05:49 | 0:05:51 | |
Research can be qualitative - about people's reaction | 0:05:52 | 0:05:55 | |
to the product. Do they think it's a good idea? | 0:05:55 | 0:05:57 | |
Or quantitative - | 0:05:57 | 0:05:59 | |
gauging the number of people who'd actually be willing to pay for it. | 0:05:59 | 0:06:03 | |
So being an entrepreneur is more than just | 0:06:04 | 0:06:06 | |
coming up with an idea. You have to take a calculated risk | 0:06:06 | 0:06:10 | |
and actually do something with those ideas. | 0:06:10 | 0:06:12 | |
And if you do, with the right qualities, you never know, | 0:06:12 | 0:06:14 | |
you too could be sat on a fortune! | 0:06:14 | 0:06:17 | |
And if you'll excuse me, I need some privacy now, so...cheers. | 0:06:17 | 0:06:20 | |
Three days, 80,000 people, | 0:06:33 | 0:06:36 | |
40 brilliant bands, | 0:06:36 | 0:06:38 | |
the Reading Festival is where every aspiring rock star | 0:06:38 | 0:06:41 | |
wants to play. But the music business | 0:06:41 | 0:06:43 | |
is about more than just the glamour of a festival. | 0:06:43 | 0:06:46 | |
One type of businessperson might ply their trade | 0:06:46 | 0:06:48 | |
a world away from the noise and chaos of Reading, | 0:06:48 | 0:06:51 | |
but still play a really important role in the music industry. | 0:06:51 | 0:06:54 | |
This is Jake Travis and this is his record shop. | 0:06:55 | 0:06:58 | |
Nine years ago Jake turned his passion for reggae into his job. | 0:06:59 | 0:07:02 | |
He swapped the factory production line for the freedom of being | 0:07:02 | 0:07:05 | |
his own boss, and became a sole trader. Put simply, | 0:07:05 | 0:07:09 | |
sole traders are the only owner of their business. | 0:07:09 | 0:07:14 | |
I'm not a great one for being told what to do and having to stick to | 0:07:14 | 0:07:17 | |
a time schedule. | 0:07:17 | 0:07:20 | |
You're your own boss, you're your own business. | 0:07:20 | 0:07:23 | |
You come and go as you please and you answer only to yourself, | 0:07:23 | 0:07:27 | |
so, you know, that is a major plus. | 0:07:27 | 0:07:29 | |
As a sole trader, what are you responsible for? | 0:07:29 | 0:07:31 | |
Bills, rent, rates, | 0:07:31 | 0:07:34 | |
I have to buy stock, | 0:07:34 | 0:07:36 | |
I have to buy bags. | 0:07:36 | 0:07:38 | |
Everything that you see here is sort of | 0:07:38 | 0:07:41 | |
stuff that I've bought and had to sort of literally price up and | 0:07:41 | 0:07:45 | |
physically put in the racks. You're responsible for everything. | 0:07:45 | 0:07:48 | |
Even though they're their own boss, | 0:07:48 | 0:07:50 | |
sole traders like Jake have a lot of responsibility on their shoulders. | 0:07:50 | 0:07:54 | |
For starters, they decide what to sell. | 0:07:56 | 0:07:58 | |
They source their stock and make sure they've got | 0:07:58 | 0:08:00 | |
enough of it. They price and market | 0:08:00 | 0:08:03 | |
their product, and to top it all off, | 0:08:03 | 0:08:05 | |
they physically sell it too. | 0:08:05 | 0:08:07 | |
And like every business, they need to make sure VAT, income tax | 0:08:08 | 0:08:12 | |
and National Insurance payments are in bang on time. | 0:08:12 | 0:08:16 | |
That's a lot for one person to take on, | 0:08:16 | 0:08:19 | |
but, believe it or not, the majority of businesses | 0:08:19 | 0:08:21 | |
in this country are sole traders. | 0:08:21 | 0:08:23 | |
And they're not all involved in selling products. | 0:08:23 | 0:08:25 | |
Some provide a service, like plumbing or hairdressing - or music. | 0:08:26 | 0:08:30 | |
Genevieve Wilkins is a percussionist. She's played with | 0:08:30 | 0:08:33 | |
huge stars including Lionel Richie and Akon, and also performs in West End shows. | 0:08:33 | 0:08:37 | |
But today is her lucky day, because she's got the chance to teach me. | 0:08:37 | 0:08:43 | |
This is one of my favourite instruments around. | 0:08:43 | 0:08:46 | |
