Sir Tom Hunter in conversation with Matt Moulding

How are you? Yeah, very good, thank you Tom. Very good. I mean, I'd be looking forward to a bit of travel and being able to meet up in person, but for now we're on yet another Zoom call, but I'm sure we're getting through it. Yeah, okay, so.

Tell you what, Tom, it's always lively anyway.

I don't think there'd necessarily be any clues in my own background as to the direction I was going, Tom. All I knew was that I wanted to try and do better, and I had it in me. I've always got this memory of being in junior school and in a class where I got a calculator out. I was trying to work out how long it would take me and how much I'd have to earn to be able to own my own terraced house in Colne. And houses back then were very cheap indeed. But I remember looking back on that through the years and thinking that's probably not usual for a 10-year-old kid to be thinking how do I get my own house. And that probably has a lot of insecurity behind that that drives that kind of thinking. But I don't think it's just regular. Everything's just regular about my life, and I genuinely mean that. Regular in terms of no different than someone in Glasgow growing up or anywhere else. And you need a bit of luck along the way, and we've had some luck that has helped us as well. Sure.

Um, look, my brother was brighter than me. I believe that. He is now, and I went to university, and he didn't. I mean, look, we didn't go to university. What was the thought process there? No, no, what had happened is I left school actually and I went and worked in the same factory that my brother worked in in my hometown. Very traditional northern town, still got the factories at the end of the terraced streets. He was working in there earning money, so as soon as I left school I went and worked in there. And I was just aware that a couple of friends that I had were going to go to college and uni, and yeah that was their plan. And then literally the week before college started, I actually went down to the local college and I registered and gave up my job. So I was actually working in a factory and I was working double shifts every day, so 16 hours a day in a factory from the age of 16. So I was getting two paychecks for a year older than I was, and it was immense. But one of the best lessons was my dad tried to take 80 percent of my checks off me. My cash, you got paid in cash actually in a brown envelope every week at the end of the week, and my dad thought that my board should be 80 percent. I honestly couldn't cope with it. And actually that was... I'm thinking if I carry on this way, someone's taking this off me, I might as well go to college. And actually I got expelled after the first year, Tom.

I got expelled. Not for bad behavior or anything like that per se. I mean, I just didn't attend as well as I should have done. My brother had had a bit of misfortune in some direction he took and he was helping Her Majesty out with some tasks. So I spent a lot of my time going visiting him instead of going to lessons, and I actually got kicked out of college. But you know, you need good fortune in your lifetime, right? I've been fortunate on many occasions with the people I've met. The subjects I did: economics, maths, some other things as well. My economics teacher actually rang my home number and said he needs to come back to this college. I'll put him under my tutorship. He can be part of my department. I need to take another subject like psychology because he headed up social sciences there. And I think he needs to go. He needs to come back. You know, I think he could do well. A guy called Mike Smith. I've never been able to track him down to this day actually. I've been trying recently to thank him. And so I went back to college. Right, so I would have been back in that factory doing something like that. Somebody out of their own volition picked up a phone and said get yourself back here. When he came into work that day, he changed the course of my life. I went back and I straight ahead everything. And you know, it was amazing because I had someone there. My brother was back with us. I had teachers that were behind me. And I just went all the way through and did really well in my academics.

Great entrepreneurs I've met, there's always turning points in their life and it could go either way. And even the big ones like yourself, just someone took up an interest for whatever reason. So universities kind of done, did you go straight to the Caldwell Group from university? No, I went into accountancy. I went into corporate recovery, so businesses in distress. So what I'd learned through my economics teacher back in college, I had a real interest in how business works, supply and demand and all those kind of factors. So I was pretty good at it because I was interested in it. And then at university I went deeper into that. So by that point I'd really got myself interested in how businesses operate and what goes well and what doesn't go well. So I decided I thought I was good at maths. So accountancy is boring, I don't care who you are, you can't get that excited about accountancy per se, not for me as an individual, but it's an incredible business discipline. So if you can understand it, I think it stands you in great stead. So I thought I'll try and match the two, and I looked around for work in big organizations that do turnarounds and receiverships, getting really stuck into businesses that have been through the mill, and trying to understand more. So that's what I managed to do. I went to a firm called Arthur Andersen in their corporate recovery, which in itself is quite strange. Most people go towards audit work there for a few years then go into corporate recovery, but I went straight into there. Thankfully, I was in a different business every few weeks that was in distress. So it was just an amazing opportunity.

