My First Million: Rachel Elnaugh of Red Letter Days
How one entrepeneur made a mint from 'wrapping up experiences'. And where it all went wrong.
Rachel Elnaugh started her career shortly after leaving school in 1983, as an office junior in an Essex accountancy firm. Bored with the day-to-day routine, "I began asking for more demanding work, and soon enough was taking on more responsibility", she says. She began taking on her own portfolio of clients and by 1986 the "little Essex girl" was working as a senior tax consultant in London with Arthur Andersen, then the world's biggest accountancy firm. "I was advising top-flight clients, entrepreneurs such as Sir Terence Conran and Anna Vinton," she says. That got her thinking about starting her own business, although it wasn't until 1989 that she got the idea for it.
Red Letter Days: the inspiration
"It was my father's birthday, and I thought, what do you get the man who has everything? I knew he loved cricket, so I bought him tickets to the England v India cricket match at Lords in February." But the match wasn't for another six months, so in a bid to whet his appetite, Elnaugh created her first "experience". "I filled a box with several clues as to where he would be going. It included a jar of English mustard, a pot of curry paste and a biography of W.G. Grace." Her father loved the gift, and that's what set her on the idea of "wrapping up an experience" and selling it. "Once all your ideas crystallise, you form a very clear concept," she says, and that's how Red Letter Days began.
With £25,000 of her own savings and £10,000 gathered from family and friends, she set about offering experiences to the public from her sitting room. But the firm soon found itself in trouble. "We made all the classic mistakes of a business start-up; we spent too much money on advertising. Within 18 months, we had blown all our money, and were in the pits." Worse, Elnaugh was making no money from the business and freelanced as a tax consultant to make ends meet.
Red Letter Days: the importance of marketing
That's when an acquaintance introduced her to a marketing guru, Barry Davis, who redesigned the firm's logo and brochure and suggested placing inserts into magazines and newspapers in the run-up to Christmas 1990. It paid off. "In the three weeks up to Christmas, we made a turnover of £30,000. It was then we realised it would work and that we had something big on our hands." Turnover began to increase and from £200,000 it went to £300,000 and then £600,000, until 1995, when the business made its first million. "It snowballed. Once you get momentum, things start happening."
Red Letter Days: where it all went wrong
By 2003, Red Letter Days was turning over £18m a year as Elnaugh stepped back from the business, handing the day-to-day running to someone else. It was a mistake. Too much money was spent relaunching the brand and although she tried her hardest to put it back on track (even holding meetings the day she gave birth to her fourth child), she couldn't stop it from going into administration in 2005. She remains philosophical, though, admitting that there comes a point when "you have to admit when the game's up". She's now applying that positive attitude to one of her newest ventures, Lifechangers, providing motivational books, cds and dvds for entrepreneurs. "Mental attitude is the key to successful business, once you have that, everything else sorts itself out. The tapes provide the psychological tools."