It's called a cajon. And it's the Spanish word for box. | 0:08:46 | 0:08:49 | |
Because Genevieve is a sole trader, she's responsible for everything. | 0:08:51 | 0:08:55 | |
Cool. So what do I need, a flat hand? | 0:08:55 | 0:08:57 | |
From advertising her services | 0:08:57 | 0:08:59 | |
to giving lessons. | 0:08:59 | 0:09:01 | |
And then you can start... | 0:09:01 | 0:09:02 | |
that's it! I'll keep going like that | 0:09:02 | 0:09:04 | |
and you can just add in things like that. That's it! | 0:09:04 | 0:09:07 | |
-Now we're rocking. -What are | 0:09:07 | 0:09:09 | |
the advantages of being a sole trader? | 0:09:09 | 0:09:11 | |
I can have a variety of what I do for a living, so I can do pop gigs, | 0:09:11 | 0:09:14 | |
I can do classical music gigs, I can do some teaching.. | 0:09:14 | 0:09:17 | |
And the nicest thing is that | 0:09:17 | 0:09:19 | |
I can pick and choose | 0:09:19 | 0:09:21 | |
to do the projects that I love. I'm never really doing | 0:09:21 | 0:09:23 | |
any of them just for the money. | 0:09:23 | 0:09:25 | |
You're your own boss. It's brilliant. | 0:09:25 | 0:09:27 | |
So how did you become a sole trader? | 0:09:27 | 0:09:29 | |
I was really lucky to get a part-time teaching job | 0:09:29 | 0:09:32 | |
in a really good music school, | 0:09:32 | 0:09:34 | |
and as I graduated university, and I started performing as well, | 0:09:34 | 0:09:38 | |
you have to be a sole trader. You've got so many incomes from so many different places. | 0:09:38 | 0:09:42 | |
Being your own boss sounds great, | 0:09:42 | 0:09:44 | |
but there are financial and legal implications. | 0:09:44 | 0:09:47 | |
Sole traders have what's called unlimited liability. | 0:09:48 | 0:09:51 | |
This means they have a personal responsibility for everything | 0:09:51 | 0:09:54 | |
to do with their business. | 0:09:54 | 0:09:56 | |
If they go bust and owe money, they could have to sell | 0:09:56 | 0:09:59 | |
everything they own to pay off their debts. | 0:09:59 | 0:10:03 | |
In the worst case, that could include cherished possessions | 0:10:03 | 0:10:07 | |
like their TV, car or even house. | 0:10:07 | 0:10:10 | |
Jake is well aware of the pressures that come with being his own boss. | 0:10:11 | 0:10:15 | |
If people don't walk through the door, | 0:10:15 | 0:10:17 | |
you don't earn money. | 0:10:17 | 0:10:20 | |
And that comes with its pressures - | 0:10:20 | 0:10:22 | |
your security is in the hands of the general public, as it were. | 0:10:22 | 0:10:26 | |
But the pros often outweigh the cons. | 0:10:27 | 0:10:30 | |
I'm the boss, I'm the performer, | 0:10:30 | 0:10:31 | |
I'm the accountant, I'm the manager, | 0:10:31 | 0:10:33 | |
I have to find some gigs for my duo. | 0:10:33 | 0:10:35 | |
You have to do sort of do absolutely everything, | 0:10:35 | 0:10:38 | |
so the skills have been really good. | 0:10:38 | 0:10:40 | |
I've learnt lots of different things I thought I'd never learn how to do. | 0:10:40 | 0:10:43 | |
It can be hard work and long hours, but for many, | 0:10:43 | 0:10:46 | |
the dream of owning their own business makes it all worthwhile. | 0:10:46 | 0:10:50 | |
Putting all the hard work to one side, | 0:10:50 | 0:10:52 | |
there is one great advantage to being a sole trader. | 0:10:52 | 0:10:54 | |
You alone are responsible for any money you make | 0:10:54 | 0:10:57 | |
and it's yours to do what you want with. | 0:10:57 | 0:10:59 | |
So, put the hours in, and that record shop or drum kit | 0:10:59 | 0:11:02 | |
could be your passport to a great profit! | 0:11:02 | 0:11:04 | |
Of all the businesses trying to make a little cash at Reading, | 0:11:20 | 0:11:24 | |
from the T-shirt vendors to the burger vans | 0:11:24 | 0:11:27 | |
and noodle bars, there's one that's different from all the rest. | 0:11:27 | 0:11:31 | |
And it's not because of what it sells, | 0:11:31 | 0:11:33 | |
