Julian Metcalfe On Going From From Zero to $2 Billion: The Tenacity and Grit Behind Building a Successful Business

0:00Everything begins and ends with the funnel and if things go wrong you're in real, real trouble. I'm a prayer to know you've got it soon. Two billion dollars prepped myself I believe. Did you have a big tax bill on your two billion sale? It's actually criminal. What's the most disruptive thing anyone's ever said or done to you? We had a very bad review 20 years ago I remember. I take that pretty damn seriously. But what if you go bust? I've nearly gone bust a few times but there is no success without the bumps. Do you think Labour could do more to support businesses in the UK? Rates are now often more than rent.

0:29So it's become very difficult for people to start a business, to employ people. Terribly damaging. What are the biggest mistakes you see entrepreneurs make? The only answer surely to that is the... Julian, is it true you love failure? God, have I said that? Of course I don't love failure, I hate failure. But I embrace it and I'm realistic about it. That if you're going to try and change anything or add value to anything, it's not going to come that easily. So you're bound to make mistakes. And those mistakes equals, I suppose, failure. But there is no success without the bumps. It just doesn't exist.

1:08It's just impossible. And no one will tell you they've been successful without the bumps. It's like saying you're an Olympic athlete without training. It's crazy. So somewhere clearly on the Internet, you've been interviewed and you've said you love failure. and I find this a paradox no one loves it like you said but um if you can't have success without failure then can you learn to love it as much as is possible to love it I think if I was ever if I was quoted as saying I love failure it's because I tend to kind of exaggerate uh to get my point across which is uh so many people who uh who want to start a business who have just started a business, really honestly do expect it to be a combination of hard work, good luck, and on they go.

1:53You've got to accept the fact that things never, ever work out the way you expect or want. And the bumps, it's all about how you deal with the bumps. So when I say I love failure, what I'm trying to say is anyone who wants to start a business is going to experience appalling disappointment. And then it's a question of getting on with it and changing your, tweaking your course, changing your product, changing your service, changing your people, changing whatever it is you need. And if that equals failure and therefore loving failure so you can change, then so be it. So I like how you call them bumps.

2:29Yeah, they are. That's what they are. They're bumps. I bet at the time they don't feel like bumps. No, no, you're right. For many people, you get up in the morning and you have lots of bumps. but they are just bumps. The question is how you deal with them. But what if you go bust? Well, I think lots of people do go bust, don't they? There are various businesses where the amount of people who percentage-wise go bust is really high. That is, that's awkward, isn't it? Awkward. I've never gone bust. I've nearly gone bust a few times but usually you can find your way around it. You have to, but as long as you've dealt with the bumps on the way.

3:05I mean, you don't go bust. Usually you can feel your way when things are, when you're facing problems and headwinds, you've got to deal with it. So if I'm honest, probably my biggest fear in business is going bust. Right. And I wonder if it holds me back. Because I've got friends who are billionaires. I know many successful entrepreneurs in the UK, like yourself, who, you know, have financially on paper made more than me. and I wonder if it's because they were more bold and they stared failure and defeat and going bust right in the face. For example, my friend James Watt, Brewdog, he reckoned regularly they were two weeks away from going bust.

3:47And he said, we've just got to get as close as we can because we know it's going to be big on the other side. What are your thoughts on that? Well, people who start businesses and entrepreneurs, whatever you call them, they tend to be risk-takers because you're sailing into uncharted waters, aren't you? If you believe you have an idea for a product which consumers, customers want, it's very often going to be something new. And that's going to involve all kinds of risks and levels of commitment, determination, tenacity. I don't think you should coast along worrying about going bust so much. There are a lot of things which make a business work, from the product, the relationship with your customers, your pricing, all kinds of things.

4:30I've never feared going bust. I fear letting my customers down, the product not being as good as it could be. These are things you can change. These are things you can come to terms with. But going bust, running out of money, having a terrible relationship with your bank or your finance, or not changing your product so you get the money in time. Anyone watching this needs to remember everything begins and ends with the product, frankly. Right. It really does. Okay, so many people who've been on the show over the last 10 years have said to me that failure and maybe going bust once or even twice is embraced a lot more in America.

