What makes a great entrepreneur?

Merryn Somerset Webb asks Luke Johnson, chairman of private equity house Risk Capital Partners, what makes for a ‘transformational entrepreneur’.

According to the blurb on the back of Luke Johnson's new book, he is "Britain's busiest tycoon". What's more, he has a "personal fortune estimated at £120m". Assume the estimated amount is similar to the real amount (which seems reasonable, given that Johnson must have approved the PR gush), and this "independent, unorthodox" entrepreneur is clearly a very rich man.

So why, you might ask, would he want to write a book? After all, everyone knows that if you aren't Philip Pullman there isn't much money in publishing these days. Johnson tells me that he expects his book to sell something in the region of 10,000-20,000 copies. I reckon that will make him, at best £15,000. Hardly worth getting out of bed for if you've already got £120m in the bank, I say.

It isn't about money, says Johnson. "I do it because I like writing; because books endure; and because if you have written a book on a subject people take you more seriously about it." I can't believe that Johnson needs to write a book to be taken seriously as an entrepreneur. He is, after all, the man behind Pizza Express, Feng Sushi and Strada.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Perhaps, he says, but "I also believe in the cause. I think it matters and I think if it makes a difference then it is worthwhile." The real point, then, is to encourage other people to do what he has done: to break from the grind of working for other people, "to controlling their own destiny" and, with a bit of luck, to kick-start our slowly shrinking economy.

But can a book really help someone start a business? I've always seen how-to business books as being rather like diet books. People buy them not as a spur to action, but as a substitute for action. After all, no one really needs to buy a diet book to find out how to lose weight. And if the buying of diet books helped people lose weight, no one would have more than one and the publishing industry would be all but dead.

It is surely the same with business books. I'd bet that people who buy one read bits of it, do nothing and then buy another one a few years later. All these books are simply part of the self-help industry: they sell hope rather than a path to action that anyone will ever take.

Johnson says I am "a bit cynical by nature". Maybe he is right. I think that not very many people are actually suited to running businesses: it seems to me that mostly people will take security over dream fulfilment any day. He disagrees. He turns his nose up at "lofty concepts" such as "life-work balance". He thinks that working for other people is not a natural state for most people to be in; and he reckons that, given the tools, most people are perfectly capable of starting a business. "I think you are wrong that only a small number of people are suited to starting a business," he says, "probably no more than one in ten does it... but that's still quite a few."

So who are the people from the 20,000 who might go ahead with it? The type is changing. It used to be that the typical entrepreneur was "in his 40s, male... and not necessarily university-educated". These days it is "much more common for university-educated people to start their own businesses". The same goes for women, ethnic minorities and the young (new graduates in particular). The young are best at understanding the technology entrepreneurs need and if they get going before they have "a house full of screaming babies and dependants" they'll find it a lot easier.

OK. So what makes an entrepreneur? What will the person who looks at this book and uses it as a guide to actually starting a real business be like? "It ain't scientific I look at my own career and the paths of others I've met and they are very haphazard." But there are still lots of "personality traits that successful entrepreneurs tend to possess". They are naturally optimistic, they are "perverse by nature, ie, they don't want to take orders; independence matters to them; they are willing to go against the flow in terms of their views on what makes an opportunity; they are often obsessive in general that is, they will pursue a dream or an idea for years without success". Look at James Dyson. He spent "literally years in his garden shed building his first prototypes for this vacuum cleaner". They also tend not to be in it for the money but for either the status or the flexibility and freedom.

I pick up the idea of James Dyson. He is a great success story and a pretty good self-publicist. But there aren't that many Dysons around. I suspect that the vast majority of entrepreneurs find that attempting to live the dream is a total nightmare and that, if they can get it, they end up back in salaried work. So what of the failures? "I have met very few entrepreneurs who have said they regretted starting a business... and going to work for themselves," says Johnson.

I'm sure he hasn't. But then not only do people rarely admit to mistakes (which if you can't undo them is just as well), but Johnson is also unlikely to meet the failures. He'll meet the successes. Not at all, he says. He gives a lot of talks for the cause and they are mostly to "would-be entrepreneurs or very small freelancers, people who are struggling".