but because of the special way it's set up. | 0:11:33 | 0:11:35 | |
Ice cream is a festival staple - | 0:11:35 | 0:11:38 | |
particularly when the sun is out, | 0:11:38 | 0:11:39 | |
and Dominic Daniele knows how to cash in | 0:11:39 | 0:11:42 | |
on this captive market. | 0:11:42 | 0:11:44 | |
He's dishing out gallons of the stuff to the hungry crowds | 0:11:44 | 0:11:47 | |
from his seven Wall's ice cream vans around the site. | 0:11:47 | 0:11:50 | |
And what makes his business different | 0:11:50 | 0:11:53 | |
is that it's a franchise. | 0:11:53 | 0:11:54 | |
We've all heard the word before, but how many of us | 0:11:54 | 0:11:57 | |
actually know what it means? | 0:11:57 | 0:11:58 | |
What's a franchise? I don't want to look stupid. | 0:11:58 | 0:12:01 | |
It's when one company develops a string of companies, like McDonald's is a franchise. | 0:12:01 | 0:12:06 | |
A franchise is a business which is owned by yourself, | 0:12:06 | 0:12:09 | |
it's a big business which is owned by individual people. | 0:12:09 | 0:12:12 | |
It's a simple idea, really. | 0:12:12 | 0:12:15 | |
You pay an established company a fee | 0:12:15 | 0:12:17 | |
and that gives you the right to use its name and sell its products. | 0:12:17 | 0:12:22 | |
Franchises are common on our high streets. | 0:12:22 | 0:12:24 | |
The burger you wolfed down at McDonald's for lunch, | 0:12:24 | 0:12:27 | |
or that pizza from Dominos and the photos printed off at Snappy Snaps | 0:12:27 | 0:12:30 | |
were all bought from franchises. | 0:12:30 | 0:12:33 | |
In fact, there are an estimated 897 different franchises in the UK. | 0:12:33 | 0:12:38 | |
What is the advantage to having a franchise like this, then? | 0:12:38 | 0:12:41 | |
We've got a multi-million pound company | 0:12:41 | 0:12:44 | |
that is basically doing all of our advertising, | 0:12:44 | 0:12:46 | |
and we do have the bestselling products | 0:12:46 | 0:12:49 | |
in the ice cream line in the UK. | 0:12:49 | 0:12:52 | |
We've bought five brand-new vans, | 0:12:52 | 0:12:54 | |
and our sales and our purchasing power has increased. | 0:12:54 | 0:12:58 | |
Are there any disadvantages? | 0:12:58 | 0:12:59 | |
The only disadvantage is cosmetic, | 0:12:59 | 0:13:02 | |
because when you own a business, you want your name in lights, | 0:13:02 | 0:13:07 | |
but after five or ten minutes | 0:13:07 | 0:13:09 | |
of Walls' products flying out of the window, | 0:13:09 | 0:13:12 | |
that passes right away, so there's hardly any disadvantages. | 0:13:12 | 0:13:15 | |
Now, Dom, | 0:13:15 | 0:13:16 | |
I'd feel like I'd do myself an injustice if I'm | 0:13:16 | 0:13:19 | |
at an ice cream van chatting to the owner and not having a go. | 0:13:19 | 0:13:22 | |
Please can I have a go? | 0:13:22 | 0:13:23 | |
I've always wanted to. | 0:13:23 | 0:13:24 | |
Sure, hop on in. | 0:13:24 | 0:13:25 | |
Ahhh! | 0:13:28 | 0:13:29 | |
There you go, sir, | 0:13:29 | 0:13:30 | |
you can have that one. | 0:13:30 | 0:13:31 | |
Thank you. | 0:13:31 | 0:13:33 | |
Anyone else want one? | 0:13:33 | 0:13:34 | |
Oh! Look at that! | 0:13:34 | 0:13:35 | |
One shot, one shot, and a shot in the middle. | 0:13:35 | 0:13:38 | |
That deserves two flakes. | 0:13:38 | 0:13:40 | |
That's one, and that's two. | 0:13:40 | 0:13:44 | |
Anyone want...a lunch and dinner?! | 0:13:44 | 0:13:47 | |
Fortunately for Dominic, given my huge servings, | 0:13:47 | 0:13:49 | |
it's not just the number of ice-creams he sells | 0:13:49 | 0:13:52 | |
that's crucial to the success of his business. | 0:13:52 | 0:13:54 | |
But there is one important group he has to impress | 0:13:54 | 0:13:57 | |
to ensure he keeps his vans on the road. | 0:13:57 | 0:14:00 | |
And that's the franchisor. | 0:14:00 | 0:14:02 | |
The franchisor is a big and well-established company | 0:14:02 | 0:14:05 | |