Oh, the doing bit was amazing, right? So all my peers were doing audits which you don't get any exposure. You're in a room with folders, yet I was in businesses addressing workforces, you know, trying to calm them in some instances, unfortunately telling them look this is closing down or we're going to have to reduce the workforce. Really tough life lessons that I was having to deal with and understand the importance of a job to somebody. You're not just a number on a piece of paper. You go in and you have to tell 50 people in a room your job's gone here in a small town. This business isn't viable, the bank needs its money back. Proper life lessons that you can't begin to appreciate really. So I needed that kind of background as well because going into the Caldwell Group afterwards, you know, that was a tough environment, so you needed something.

Well, the truth is money. Cold hard cash. There was no other way to put it. Caldwell was known for paying very high salaries because they would in the northwest, they wanted young people that they could mould or burn. You would go in and you would succeed or fail in a blink. But they would pay a very big entry fee. So at 26 years of age, I had a mortgage and all of those things, and I could get an 80,000 pound salary going to work for John Caldwell versus a market rate of 40 or 50. And then there was a promise of 50 bonuses and all these things, but there was this huge health warning came with it to say, you know, you speak to anyone on the outside, you've got a 25% chance of being in that job in 12 months.

I mean, look, the main guy that was running that from my side was a guy called Craig Bennett who was the CFO. He taught me how to run a business. He would ring me every single morning at 6:30 a.m. So at 6:30 my phone would ring. So first of all you've got to be up early every morning because if you don't take that call, you're fired. You'd be fired if that was a consistent failure. He would ask me at 6:30 an incredible level of detailed business questions. So I would need to be all over my business in the detail and I'd need to be able to forecast what was happening in the future and think ahead. So that pressure to understand the business model was immense. I very much appreciate that training, that discipline because it kept me on my toes from the off.

No, I don't. I phone them at all hours to be honest with you, but I don't do that kind of regular thing. That was regular every single morning. Ours is different. That would typically be my main conversation with John or Craig at that time in the morning. I speak to my team all day every day up until bedtime. I don't need to ring them at 6:30. They've got kids or whatever, the world's moved on.

I'm getting the sense that you're money driven, so you've got material goals in there. But how did you actually go from being paid really well to saying no, I want to do it for myself? What's the process that went on? I mean, yeah, so what I did on that, Tom, is I bridged the gap. I carried on working and putting every penny I got into the business. Quite a pivotal moment for me was me and my ex had split up, so that actually gave me an extra spurring on. I had nothing. What bit we had had gone. So I was starting afresh, but I had a high salary and everyone around me had high salaries in the business too, but they were spending it in a way that probably wasn't ideal. So I thought, well, what do I do here? I've got to make this count. This won't last forever. You were always under this concern that next month you might not have your job. So I decided I should think about the internet. I'd made a transaction online. I could see it. I actually took it to John Caldwell, believe it or not. For three or four months I discussed it. I put it at the end of my board meetings to say I think we should do this instead of... we had a lot of stores in the group that were failing and needed to be shut, and you could support the internet with the stores and do this omni-channel thing. Anyway, look, we then had a blockbuster few months in the business and John said why would we waste our time on this? I'm going to sell the group. You maximize this and then I'm out of here in a few months, I'm all good. So what I did was I was earning a lot of money at that point. I think in my final year at Caldwell I earned 2 million pounds, believe it or not, because we sold the group and I got a 1.6 million share of it as a reward. But after that I've never earned that money again. So I was back down to a strong salary really, but that salary might not last long. That was as good as it could ever get. So I knew that had come to an end. I had a strong salary and I thought if I want to do anything else, I've got to do it for myself. So I ran with the idea I had, and at that point I built up the cash. I put every penny I had into the business, thinking that would be enough, thinking now I've made the secure jump, I've developed the idea, the concept, I've gone and made the jump, and it wasn't enough. I wasn't taking the salary, so all of a sudden you go from this super wealthy position in many ways to having a really crappy loss-making business with no income and all your money's gone into it.

