View From The Top: Heroine of the Dragons' Den

Red Letter Days founder Rachel Elnaugh talks to Adam Hill about building a business brand and, latterly, a cult of celebrity.

Rachel Elnaugh is both polite and slight in person. Yet for six weeks she breathed fire over a raft of cowering hopefuls in the BBC2 series Dragons' Den. Would-be entrepreneurs came in search of money for their business venture and Elnaugh, plus four male high-fliers, usually made it abundantly clear she had no time to waste on such nonsense.

Elnaugh's own multi-million-pound turnover company, Red Letter Days, would almost certainly have got short shrift on this Pop Idol-in-pinstripes TV programme if it had been around in 1989 when she started it at the age of 24. Fed up with buying uninspiring presents for her mainly male family, she effectively created today's thriving 'experience' gift market. Mintel estimates that it's worth £250m a year, and Elnaugh gives ABC1 punters the opportunity to pay between £49 and £9,750 for anything from an aromatherapy massage to a flight to the edge of space in a MiG-25 fighter jet.

Although Elnaugh's clientele is 70 per cent female, her fan mail - some of it 'lewd', she giggles - is mainly from men: 'They say they love the show and that I'm their favourite dragon. It's quite sweet.' Her TV appearance has served to 'warm through' her company's image, she believes: 'Red Letter Days is perhaps a bit cold,' she admits. 'Dragons' Den adds personality to the business. I showed a range of emotions, from being quite tough to compassionate.'

The latter adjective did not spring to mind in Elnaugh's treatment of one putative businesswoman. 'Was that the aromatherapy woman?' Elnaugh asks with a frown. 'I was quite angry, she was very arrogant. I was pointing out that the market was heaving with similar products and she resented that line of questioning. That rankled me.'

The line between assertive and arrogant is a fine one, she says. And Elnaugh should know. Balloons Over Britain has had the exclusive agreement to supply balloon flights to Red Letter Days since 1997. Balloons business relations director Arthur Street recalls with some amusement that in early meetings Elnaugh 'was a little bit nervous and that made her slightly abrasive and pushy. I don't think that she went to a school of diplomacy'.

He seems happy enough with a relationship that continues to serve both parties well, however.

Early resolve

Suffering 'soul-destroying' rejection by universities and management training courses, Elnaugh started out as an office junior at an accountants' office before doing a correspondence course in tax. She eventually landed a job with Arthur Andersen before getting bored and setting up on her own. In the second year of Red Letter Days she hired Jane Burton PR.

'I couldn't afford much but we got into every women's magazine and went from two phones that never rang to two phones that rang all day,' Elnaugh recalls. She insists PR is not just 'icing on the cake' and that she understands the power of branding. 'Eighty-one per cent of our business comes from word-of-mouth referrals,' she says. 'The power of PR is amazing.'

Kudos Communications currently handles Red Letter Days - something she believes was the right choice, after a thorough search. 'You have to get an agency that's right for your culture, rather than have your business passed down to the account executive girls,' she says with feeling.

But now, Elnaugh has put the development of her personal image in the hands of former Staniforth Communications director Ian Haworth's new one-man band Haworth Associates. 'Ian is less a PR man and almost a celebrity manager,' Elnaugh says. However, she remains hard-headed. 'There is a temptation to "do a Linda Barker" and grab everything, thinking it would never last.'

It seems hard to believe now, but after her third baby in 2002, Elnaugh suffered a crisis. 'I went through a period of self-doubt, having brought the firm from nothing to a £13m turnover,' she says. CEO, Simon Vincent from Thomas Cook, was brought in to help out ('a big mistake,' she recalls now). But after the wobble, it was not long before Elnaugh had rediscovered her confidence - and the CEO's role - and Vincent was gone. In the same year, her shortlisting with erstwhile airline Go and London 2012 boss Barbara Cassani for the Veuve Clicquot Businesswoman of the Year put her back on the radar in media terms.

She is now contributing a 'Dear Rachel' column on business advice for an entrepreneurship competition in The Sun. 'It's like Dear Deirdre but not as exciting,' she explains. 'I've got my own brand now which means I can do more. It would be quite nice to be an iconic business heroine.