that charges a fee to franchisees like Dominic, | 0:14:05 | 0:14:07 | |
giving them the right to trade under its name, and sell its products. | 0:14:07 | 0:14:11 | |
In Dominic's case, the franchisor is Wall's, part of Unilever, | 0:14:11 | 0:14:14 | |
a multinational company worth billions of pounds. | 0:14:14 | 0:14:18 | |
Franchisees like Dom seem quite happy with their lot, | 0:14:18 | 0:14:22 | |
but what's in it for the franchisor? | 0:14:22 | 0:14:24 | |
Bob Bhartiya is Dominic's boss. He's franchise manager | 0:14:26 | 0:14:29 | |
for Walls. It's his job to keep an eye on the 15 franchises | 0:14:29 | 0:14:32 | |
that run over 200 ice cream vans across the country. | 0:14:32 | 0:14:37 | |
From Wall's point of view, | 0:14:37 | 0:14:38 | |
the benefits of selling franchises are clear. | 0:14:38 | 0:14:41 | |
We can get our product | 0:14:41 | 0:14:43 | |
to market very quickly, | 0:14:43 | 0:14:44 | |
and pretty inexpensively. | 0:14:44 | 0:14:46 | |
Our investment is really around | 0:14:46 | 0:14:48 | |
the graphicing of the equipment | 0:14:48 | 0:14:50 | |
and also on the point of sale. We have | 0:14:50 | 0:14:52 | |
operational standards that franchisees must meet. | 0:14:52 | 0:14:55 | |
We have a very strict code on pricing, | 0:14:55 | 0:14:58 | |
there is a minimum and a maximum size that ice creams should be, | 0:14:58 | 0:15:02 | |
and monitoring those | 0:15:02 | 0:15:03 | |
standards can be sometimes challenging. | 0:15:03 | 0:15:06 | |
That means if a franchisee | 0:15:08 | 0:15:09 | |
mucks up, it's the reputation of the parent company that suffers. | 0:15:09 | 0:15:13 | |
So, to recap, a franchise is a partnership | 0:15:14 | 0:15:17 | |
between two parties and that means there are | 0:15:17 | 0:15:19 | |
good and bad sides to the arrangement. | 0:15:19 | 0:15:23 | |
On the plus side, the franchisee gets to sell an established product, | 0:15:23 | 0:15:26 | |
which means they don't have to take such a risk going into business. | 0:15:26 | 0:15:30 | |
And they don't have to worry about marketing costs, | 0:15:30 | 0:15:33 | |
because that's usually met by the franchisor. | 0:15:33 | 0:15:35 | |
Often, the franchisor will pay for staff training too. | 0:15:36 | 0:15:40 | |
There are some downsides for the franchisee. | 0:15:42 | 0:15:44 | |
They don't get much choice about what to sell | 0:15:44 | 0:15:47 | |
and there's less room for being entrepreneurial. | 0:15:47 | 0:15:50 | |
For Dominic though, | 0:15:50 | 0:15:52 | |
the advantages massively outweigh any disadvantages. | 0:15:52 | 0:15:55 | |
My father-in-law he built the company by himself for 40 years | 0:15:55 | 0:15:58 | |
and we've trebled the business since we joined Walls. | 0:15:58 | 0:16:02 | |
The vans are impeccable, the ice cream is fantastic, | 0:16:02 | 0:16:05 | |
so we just have to sit here and serve the public. | 0:16:05 | 0:16:07 | |
I've learned two things today. | 0:16:10 | 0:16:12 | |
That franchising can be a very effective way of running a business, | 0:16:12 | 0:16:15 | |
but more importantly, that I'm actually not that bad | 0:16:15 | 0:16:18 | |
at making ice cream, and it is quite tasty. | 0:16:18 | 0:16:21 | |
We Brits love nothing more than a weekend of music, mayhem and mud. | 0:16:35 | 0:16:40 | |
Festivals have become so popular that now over 400 take place every year. | 0:16:40 | 0:16:45 | |
Reading is the oldest and attracts some of the world's biggest names. | 0:16:45 | 0:16:49 | |
But Reading is more than just a bit of fun - it's a business. | 0:16:49 | 0:16:53 | |
And for the 200 or so companies that provide bottles of water | 0:16:53 | 0:16:56 | |
and wacky sunglasses, it's an opportunity to make a lot of money. | 0:16:56 | 0:17:01 | |
Though they make the festival experience better, it's important | 0:17:01 | 0:17:04 | |
to know the companies are not all run the same. | 0:17:04 | 0:17:07 | |