Isn't that my point, I say. Most would-be entrepreneurs will never be entrepreneurs and these days struggling freelancers are generally people who had jobs before the recession and are now making the best of it. I wonder if, given the recession, they aren't just desperate?

Still, one thing that we can agree on is that, whatever their reasons, anyone starting a realistic business should be encouraged. After all, given that much of the British economy is effectively ex-growth (see my blog for more on this) and that there is no such thing as a job for life anymore, then if we want to maintain anything like full employment here, we have to offer helping hands to anyone who might prompt a little growth.

With that in mind, Johnson is all for putting in place a 'Start Up Act' giving very generous tax breaks for start-up companies exempting them from reams of red tape, National Insurance, corporation tax and business rates, for example. I'm not entirely convinced on this one. A recent study in the US showed that the vast majority of small firms were set up to provide their founders with flexibility and have "no plans to grow", and Johnson accepts that in Britain too a lot of firms "didn't do it to get rich and they don't think they will get rich".

The fact is that it's not so much start-ups as fast-growing firms that provide jobs regardless of when they were started. So rather than spraying taxpayer money at every hairdresser who wants their own shop we should be targeting the help more carefully perhaps not at start-ups but at fast-growing, medium-sized firms?

Johnson thinks that is a "debate worth having" and it seems he has started having it with himself in the week since we met. This week he wrote an excellent piece in the Financial Times called "We need a Darwinian stance on start-ups". In it he noted research from Britain's National Endowment for Science, Technology and the Arts (Nesta), which shows that, "when it comes to job creation, the new companies that really make the difference are not the mass of start-ups which will never grow much or employ many staff but the 'gazelles'. These are the ambitious, bold ventures that innovate and build something significant". They are "transformational in terms of jobs technology and wealth creation".

It makes sense, then, that instead of being "fair" with tax breaks ie, giving them to everyone we should focus our deregulation, tax breaks and easy credit on the "real talent". We should "increase inequality to make sure help reaches the right places".

I'm not sure how this would work (getting someone to judge what is and what isn't real talent all seems a bit Dragons' Den), but I like the idea of distinguishing between lifestyle entrepreneurs and transformational entrepreneurs. The former are nice to have, of course. But the latter are just about the only thing that might get us through the next decade.

Finally, I ask Johnson what he would do if he was starting out today. His main focus has always been food. Would it be again? Probably not. For the last few decades the restaurant business has "broadly been a growth industry". It doesn't look so good now. If he had "grown up around technology the way people who are 21 have", he would be inclined to go into that. He likes the way anything to do with technology can immediately go global and he particularly likes the way that "you can fail quickly and cheaply online, remake your business model and try again". Just the thing for an experimental, persistent, perverse and optimistic entrepreneur.

Start It Up: Why Running Your Own Business is Easier Than You Think, by Luke Johnson, is out now. Publisher: Viking, price £12.99.

Who is Luke Johnson?

Luke Johnson, 49, is the chairman of private-equity house Risk Capital Partners. He studied medicine at Oxford University and graduated in 1983. His first job was as a media analyst for stockbroker Grieveson Grant (which became Kleinwort Benson Securities), but his big break came when he led the takeover of restaurant chain Pizza Express in 1993. Together with university pal Hugh Osmond, who later went on to found Punch Taverns, Johnson oversaw a rapid expansion of Pizza Express it grew from 12 restaurants to more than 250 before selling up in 1999.

During that time the share price rose from 40p to 900p. He reinvested the profits in more restaurant chains, and became a prolific part-owner or director of a number of listed firms. In 2004 he became chairman of Channel 4. His tenure was a commercial success, with ratings and revenues up by the time he left in 2010, although detractors claimed that Johnson dumbed down' programming. Following in the footsteps of his journalist father, he wrote a weekly column, The Maverick', for The Sunday Telegraph for eight years until 2006, and he currently writes on entrepreneurship for both the Financial Times and Management Today.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.