Paul Tustain: you don’t need a new idea to succeed

Sometimes the best ideas for a business come from a problem that the founder has faced themselves. In 1999, Gordon Brown decided to follow many of the world's central banks by liquidating Britain's gold reserves over a period of three years. Always on the lookout for "unpopular investments", Paul Tustain, now 53, decided that this was the time to invest, but when he tried to buy physical gold he found it "very difficult". This gave him the idea of setting up a company that would simplify the process and cut the cost of owning gold bullion.

Having previously founded and sold the software company SAM Systems, Tustain initially decided to fund the company himself, later getting contributions from friends and family. This gave him enough breathing space to build a sustainable business and build a robust competitive position. He believes that if he had gone down the traditional route of seeking funding from venture capitalists, he would have been compelled to chase annual revenue growth of 20%-25%. This would inevitably have led to a weak organisational structure and compromised the firm's long-term future.

Not seeking venture capital has also allowed him to retain majority control. BullionVault launched in 2005, as the boom in the gold price was starting to gather pace. Realising that it would only succeed if clients felt that risk was as low as possible, Tustain arranged things so that clients directly owned the gold. This means that if something happened to his company, they would still retain their ownership.

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To bolster confidence further, BullionVault offers a choice of five locations around the world where the gold can be stored and publishes a daily pseudonymous register of all holdings. These measures, combined with lower charges than its competitors, ensured that customers flocked to BullionVault. This was helped by rising gold prices, from under $300 per oz in 2001 to a peak of over $1,900 in late 2011.

While it has since fallen back to just over $1,000, Tustain says that "gold rations its own demand", with lower prices making it more affordable. He remains bullish, saying that "we don't yet know how the past seven years of unconventional monetary policy will pan out".

Today BullionVault cares for $1.2bn worth of gold, putting it ahead of most national central banks. Tustain hopes to keep growing the business by sticking with the strategy of providing a low-cost way to hold gold. But last May he also founded WhiskyInvestDirect with friend Rupert Patrick. This allows people to invest in Scotch whisky as it matures in the barrel, buying a share of industrial-sized quantities rather than the small casks typical of hobbyists. Tustain claims that investors should expect to make around 6%-8% a year after costs and inflation.

Tustain thinks that some of the established wisdom about founding a business is wrong. "People think that being an entrepreneur is all about coming up with a new idea," he says. But "most entrepreneurship is taking an established industry and reworking the internal processes". His advice for others who want to run their own businesses is "to start young" and "avoid taking on a large number of expenses that force you to rely on a salary".