To find out more, I'm heading | 0:17:09 | 0:17:10 | |
somewhere pretty special - backstage. | 0:17:10 | 0:17:13 | |
I'm meeting a man who provides something you can't see or touch | 0:17:14 | 0:17:17 | |
but without which there definitely wouldn't be any music at all. | 0:17:17 | 0:17:21 | |
Rob Hutchinson owns Innovation Power, which provides | 0:17:25 | 0:17:28 | |
all the electricity needed to run everything | 0:17:28 | 0:17:31 | |
from the stage lights to the guitars. | 0:17:31 | 0:17:34 | |
This is the main stage supply | 0:17:39 | 0:17:40 | |
so there's not just one big supply to the stage. | 0:17:40 | 0:17:43 | |
There's several supplies. There's the sound, | 0:17:43 | 0:17:45 | |
the lights, the video. | 0:17:45 | 0:17:47 | |
-Not like plugging your Hoover in, is it? -No, not at all. | 0:17:47 | 0:17:50 | |
So what would happen if I switched off one of these? | 0:17:50 | 0:17:53 | |
I'm itching to in a way, can I do something? | 0:17:53 | 0:17:55 | |
Those people out there would get very angry. Really? | 0:17:55 | 0:17:58 | |
Yeah. I'd be running off in that direction. | 0:17:58 | 0:18:00 | |
Supplying power to Reading isn't straightforward. | 0:18:02 | 0:18:05 | |
Neither is Rob's company structure. | 0:18:05 | 0:18:07 | |
That's because, with an average annual turnover of £1.5 million, | 0:18:07 | 0:18:11 | |
Rob decided to make Innovation Power a Private Limited Company. | 0:18:11 | 0:18:16 | |
It's quite different to being a franchise or a sole trader. | 0:18:16 | 0:18:19 | |
One of the main differences is that an owner like Rob | 0:18:22 | 0:18:24 | |
has a separate legal identity from his business. | 0:18:24 | 0:18:28 | |
That gives the business what's called limited liability, | 0:18:28 | 0:18:31 | |
which means should it go bust, bosses like Rob | 0:18:31 | 0:18:34 | |
would only lose the money invested rather than their personal wealth. | 0:18:34 | 0:18:39 | |
Also, in terms of structure, | 0:18:39 | 0:18:41 | |
a limited company needs at least one shareholder. | 0:18:41 | 0:18:44 | |
The more shares you own, the more control you have of the company. | 0:18:44 | 0:18:48 | |
We started in the '80s as a sole trader stroke partnership. | 0:18:49 | 0:18:53 | |
In the '90s we got busier. We were picking up bigger and bigger events. | 0:18:53 | 0:18:56 | |
I said to the accountant, "If something went wrong, | 0:18:56 | 0:18:59 | |
"what's going to happen?" He said, "Well, they might sue you!" | 0:18:59 | 0:19:02 | |
As you grow, you need to protect what you've worked for | 0:19:02 | 0:19:05 | |
and if you're not limited, you know, if you've not got | 0:19:05 | 0:19:07 | |
that suit of armour on, you're going to lose everything. | 0:19:07 | 0:19:10 | |
You'll be out on the street in your shirt tails! | 0:19:10 | 0:19:13 | |
What are the disadvantages of a private limited company? | 0:19:13 | 0:19:16 | |
Red tape, it's always red tape. | 0:19:16 | 0:19:18 | |
Your finances are more complicated and your accounts are published. | 0:19:18 | 0:19:22 | |
People can go to Companies House, electronically download, | 0:19:22 | 0:19:26 | |
have a look at your accounts and see if you're viable. | 0:19:26 | 0:19:30 | |
You're open to scrutiny. | 0:19:30 | 0:19:32 | |
That's all pretty straightforward so far, right? | 0:19:35 | 0:19:38 | |
However, there's one more important thing to know | 0:19:38 | 0:19:41 | |
when discussing companies. | 0:19:41 | 0:19:42 | |
There's actually more than one type of limited company. | 0:19:42 | 0:19:45 | |
Limited companies can either be private limited companies, | 0:19:45 | 0:19:49 | |
like Rob's, or public limited companies. | 0:19:49 | 0:19:52 | |
Most of the ones around the festival site are private. | 0:19:52 | 0:19:54 | |
It's all to do with who owns them. | 0:19:56 | 0:19:59 | |
