Interview with Sir Charles Dunstone

Sir Charles William Dunstone, CVO is the British co-founder and former chairman of mobile phone retailer Carphone Warehouse, former chairman of multinational electrical and telecommunications retailer and services company Dixons Carphone, and executive chairman of the TalkTalk Group.

In 1989 and at the age of 25, Charles Dunstone set up The Carphone Warehouse with £6,000 of savings. It was a success from the start, turning over £1.5 million in its first full year of operation, and increasing employee numbers from just two to 14.

He has been rated as 124th most powerful person in the UK by an Observer survey.

“I think as you grow up and start your own business in this world it’s what you make of it for yourself. There isn’t anybody who is going to come and try and give you special treatment or try and take care of you. If I see someone doing a terrible mundane job, I think to myself I guess when they were 12 or 14 this isn’t how they imagined it all ending up. It’s a harsh lesson and it’s a tough world and you’ve got to fight for yourself.  If you don’t take the most out of education and what its got to give to you then no one is going to pick up the pieces later.”

Can you tell me about your upbringing?

I grew up in Essex, and didn’t go to University. I got a place but I started working and didn’t go.

Did you ever have a mentor at any age?

No.

How important do you think education is for someone who wants to start their own business?

I guess it’s important in that you have to be able to read and write and add up, but a lot of it is just common sense.

Did you know you wanted to run your own business from a young age?

I was always interested in business but I am not really an entrepreneur because I have only ever started one business. So I’m no different to someone that runs any other business. I happen to have a corporate job and a business that I started.

Can you tell me how you got the idea?

I worked in the mobile phone business and I got into mobile phones accidentally, so it’s just about trying to make a living really; it wasn’t some amazing piece of insight or some great thing to say ‘I’m going to change the world’ or the way people use mobile phones.

Did you foresee your success?

No. The first reason is because no one thought mobile phones would be as big as they have been. Back in those days it was just a business tool, and they were expensive. Secondly, we were a tiny business and we wanted to try and make a living.

How did you start?

We had an office to start with and used to sell over the phone, and then we opened a shop.  It’s the name that the company suggested and stuck with which was ‘Carphones’ – which were phones in a car that you couldn’t take out. People don’t really remember that those existed any more. It used to be that you came and had the thing fitted in your car and it only ever worked when you were in the car! People thought they were amazing.

Can you take me through the steps you undertook from when you came up with the idea until you opened the first shop/office?

Again it wasn’t very difficult because I knew the people in the mobile phone business so I knew the people to open an account with and get support, I knew how it worked which was to my benefit.

How did working within the industry help?

It really helped to understand the industry and know the contacts, get some relationships, get some trust – so that when you called up and said ‘I’m doing this’, they knew who you were. I suspect for a lot of people it’s not possible to do that.  That’s why I say I’m not really an entrepreneur because I just extended a business that I was in – I didn’t just decide to do something new and go off on my own which is very different. I am not a James Dyson or anything like that.

Did you face some challenges when you were getting your idea off the ground?

It was very challenging. One of the most difficult things is that if you have been used to working in a large organisation where lots of things have been taken care of for you – people to do the accounts, make sure the electricity is paid, someone to fix the heating – you find when you first start your business you spend 70% of your time doing all the support things rather than actually doing the business itself. That was a real lesson. If you didn’t have any computers you would have to go and buy a computer, set it up, find a photocopier, find some desks, buy stationery. All of this stuff to make the business work.

Was that the main challenge? Were there any business challenges?

Then it’s finding enough customers, getting staff, pricing, managing the cash flow – which was all very hard in the early days. Lots and lots of challenges.

Have you made any major mistakes?

Some things we learnt that we could have done sooner. I don’t think there is anything we did that I would go back and think ‘I wish we had never done that’.

How much money did you start with?

£6,000. In 1989 it was equivalent to £20/25,000 today.

It isn’t that much is it?

No.

How long was it before you started to make a profit?

When you start a business there is a difference between profit and cash flow, so in the first year we made a profit but it was still very tight in terms of cash flow. When you start a business cash flow is more important than profit, because if you have a business that is making money and your customers don’t pay you for three months, and you have to pay for the goods you buy in 30 days, then even though you are making a profit on what you sell you are going to run out of cash to buy more goods. So you have got to keep your working capital and your cash flow in a new business. If you are selling things for a massive loss you are going to go bust.

Is there a period of time you would put on waiting for profits before you consider closure?

Again, I think it depends on the cash flow of the business. Can you foresee getting to profitability?

What do you attribute your fast success to?

Luck. The mobile phone marketplace is very fast.

What are the most important questions people should ask themselves before starting a business?

Do people really want what I am going to sell them, or the service I am going to provide? I see lots of people and too many businesses where it is a very good idea – but is someone actually prepared to pay for it? That’s the hard test.  People can be quite naive about what they think customers might be prepared to do or pay for.

What differentiates the Carphone Warehouse from other leading players that haven’t quite caught up?

I think because we started with virtually nothing we had to work harder than anyone else to win people’s business, and I think probably that ethic remains in the company, so we do more for our customers than anybody else does.  That’s not to say we don’t get it wrong from time to time but I think the customers do really believe that and never think that’s not going to happen.

Do you have any advice for young people in education?