Just a hunch, Mark? Because it's going to lead on to some seismic decisions down the line. But at that point, was that a gut feel? How did you come up with that? I mean, your business is poor, right? So I'd take it back to going back to corporate recovery when I left university and I go into distressed businesses. You're just soaking up around you how you look at the business and say it's got to change or it's going to go bust. So you look at our business and we were sat there going it's going to go bust. Stop it going bust. What do we change? Got to change the cost base. Rule number one. Well, the quickest way changing the cost base is build our own technology, believe it or not. By doing that, it was a fraction of the cost of using someone else's technology back in 2004. So that was an easy one. And then the second thing was Google was too expensive for us, so we had to reduce the marketing. Well, the best way I could do that is use someone else's brands. So we rang around all of British high street and said let us launch you online with our technology that hasn't been built yet. Thankfully we got both. We built our own technology and we got some big high street retailers. So we fixed the two big issues in our P&L. It's just simple numbers when you looked at it, Tommy. Punch or no hunch? You're just looking at it and saying well we either need a truckload more cash. I don't know anyone with any cash. I'm the only person who had the cash and I'd not left.

I mean, look, who did we have to? I didn't really have a great deal. In the very early days, David Moore was good. He's a friend of ours. David put some money in on day one, so I could always say to him what do you think and he'd give me some honest feedback. But the reality is in many ways everyone's backing you. So if you spend all your time trying to garner tell me what to do from other people, you're the wrong person to run that business. David said it to me really clear one day, which is: no one can walk in your shoes, man. Which is a really grand way of saying it's all on you. You decide. You could take it two ways. Great, no one can walk in my shoes. The reality is he's saying you decide on everything. We're just here backing you. Get on with it. Yeah, the upside and the downside.

I mean, it's a really hard question that, Tom, because I actually think those points arrive on an almost quarterly basis. It might sound crazy but they just genuinely do. We just come through some major experiences and we're just starting new ones. What you tend to do is you look back on them over time and go wow that was important. We're getting better at knowing in the moment these are important. So it feels really lively all the time. But even going back in the day, when we moved our technology, we built our own technology, that's been pivotal, unquestionable. When we decided to move into beauty and raised some money to do that, that was pivotal. We met you, Tom, around there as well before we did that. We were always skinned, never had any money. Always on the edge of our pants, begging, borrowing whatever we possibly could from anyone and anywhere to stay alive. We had a terrible business model where we'd lose money for 10 months a year and make it in Q4. So you were so hungry for 10 months of the year, coming to Q4 totally starved of any cash. So changing the model into beauty, which is an all-year-round business model, was just amazing nutrition. The moving to nutrition and healthier lifestyles and the rest of it, that was a pivotal moment as well. And then even the people you meet along the way, Tom. Sometimes it's events in your business, but just as important if not more important are the people who touch on your life during the course, and embracing them and then you returning that behavior back to other people in a similar way. That's how the cycle of life works, I believe. Various people I've met, from David Moore back in the day when he was my recruitment guy who put me into Caldwell, and then he ends up back in my business and he's made fortunes and he's still in our lives today. Meeting you, Tom, the Entrepreneur of the Year award in 2018, December 2018, was everything towards back then, absolutely everything that spun out of that has been pivotal to our business.

But I think it's a really good point that, Tom. If you were to think about probably the greatest businessman to walk the planet yet, Jeff Bezos, right? He has to be the greatest person in business to walk the planet yet. He started off as an online book retailer and he's now an absolute tech titan with the biggest advertising business in the world, the biggest hosting business in the world. I'd be surprised if you can even buy a book off Amazon these days. I don't know anyone who does buy a book off them. Five years ago, Kindle was everything on there. I don't know anyone who buys a Kindle anymore and they're onto something else and something else. So this idea that you set off on a journey and that's it, I think that's very rare. Very very rare. Anybody who is listening, you should download Jeff Bezos's latest shareholder letter. I sent it to you, I sent it to everybody I know, and it's just the best business letter I have ever read. Everybody's got to read it.