All companies are owned by a group of people known as shareholders. | 0:19:59 | 0:20:03 | |
In a private limited company, people can only buy shares | 0:20:03 | 0:20:06 | |
if they're invited to do so by the main shareholder. | 0:20:06 | 0:20:09 | |
You can tell if a company is private | 0:20:09 | 0:20:11 | |
because it will have the letters L-T-D after its name. | 0:20:11 | 0:20:13 | |
But in a public limited company, anyone can buy shares | 0:20:15 | 0:20:19 | |
which are openly traded on a stock exchange. | 0:20:19 | 0:20:21 | |
So it's a good way of increasing investment and expanding quickly. | 0:20:21 | 0:20:25 | |
These companies have P-L-C after their name. | 0:20:25 | 0:20:29 | |
There are around 9,000 PLCs in Britain, | 0:20:29 | 0:20:32 | |
and many of them are household names. | 0:20:32 | 0:20:34 | |
One of those is Future PLC, | 0:20:36 | 0:20:38 | |
publisher of some of the world's most popular music magazines. | 0:20:38 | 0:20:41 | |
With over 200 shareholders and multi-million pound profits, | 0:20:41 | 0:20:45 | |
it dwarfs Innovation Power. | 0:20:45 | 0:20:48 | |
Stevie Spring is the boss. | 0:20:48 | 0:20:51 | |
The main advantages of being a PLC are access to different lines of cash. | 0:20:51 | 0:20:57 | |
So instead of just being able to go to the bank, | 0:20:57 | 0:21:01 | |
we can go to our shareholders and get extra money | 0:21:01 | 0:21:05 | |
to expand, to grow the business. | 0:21:05 | 0:21:07 | |
It might be a good way of expanding, but becoming a plc involves | 0:21:07 | 0:21:11 | |
even more transparency than private limited companies. | 0:21:11 | 0:21:14 | |
Everything from my salary to how much profit we make | 0:21:14 | 0:21:19 | |
to any company that we might be thinking of buying | 0:21:19 | 0:21:22 | |
has to be announced to the public | 0:21:22 | 0:21:24 | |
so that everybody who is buying or selling shares | 0:21:24 | 0:21:28 | |
is doing it with the same information base. | 0:21:28 | 0:21:30 | |
So companies aren't as straightforward as you might think. | 0:21:32 | 0:21:35 | |
They come in all shapes and sizes, | 0:21:35 | 0:21:36 | |
from private limited companies to PLCs. | 0:21:36 | 0:21:39 | |
But they all have one thing in common, and that is to make cash, | 0:21:39 | 0:21:42 | |
whether that's for two shareholders or a thousand. | 0:21:42 | 0:21:45 | |
There's one thing above all else that festival traders dream of - | 0:21:58 | 0:22:02 | |
no, not the chance to headline the main stage, | 0:22:02 | 0:22:05 | |
but taking home a big fat profit. | 0:22:05 | 0:22:08 | |
But doing this isn't as simple as setting up a stall and opening for business. | 0:22:09 | 0:22:14 | |
What if your product doesn't sell? | 0:22:14 | 0:22:16 | |
Or maybe it rains so much that no-one bothers coming to your stall? | 0:22:16 | 0:22:20 | |
Even if you do sell stuff, | 0:22:20 | 0:22:21 | |
it doesn't mean you'll make a profit. | 0:22:21 | 0:22:23 | |
Actually, what is a profit? | 0:22:23 | 0:22:24 | |
-What's profit? Making money! -Yeah. | 0:22:27 | 0:22:30 | |
Making money, isn't it? | 0:22:30 | 0:22:31 | |
Don't know how to explain it... | 0:22:31 | 0:22:34 | |
She's the smart one, ask her! | 0:22:34 | 0:22:35 | |
It's like making money, more than you already spent, isn't it? | 0:22:35 | 0:22:38 | |
So you make money from what... how would you phrase that? | 0:22:38 | 0:22:43 | |
Profit is actually easy to define. | 0:22:43 | 0:22:45 | |
It's simply the money you're left with | 0:22:45 | 0:22:48 | |
after you've covered your costs. | 0:22:48 | 0:22:50 | |
Profit is never guaranteed | 0:22:50 | 0:22:52 | |
but it's the reward you get for taking a calculated risk. | 0:22:52 | 0:22:55 | |
That risk could be anything from adding a new product | 0:22:55 | 0:22:58 | |
to your range or even trading at a new festival. | 0:22:58 | 0:23:01 | |