I represent something different - empowerment through starting a business from nothing. You really don't need an MBA or an Oxbridge education,' she says.. 'That's quite inspirational, isn't it?'

It is this sense of perspective, plus the TV, which has given Elnaugh what she calls 'business celebrity status'.

'A year ago, I felt that Kudos was underutilising me - not that I've got a big ego - but I said I should be doing something on TV. They said: "what are you talented at?", which left me thinking that's that then.' A few weeks later she got the call from Dragons' Den, which suggests that the BBC producers knew more than her PR agency.

And Elnaugh is convinced there is a space for her in the public imagination. 'Anita Roddick is still the most iconic female entrepreneur,' she suggests. 'Maybe I fill a bit of a gap there. There's only really (1980s PR guru) Lynne Franks at the slightly wackier end - no, don't print that!'

But there is no doubt about her main role model: grocer's daughter Margaret Thatcher. 'She fell from grace but at the time it was very exciting. I'm a child of the 1980s,' she laughs.

'Is that really awful?' In the spirit of that decade, Red Letter Days plans to go public with an AIM listing this year. 'It's an iconic business milestone, to take a business to market,' she says.

Handling critics

Elnaugh is fabulously sniffy about the competition, like Activity Superstore, as befits the queen of all she surveys. 'They're all run by men,' she says. 'They're high-adrenaline, gutsy people jumping out of aeroplanes.

We're more about emotion. They try to copy, they don't add anything of their own and resort to criticising to see if they can damage us.'

A Daily Mail article last October questioned her involvement in Dragons' Den, pointing out that Red Letter Days' operating loss of £4.6m in its most recent accounts made her look more 'corporate newt' than fearsome dragon. Elnaugh sighs. 'In 2002 we pulled out of Tesco and Sainsbury's and relaunched the brand,' she explains without irritation. 'We invested £4m to do it, so the P&L took a hit.

'The figures to 31 July 2003 were a bit of a bloodbath,' she admits, 'but the accounts to July 2004 show a profit of £873,000 and this year profit will be around £2.2m, so we're starting to capitalise.' And one crucial thing that does not appear on any balance sheet is brand value, she adds.

Elnaugh took the brave decision to leave behind all 'non-experience' business - such as its white-label gift deals with supermarkets - and go for the premium, aspirational market. 'It was a tough decision to say no to Tesco because we knew we would never get the business back,' says Elnaugh. 'But it's a commodity-driven buyer and we don't offer commodity products. The courage to say "no" in business is quite important.'

Of course, humiliation attracts viewers and 'no' was something the hopefuls on Dragons' Den heard quite a lot. 'I could see that it was going to be a cult show,' insists Elnaugh. 'It had two million viewers in week one and 3.6 million in week six.' She hasn't got where she is today by not knowing chapter and verse on figures - but claims the public exposure has surprised her.

Given that she wanted to be on TV in the first place this seems odd, but it was certainly a risk because 100 hours of filming was distilled into five hours of programmes. 'The edit was quite severe in places.' Yet both fellow entrepreneur and TV 'dragon' Doug Richard and long-time business associate Paul Glide, partner in branding specialist Mason & Glide, tell PRWeek the programme was an accurate reflection of her personality.

In fact Elnaugh is a likeable mix of the spiky and, more often, the open.

At one point she uses semi-mystical terms ('I feel like I'm on some kind of path, I can't really explain it, I feel it instinctively') to account for her business success - an explanation which, you feel, wouldn't cut it on an MBA course.

She manages to be both tactful and indiscreet, sometimes in the same sentence, and does not suffer from bouts of false modesty. Her unusually liberal use of the word 'iconic' in conversation perhaps underlines her belief that, with Red Letter Days and now Dragons' Den, she is beginning to fulfil her destiny. But then that should come as no great surprise if Elnaugh's role model is, indeed, the Iron Lady herself.

1989: Sets up Red Letter Days with savings and money from family

1992: Red Letter Days first corporate order for incentives packages

1995: Red Letter Days reaches £1m turnover

1997: First 'experience' gift product sold on-the-shelf in Boots

2002: Relaunch of the brand

2005: Appears on BBC2's Dragons' Den

2005: AIM listing planned

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