I think as you grow up and start your own business, in this world it’s what you make of it for yourself. There isn’t anybody who is going to come and try and give you special treatment or try and take care of you. If I see someone doing a terrible mundane job like collecting supermarket trolleys in the car park or something, I think to myself I guess when they were twelve or fourteen this isn’t how they imagined it all ending up. It’s a harsh lesson and it’s a tough world and you’ve got to fight for yourself.  If you don’t take the most out of education and what it’s got to give to you then no one is going to pick up the pieces later.

Any advice to give to young people wanting to start a business?

Just really think hard about whether you have really got an idea and product that enough people are prepared to pay for. If you have that then you are most likely to succeed.

What do you think about market research?

Professional market research is expensive.  It’s like a common-sense test to try and look at what other people do in the same area of business and what services and products they are providing. How does what you are going to provide compare with that in terms of costs, efficiency and customers’ benefit? What do people do in other industries? These are lessons that you can learn.  In business you should never be frightened to learn from others.

What is the maximum percentage of the company that a person should be prepared to part with in your opinion in order to secure start-up funds?

That depends on how risky the venture is and how much money they need. The one lesson everyone learns is it is very easy to give shares away and it is very expensive to get them back. You can say ‘well, I’ve got nothing so if I give half of it away I have still got half of something’, but if in five years time the business is really successful you may really sense you gave too much away. So be mean about it. You’re going to put all the effort and all the perspiration into this so make sure you are going to get the lion’s share of the rewards.

Is there anything you think is the biggest mistake small businesses make?

One thing: you have got to be ambitious and understand the world keeps on changing and you will have to adapt what you do as the world changes. I don’t think small businesses are any worse at doing that than big businesses; it’s the same the world over really.

How do you view starting up a business today in a market where strong competition already exists?

It’s a competitive world so in lots of businesses lots of people are trying to fight for the share of money that there is, but that said, people keep on turning up and doing something new and having a new idea and doing it in a new way; businesses definitely recycle brands. I don’t think you should be scared of competition but it comes back to the question – ‘is what you do genuinely better than what they do?’  If you can’t say you really add value in some way to what already exists then there is probably going to be hard work.

What kind of attitude and mindset does a young entrepreneur need to have to fill the part of a businessperson?

Be very hard working, stubborn, and have common sense.  You are going to have to work late, get up early, and have amazing faith in what you are going to do because no one is going to believe in it; you have to believe in it to make it happen, and it’s you against the world. You have to convince the world what you are doing is right.

What is your attitude towards what some people refer to as failure?

I think there are two types of failure: the first is failure for people who had a good idea, tried very hard, earnestly did what they needed to do and it didn’t work out. Maybe because the market went against them, or the economy went against them – possibly some new competitors came into the market place which is fine, that happens. They should be happy to dust themselves down and get up and do it again. Then there’s the failure of people whose whole idea of what they were trying to do was misconceived and no one was ever going to buy it, or they didn’t have the commitment or the passion in the first place to make it work.

So if somebody did have the commitment and passion and they didn’t succeed with their idea?

Try again. I think attitudes are changing in that I don’t think it’s such a stigma now as it used to be to have a failure and then start again.

Are you a risk-taker?

Yes. All business is basically a calculated risk. In the end it was a risk to take that first £6,000 and buy some phones. All the way through, everything you do is about investing some money and hoping that out of that investment – because you know you’ve bought a van, some phones etc – you are going to be able leverage that into some profit. So in all businesses there is risk taking and you just need to balance the risks that you take.  Sometimes you have got to take some bigger bets than others and it’s just a question of trying to get that right.

You have obviously met some of the most successful people in the country – is there any commonality in personalities in business?

I would say don’t be intimidated because the thing that strikes me is that they are actually just very normal people, and I don’t feel any different. I feel like quite a normal person and not particularly special. I am always struck by how these human beings have the same normal frailties and issues as the people you meet in every walk of life. So, there is not a trait that you would say is throughout successful people.

What is your one life principle?

With Carphone Warehouse it was to try and end this idea – which I think is an old fashioned business idea – that to be successful you have to squeeze as much out of your customers and employees as you possibly can. I think what we have proved is that you can have a business where you can do the best you can for your customers and you treat your employees with dignity and respect, and that can still be a very successful model.

I think that is like a new generation of business which is about doing the right thing, but also proving that just because you are like that it doesn’t make you soft and it doesn’t turn you into a charity. You can still be a very profitable business but hopefully everybody wins as a result.

When you first decided to open the Carphone Warehouse how did you target customers, did you have an advertising budget?

Yes, we spent money in the Evening Standard and on Capital Radio.

So you went straight for the main channels?

They worked. It’s very simple. You put your ad in and pay your money and then wait for the phone to ring to see if you sell enough to pay for it.

Was the radio just as beneficial?

Yes.

Was it literally those two?

They were the first two, yes.

Was the Carphone Warehouse part of the Software Warehouse?

I know the guy that was behind it but no. Ever since we started Carphone Warehouse there have been a succession of warehouses; everyone who opens a business then says ‘I’m the software warehouse, computer warehouse, curtain warehouse’, there’s even a mobility warehouse down the road that sells wheelchairs. So everyone just got into this warehouse business including this bloke called Steve Bennett who ran Software Warehouse. I knew him but he wasn’t anything to do with us.

Anything I haven’t asked that you feel people should know?

The final tip to say is it’s very hard work but if you can do it and make it work it’s the most fantastic buzz.