One man who knows all about making a profit is Simon Baldwin. | 0:23:03 | 0:23:06 | |
For over 20 years he sold hats and clothes from a shop, | 0:23:06 | 0:23:10 | |
but now he's switched to selling at festivals. | 0:23:10 | 0:23:12 | |
It was the chance to increase profits that prompted the move. | 0:23:12 | 0:23:15 | |
The joy of a festival stall over a shop is that the overhead | 0:23:18 | 0:23:21 | |
stops tomorrow, and if a shop is losing money, | 0:23:21 | 0:23:24 | |
you'll continue losing money, whereas a festival, | 0:23:24 | 0:23:27 | |
if it's losing money, you stop, so the risk is less. | 0:23:27 | 0:23:30 | |
It sounds like an obvious question, | 0:23:30 | 0:23:32 | |
but how important is profit in a business? | 0:23:32 | 0:23:34 | |
Profit is ultimately everything. | 0:23:34 | 0:23:36 | |
Profit is crucial, then, | 0:23:36 | 0:23:38 | |
and there's one factor which dictates | 0:23:38 | 0:23:40 | |
the amount a business like Simon's will make - | 0:23:40 | 0:23:43 | |
the selling price. | 0:23:43 | 0:23:44 | |
That's the amount he charges for every product. | 0:23:44 | 0:23:48 | |
And this year, there's one item fuelling Simon's profits. | 0:23:48 | 0:23:53 | |
This festival, they're all mad keen on the animal hats. | 0:23:53 | 0:23:57 | |
They are great, though. | 0:23:57 | 0:23:59 | |
Yes. A very festival item. | 0:23:59 | 0:24:02 | |
-And these go for £10? -They're £10, yes. | 0:24:02 | 0:24:05 | |
-So my monkey costs me £10 to buy from you. -Correct. | 0:24:05 | 0:24:08 | |
How much does it cost you to buy? | 0:24:08 | 0:24:11 | |
I get them made in Nepal, | 0:24:11 | 0:24:13 | |
and they cost me £2.50 landed in the UK. | 0:24:13 | 0:24:15 | |
So we make a gross profit of £7.50. | 0:24:15 | 0:24:19 | |
A £7.50 profit seems like a huge amount for one hat. | 0:24:19 | 0:24:24 | |
But, as Simon says, this is a gross profit, | 0:24:24 | 0:24:26 | |
which means it's the TOTAL profit | 0:24:26 | 0:24:29 | |
before he's paid off any of his costs, | 0:24:29 | 0:24:31 | |
and there are a heck of a lot of them. | 0:24:31 | 0:24:33 | |
That £7.50 helps to pay, amongst other things, | 0:24:33 | 0:24:37 | |
for hiring the stall at Reading, for staff wages, and for petrol | 0:24:37 | 0:24:41 | |
for his van to get his products to and from the festival site. | 0:24:41 | 0:24:44 | |
There's nothing to stop Simon | 0:24:46 | 0:24:48 | |
doubling the price of his hats to £20, | 0:24:48 | 0:24:50 | |
but that wouldn't necessarily increase his profits, | 0:24:50 | 0:24:52 | |
because fewer people would buy them at such a high price. | 0:24:52 | 0:24:56 | |
Get the selling price right, | 0:24:56 | 0:24:58 | |
and your business will take off. | 0:24:58 | 0:25:00 | |
Get it wrong, and your business could go bust. | 0:25:00 | 0:25:03 | |
While we'd all love to be loaded, it's not just profits | 0:25:03 | 0:25:06 | |
and the selling price you need to worry about. | 0:25:06 | 0:25:08 | |
To keep a business going you need to have cash coming in, | 0:25:08 | 0:25:11 | |
to cover your costs and to help it grow. | 0:25:11 | 0:25:13 | |
Money coming in and out in this way is called cash flow, | 0:25:13 | 0:25:17 | |
and it's what keeps all businesses ticking over. | 0:25:17 | 0:25:21 | |
Cash coming into the business comes from selling your products, | 0:25:21 | 0:25:24 | |
but also from other sources, like bank loans and personal savings. | 0:25:24 | 0:25:29 | |
Cash going out is also known as your costs, | 0:25:29 | 0:25:32 | |
and can take two forms - fixed and variable. | 0:25:32 | 0:25:36 | |
Fixed costs have to be paid | 0:25:36 | 0:25:38 | |
even when your business doesn't produce anything. | 0:25:38 | 0:25:41 | |
Variable costs change as the business grows. | 0:25:41 | 0:25:44 | |
Mismanagement of cash flow is the failure of most businesses, | 0:25:44 | 0:25:49 | |
and I learnt that myself the hard way | 0:25:49 | 0:25:52 | |
