Page 308 - James Caan - The Real Deal

The Real Deal

create what’s called a P&L, a profit and loss account, each month;
but, depending on how you account for your income, it might not
have any relation to what’s in the bank. Let’s say you sign a deal
for a piece of work in March for £60k; do you log that money in
March, or do you log it when it actually arrives in your account
in May? And if it’s payable in instalments, how do you account
for your income then? Some people will put the £60k in March,
deduct their costs of a couple of grand and kid themselves they
made a profit of £58k in March, when in fact they made a £2k
loss. It’s a problem that comes up time and again on Dragons’
Den, but even before I joined the panel I knew that enough
companies had cash difficulties: that meant finding new clients
shouldn’t be a problem precisely because surprisingly few people
know how to correlate cash and profit.
I think part of the problem is that spreadsheets make it very easy
to extrapolate figures by automatically replicating formulae: to be
crude, a spreadsheet assumes that if your profits increase at 5 per
cent a month that increase will be constant. In reality, businesses
are seasonal or have capacity issues, and they don’t grow evenly.
It’s easy to understand why inexperienced entrepreneurs run
aground if they rely on what their spreadsheet tells them. As I
suspected, these kinds of errors with cash and accounting allowed
the business to grow, and when Hamilton Bradshaw exited the
business in 2008 the turnover had increased to £430 million.
The ink was barely dry on the first deal when I took a call that
would lead to the next one.
‘Do you fancy investing in a property business?’
‘Might do. Tell me about it.’
It became clear that the opportunity was to fund a start-up,
not what I had set up Hamilton Bradshaw to do, but it seemed like
such a good business that I arranged to meet the MD.
David Alberto came to my office and told me about his plan for
serviced offices.

298