5:13And it's almost like you're even more investable if you've gone bust a couple of times. Yes. Because I'm proud that I haven't gone bust in 19 years, and I think it's great to have an open conversation about, well, isn't it good not to go bust? But I think the downside of that is it makes you play small. So have you noticed that with the American culture of boom, bust, boom, bust, boom, bust, and one day we'll be big? Sure. Well, I guess there is more of that in America. There are various businesses where you can borrow enormous amounts of money and do well on the upside. And if things go wrong, you're in real, real trouble.

5:49That's not the sort of businesses I'm interested in or have ever been involved with. I'm much more interested in developing a wonderful product and having a wonderful, brilliant, a beautiful relationship with my manufacturers, my employees and my customers. That's the way, that's what I find compelling. But there are many businesses, which I'm sure you're right, it's all about who's got the biggest appetite for risk. And it can all blow up in your face. No, it's not for me. I like building a wonderful product. And is it true you sold Pratt for$2 billion? $2 billion Pratt was sold for, I believe, yeah.

6:27Wow. I believe, yeah. That's a lot of money. But I was in Milan Airport last week, and it was amazing to see Pratt, you know, open up all over the world. I must say, it was great. It was spotlessly clean, and it looked really compelling. I was very thrilled to see it operating in Milan Airport. I had no idea it was there. When did you sell Pratt? We sold it in 18. just before not long before COVID which would have been awful and probably was we all know it was do you think if COVID had come a bit earlier or you'd have had to sell after COVID you just got less money I don't know we'll never know good businesses which have wonderful ethnic people and tremendous track record with customers tend to be quite valuable so we don't know yeah no idea so i saw mr beast he's doing his beast games and um he gave 10 million dollar prize away and the person paid nearly five million in tax did you have a big tax bill on your two billion sale of course the taxes the in this country uh i was never motivated i didn't never really i would never leave the country i don't think to save tax.

7:49I don't really, didn't resent the tax. And, you know, you'll find some, if your main driver is to make money with regard to your business and your product and your relationship with your customers, you're unlikely to make, to be successful. You're really, your heart has got to be in those relationships. And it really does, in my opinion. And how do you balance having the love of the product and the people? but you still have to sit in boardrooms sure you still have to look at p &l it's a good question well if you love your the the opportunity uh with regards to developing an amazing product and having an amazing relationship with your customers and and your the people you work with uh the the you know the couple of hours a month in a boardroom are easy actually they're quite enjoyable i've never i've we've always we have board meetings of course we do uh at its soon we get together once a month for three hours and it's very enjoyable.

8:46It can be really constructive too. It really is. It's good. It's actually more enjoyable and easier than often dealing with the day-to-day challenges, which can be very difficult. And so how do you balance quality of product with looking at gross profit margin, net profit margin? Very good question. Well, that question applies to every single one of us who's got a product up our sleeve or products or services we're selling, dealing with. And it's really hard because, you know, you need a vision. And to start with, you need to have somebody or a group of people who share a vision. What is this product?

9:27Who's it for and why? And from that will come everything. The cost of how much it costs to make it and sell it and distribute it and hundreds of things. But if you don't make a profit, you're going to be in trouble. I mean, there are many examples. Amazon didn't make a profit for decades, did it? His vision was very big. Yeah. But, you know, there's always that period of time where some businesses don't need to make a profit for a few years. Every business is different. They're all different. With regard to Itzu, it's a difficult business being in the food business, the restaurant business, hospitality business, the grocery business.

10:06It's a hard one, food. So you've got to be sure if you're going to ensure your customers are loyal, your product's simply got to be better. It's got to represent wonderful value for money and be good. And how do you make a great product? Well, a combination of different skills. So in our case, I've been lucky. We started Itzu Grocery, for instance, with just one person. And now we have 120, I think. And each and every one of them adds real value. They really do. I'm not just saying that. They really, really do. They work often beautifully together. We've identified years ago the four qualities which we try and encourage in the people we work with.

10:51And without those four qualities, maybe we never would have gone anywhere. But the four qualities are absolutely fundamental to our ongoing success. They really, really are. And what are they? Oh, well, I care. So I care. I want to grow. You know, I build trust. I take pride. Those four. And actually, you know, when you say I want to grow, what that means for us is you really want to grow yourself. You want to have the guts and the bravery to grow your skills, to grow. That means putting yourself often in uncomfortable situations. You know, most of us have unlimited potential to grow as people.