and I run it very, very strictly. | 0:25:52 | 0:25:55 | |
Every week you have to be aware of your cash flow. | 0:25:55 | 0:25:57 | |
And what are the consequences of bad cash flow? | 0:25:57 | 0:26:00 | |
You'll start running out of cash just when you need it | 0:26:00 | 0:26:03 | |
and then you can't pay your suppliers, for example, | 0:26:03 | 0:26:06 | |
you can't pay the bank and they won't take kindly to that, | 0:26:06 | 0:26:10 | |
and they, of course, will pursue you | 0:26:10 | 0:26:12 | |
for that money and that could fold you. | 0:26:12 | 0:26:15 | |
It's important to remember, though, that cash flow | 0:26:15 | 0:26:18 | |
and profit aren't the same thing. | 0:26:18 | 0:26:21 | |
Cash flow is the money going in and out of the business. | 0:26:21 | 0:26:24 | |
Profit is the money left when ALL costs have been covered. | 0:26:24 | 0:26:28 | |
But putting profit to one side, there's one very basic thing | 0:26:28 | 0:26:32 | |
that all business like Simon's want to achieve. That's this. | 0:26:32 | 0:26:37 | |
When a business covers all its costs, it's hit that magic point | 0:26:37 | 0:26:42 | |
called breaking even. | 0:26:42 | 0:26:44 | |
Every sale from then on is profit. | 0:26:44 | 0:26:46 | |
So once you've broken even, you're on your way to making a fortune! | 0:26:46 | 0:26:50 | |
All this talk of money | 0:26:50 | 0:26:52 | |
has made me want to make my own, so I'm leaving the music behind | 0:26:52 | 0:26:55 | |
to do some selling and put everything I've learned | 0:26:55 | 0:26:58 | |
about pricing, cash flow, | 0:26:58 | 0:27:01 | |
break even and profit into practice. | 0:27:01 | 0:27:03 | |
Simon's given me five hats. They cost him a pound each, | 0:27:04 | 0:27:07 | |
so if I sell these for £5 a hat, that'll be £20 profit. | 0:27:07 | 0:27:11 | |
Let's give it a go. | 0:27:12 | 0:27:14 | |
Anyone want any hats? | 0:27:14 | 0:27:17 | |
Anyone for hats at all? | 0:27:17 | 0:27:19 | |
There must be someone! | 0:27:19 | 0:27:20 | |
After a sluggish start with no sales and therefore no chance of a profit, | 0:27:20 | 0:27:25 | |
my luck starts to change. | 0:27:25 | 0:27:28 | |
-You want that one? -Thank you. -Thank you very much! | 0:27:28 | 0:27:31 | |
Thank you. Have a great day! | 0:27:32 | 0:27:33 | |
With just one £5 sale, I've covered the cost of all the hats | 0:27:35 | 0:27:37 | |
and broken even, and soon things get even better. | 0:27:37 | 0:27:41 | |
My next sale takes me into profit. Can I interest you in that for £5? | 0:27:41 | 0:27:44 | |
Yeah, definitely. | 0:27:44 | 0:27:45 | |
OK, thank you very much. There's your hat. Enjoy! | 0:27:45 | 0:27:50 | |
Thank you! | 0:27:50 | 0:27:51 | |
£10 achieved, two hats sold...this is easy! | 0:27:51 | 0:27:55 | |
Too easy! | 0:27:55 | 0:27:57 | |
Two £1 hats sold for £10 equals an £8 profit. | 0:27:58 | 0:28:01 | |
And the great thing is, because I've got no real costs, | 0:28:01 | 0:28:05 | |
that profit is all mine. | 0:28:05 | 0:28:08 | |
But you need to continue working hard to keep the cash coming in. | 0:28:08 | 0:28:12 | |
Unfortunately, I start getting a little distracted. | 0:28:12 | 0:28:17 | |
I sold two hats for £10 and then | 0:28:17 | 0:28:19 | |
people started recognising me and then it became distracting, | 0:28:19 | 0:28:22 | |
the hat sales then dropped off, so actually | 0:28:22 | 0:28:26 | |
the business has stalled for a bit. | 0:28:26 | 0:28:28 | |
I shudder to think what the Lord Sugars | 0:28:28 | 0:28:30 | |
and Richard Bransons of this world | 0:28:30 | 0:28:31 | |
would make of that performance, but I have learned one thing. | 0:28:31 | 0:28:34 | |
It takes hard work to deliver big profits. | 0:28:34 | 0:28:39 | |
Oh, well, it's not all bad. At least I've added | 0:28:39 | 0:28:41 | |
three snazzy new hats to my wardrobe! | 0:28:41 | 0:28:44 |