Well, one of the things is I'm really clear that you've got to change your management team from time to time. It's great if you could take the same people with you for 20 years, 17 years or whatever, but again that's just never happening. I'm probably on my sixth senior management team in 17 years in some form. There have been times when I've cleaned the entire management team out in one three-four month period. I don't think you can grow at space personally. I don't think I can without doing that at times. That's one of the biggest lessons I've had. The business comes first. Not everyone can grow with the business at the rate you want. When I make a change, I promote from within, so I don't bring some outsiders in to rock the boat. Huge management swap outs normally mean someone else's chance to have a go. We back that up by giving equity away, tomorrow, of really large proportions. Not just senior people, we share it around. As a result, you end up with quite an ecosystem, quite a buzz. It just works.

Yeah, I mean, I know you know it's definitely doable, Tom. I come back to some of the biggest companies in the world that have found a lead. They don't lose their edge. What's great is the more founders you can keep at the helm of the business, the more likely they are to pivot and twist and turn and try and keep growing. I think that's such an important point versus if you're brought in to run a business, it's a different thing. You're brought in to manage a situation, to take it in a measured and calm way, whereas if it's your baby, you want it to shoot for the stars. So the very first thing is founder-led businesses tend to stay more entrepreneurial. You've only got to look at the big US guys to see the things they've done. In our business as well, there's just lots of things we do. We share the wealth between lots of people, that creates a buzz and an excitement. My senior team have all been homegrown, so we try to avoid bringing in a big hire that sits at the top. We're still bringing big hires but they've got to come in beneath and they work their way up from a certain level and they get ingrained. That's a big danger of derailing things. Bringing talent through and doing things that way, and also doing exciting things. If you keep it alive and keep changing things in different directions, the whole business stays fleet-footed, I believe. We do that right. I know now that the management team barely know what I'm up to right now. If I come to them later this week with some news or whatever, they'll be like this is mad, but it then brings an energy. So yeah, just the way it is.

The honest answer there, Tom, was we were coming into the pandemic or we're in the pandemic and sat there going the world's going to change from this. Things should accelerate in our favor. So I've spent year after year generating my own cash, borrowing money. Most of the investment investors that came on board were buying secondary shares. I was just sat there thinking if I can access capital now and deploy it at scale, I can bridge the gap between a UK business and the US guys. I wrestled with it for a couple of days, not much longer than a couple of days if I'm honest, and just thought I'm doing it. I remember making the phone call to my M&A guy and said by the way we're doing it, we're doing it now. I don't want to mess around and we did it in unbelievable time scale. But the access to capital at a time when the world was changing, I have this kind of view that when there's chaos running around you, you should try your best to clean the center ground because most people are undecided if they want it or not so you can take it the easiest. I just thought no one's going to be listing a business in this environment, but the opportunity to deploy capital should be immense, so let's just go and do it. That was the primary logic really.

Oh yeah, I love it, Tom. I just love the fact that I touch on various people in the business who I know when I walk past them in the corridor or see them grabbing a coffee, I know that their lives have been changed in some form. Not everyone's had huge numbers, but drivers or whatever it can be varying people. They've bought houses and things with the cash. At the big scale, I get people texting me saying one of your directors is buying a house for X and that X is like three times the cost of my own house. I sit there and it makes it feel like we're doing this together. I like it.

Look, I mean, I'm hoping I'm going to do a lot of it, Tom. The benefit I have is if you start with a lot of money then you know it must be harder to give it away. I didn't have anything. I've never had anything, so I'm not missing anything. I didn't have anything, now on paper I've got a lot. To be able to take some of that and then do these huge things with it whilst my kids are young, they can see it, my wife can get involved, people around me, my team can see what we do. It's purely selfish because I get to see it, I get to be involved in it. Not that I want to be involved in it, but it's nice to see it. So why not just do it now? If you're going to give it away, I might as well give it away now. If you enjoy it and you get the right things, you have the opportunity hopefully to do it time and time again. I didn't have it to start with, so it doesn't matter, does it?

What you should start with is what's fair, but also who do I want with me? What do I want for the journey? Because I see it all the time, so many other businesses around me that have gone bust chasing the ace of valuation, and it terrifies me. The people you're doing it with matter to me way more than today's price. Then everything else will take care of itself.

Cheers Tom, you too.