11:38We really do. So I want to grow is important. I take care is very much about taking care of each other. You know, that's important. And also taking care enormously of the quality of your work. You know, you've really got to cross the T's and dot the I's. You can't be sloppy. I guess in food you can't be sloppy, can you? And I take pride is really important because it's that last 5%, which is so often which makes a difference in any product. It could be a car. It could be instant noodles. It doesn't matter. You've got to take great pride in your product. And I build trust is an interesting one.

12:16You know, anyone who has a vision of building a company, if the people you work with don't trust you and you can't trust them, it's going to be a problem. On the whole, people thinking about starting a business, the more you read, the more you listen, you'll hear this again and again and again, the importance of being able to delegate to a team of people who trust you and you trust them. It's pretty fundamental. So we initially talked about product. Yeah. And you quite quickly went into people. So would you say the right people is the most important part of the business? I think in the early stage of your business, I was watching someone the other day who said in the first few years, you first, I think they even mentioned to your sales of 10 million.

12:56It's quite common to find the entrepreneur, the person with the vision is very unreasonable, very demanding, very unreasonable. And their vision for their product will often come before everything, for their relationship with their team, their people. But after, once you hit a threshold where you're kind of, you know, you're safe and you have your visions just beginning to come real, then I think it's true to say your relationship with the people you work with is absolutely fundamental you've got to be a shared goal everyone's got to pull their weight and add their value everybody very very important and you mentioned earlier because i don't think people think about this a lot you said value for money yeah and i feel like any product the price is fundamental within the product because anything is good value if it's low price enough and anything is not good value if it's high priced enough.

13:53So how do you wrestle with the struggle of creating a great product but at a price people like? It's a good question. I think that the only answer surely to that is to come back to the vision of the person and the product. Exactly what are they trying to do? Because the price of their product clearly needs to be spot on for the type of people they're selling to. why do people buy a handbag for 20 000 pounds it's interesting why do people spend 10 000 pounds on a watch when you can buy one for 50 pounds why what is driving that behavior saying with clothes and food i mean everything uh we as humans you know the many with the many triggers to why we spend the hard-earned money we have why why why now with the godjob product what are you trying to achieve?

14:45Where's the gap? And how much is that product worth? God, it's critical. Get that wrong and you're in real trouble. And so who are you targeting with Itzu? Well, with Itzu, it's interesting because we have the restaurants. We have soon 100 high street restaurants, which relatively speaking are pretty good value for money. You know, you can be in and out for seven pounds. You know, so not everyone can afford that, but a great many people can afford. Then you've got the healthier aspect. to vitsu so it's all steamed it's low calorie it's vegetarian you know there's so many things about the food which distinguishes it against the mass-produced process meat you know fast food so we we pick up enormous amount of loyal customers from that yeah so the restaurants are truly different they're kind of on a good day they're beautifully run they're affordable that yeah it's a huge uh that many of them are immensely successful the grocery business is different because we're expecting our customers, this is food that they buy and consume during the week.

15:47And again, it's got to be exciting and better and different. And UPF, on the whole, completely natural, which makes it slightly more expensive to make without all that processed chemicals and MSGs and all that crap. And then it takes a lot of dedication and commitment. So all of us here at It's a Grocery, we spend a lot of time flying back and forth where we make our food. I've been to Japan, I think, five times in one year. Wow. Because I've got to visit the team who make our broths, our miso broths. I've got to be there. Absolutely. So we all go a lot, whether it be to Korea or Vietnam or Thailand or China.

16:29You know, they're there a lot. Real commitment. And what do you think of the food industry? Because it sounds like it being healthy and not full of stuff is important to you. Which is important to me. It's not important to many brands, but it's important to us that it is. We think that's we it's just our vision as a group of people. We want to try and create food which is not full of any chemicals. And that's been our line for a long, long time. We want to try and sell food which is healthy, nutritious and affordable. It's it's it's it's that's what we that's I don't know. It's what we do. It is.

17:02Should should more companies know the world that way? It's not for us to say. I think people should be allowed to. So people will obviously spend their hard-earned money on what they want. But I think there's, come on, there's a huge movement to try and avoid chemicals, the mass-produced processed chemicals, which will find their way across so much of our food, which is now being shown to be so bad for us, really bad. And also we've all been educated more and more to understand the horror of masses of sugar. But it's taking time. We launched Zen Waters, which are like fizzy, really delicious fizzy drinks with absolutely no sugar, no additives of any kind at all, extracts.

17:48And they're now outselling Coca-Cola in it, which is, I never thought that would happen. But yeah, they're outselling Coke. So progress is slow, but it's definitely coming. There's no question about it. People want to eat more nutritious, affordable food. And East Asian food, traditionally, you know, the countries, they all have very interesting cuisines, as I'm sure you know. Japanese food is very different to Korean food, but both are wonderful. But there's not a lot of crossover, actually. So when did you start Pret? Oh, Pret started in 86. Right. And then you... The first Pret opened then.

18:24And then we carried on opening more and more and more. And then Itzu, I think, the first restaurant opened in 97. so 96 did you say prep prep was 86 86 yeah okay and then it sold 2018 so is that 32 years something like that yeah why wouldn't you just relax you've sold for 2 billion why go and do it all again that's a good question and some of the people who are watching this will be thinking what a weird well look the truth is if you really love what you do you really really enjoy it as i do and there are many aspects of what I do why I enjoy it so much it could be working on the designs it could be playing with the thing I love most which is food or it could be working with young people who are thriving and doing really well you feed off all of that so I jump out of bed on Monday morning I really really do but it's not the the fact there's money there it's it's because of the it's so fulfilling it's so enjoyable the creativity watching young people take on more responsibility, more accountability, and really shine and building teams around them.

19:28It's very compelling watching people grow and build trust, watching products grow. Many of our products started off five years ago, and they've just got better and better and better through continuous learning and improvement and having the guts to challenge. Well, before the cameras went on, we were talking about what is an entrepreneur. Yeah. And would you define yourself as an entrepreneur? I don't know. I definitely am quite obsessive about the pursuit of excellence. I mean, for years, you have no idea. Why would our cut? We will stop at nothing to try and deliver great, beautiful products and value for money to our customers.

20:07So like Pratt, the success, I remember, of our cakes. You know, we had Sally Clark, who was a famous restaurateur, develop all our cakes month after month after month after month. We'd sit in meetings and she'd push us to make them better. And the household names who help and have helped its zoo, many of the famous chefs in this country have all helped us develop our recipe. We don't talk about it. We don't share this with our customers. But I can assure you we do it. In fact, only yesterday I was with, you know, one of the top most famous chefs in this country who we work with on a monthly, weekly basis.

20:46But we don't tell everybody. We didn't tell anyone. Why not? because, you know, what really matters is the product. Consumers and food, you know, we all eat three or four times a day. You can't fool people. So in the case of food, it's about the product. Right. So you may get someone to buy your product once because you've done an advert on television or something. But what really matters is will they buy it again and again and again. So our chicken soup dumplings have got to be, I think they cost£2.50 and they're absolutely wonderful. Absolutely delicious. Incredible product. So there you put, you know, creative, exciting,£2.50 and very easy to cook.

21:29There, that's success. Especially now with delivery costing so much, restaurants costing so much. People want to eat at home conveniently with good food. So, but that's not easy to do. So do you think the difference then between small business owner, business owner, and entrepreneur is the desire to do it over and over and over again multiple times? Never stop. Yeah. We have food meetings here every Thursday, every Wednesday. And we never, ever, ever will stop trying to improve the product, make it better. Yeah. And you have to create a culture where that's wonderful. You know, we took two years to develop one food product recently.

22:09It was aubergine, roast aubergine with miso, which is a famous fundamentally, you see it on all, very common in Japan. But it's a remarkable polo, if you can get it right. It took us two years of eating this polo every single Wednesday until Giorgio, who's in charge of that area, cracked it. He cracked it in the end. And you've got to have that culture where you never stop celebrating what something could be rather than what it is. So it sounds like your great products now are hundreds of iterations from when they first started. Yeah, I promise you, yeah. And so therefore, do you think people hold themselves back because they want to be too perfect too soon and they're not prepared to put a version one out and keep improving?

22:55There's that. Or are they not sufficiently in love with their product? I mean, very rarely do you get a product right first time. Very, very, very rarely. Usually can be improved. so no you must continuously improve continuously and if you get your food criticised do you take that personally in a negative way or do you just take it away very very often the customers are actually right absolutely well they're eating it our customers my email is on the bag and we get many, many, many customers writing to us each month, each week. Your email's on the back? Yeah. Oh, wow. And you read them? Every single day.

23:42Yeah. And sometimes it's really hard and sometimes it's not. Yeah. But customers are usually right. Yeah, Bill Gates said the best lessons in business in your complaints department. Definitely. Do you agree with that? Yeah. God, yes. Yeah. Yeah. But very often we know something could be better and we're on our way. In other words, Hopefully we're already there and it's a question of it's coming in. We know it could be better and it'll be better in a month, two months, three months. Yeah. Are you not concerned with, say, high streets being a bit empty about going big on physical restaurants? It feels like a hard business to do right now.

24:23Sure. So, of course, we're all concerned here. Rates and rents are very, very high in this country. There's been a cost of living crisis, and there is. So the high streets are not as busy as they were. So you've got to be better than good. You've really, really got to work together to exceed the expectations of your customers. It's still possible. We all have to eat still. There's still a great many people in this country. We opened two amazing industry restaurants on Oxford Street last year. One this year and one in December. Yeah. So Oxford Street, you know, probably the most expensive street in this country.

25:00And now it was a lifelong ambition. You know, 20 years ago, we said, God, one day we'll have two shop, two Itzus on Oxford Street next to McDonald's. And we've just done it. Wow. It's wonderful. But we're already on to the next thing. But that was it was a wonderful compliment to everyone who's worked at Itzu so hard for so long that we reached that milestone. and trading next to McDonald's is very fulfilling for all of us. It's great. Do you think Labour could do more to support businesses in the UK? Of course, yeah. You know, I think it's now really expensive to employ people. That recent NI and the rates are now often more than rent.

25:46I mean, it's absolutely criminal. So it's become very difficult for people to start a business, to employ people, which is really a shame, really a shame. And hospitality is particularly difficult. Yeah. And there's no advantage, really. I know people think there is an advantage of being big, but there actually isn't. You know, we pay the same for an avocado, which we then prepare in every one of our restaurants. We don't process what we do. It's all handmade. So just because you have 10 restaurants or 50 or 100, You don't really save a lot of money. So you've just got to be extremely, you've got to really get those four qualities I told you about earlier ticking well.

26:31Without that, you're in big trouble. And what do you think the UK could do to improve for businesses and entrepreneurs? There's so much they could do. You've just got to create an environment where people who've got the guts to start a business are supported. I mean, there are hundreds of things they could do. But will they? I don't know. It's all very well saying that. Do you not, you don't feel like particularly like you should speak out about it? Because, you know, some do, don't they? They really push out about it. Like James Watt does. He's right. Well, we all do our best. But most of my work and the work of all of us here at ITSU is to do our best for our customers, actually.

27:17We focus our energy and our time on our products and our customers. Because otherwise… Because we can't really change. It could, you know, will the rates change? Will they reduce the NI back to whatever? I doubt it. I don't know. I don't know. No, I feel the same because I put a lot of posts on social media and I think that it's important to speak out. You know, the national insurance rates on me, I have 100 staff. That put 100 grand on my wage bill. Exactly, yeah. Straight like that. And so you've got to earn$700 or$800 just to make the same money. The pension contributions went up. The rates, like you said, are really expensive.

27:53And imagine a small business and they're having to immediately pay rent and then almost double it in rates. It stops that entrepreneurial flair and risk-taking in this country, which is terribly damaging, terribly damaging. But then I also understand, well, all you can do is focus on that, i.e. what you do. In the end, you can make most of the difference by focusing on what it is you're trying to share with your customers. How can you make it better? Yeah. A big thank you to my sponsor Coinbase, a leading online cryptocurrency platform for buying, selling, trading, storing, and staking cryptocurrency.

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