Red Letter Days: Rachel Elnaugh
A horse ride in Hyde Park was something Rachel Elnaugh would never forget. It was the first ‘experience’ offered by her company Red Letter Days. Now you can day trip to space for £15m. She telss GB about her business’ own stratospheric rise.
Issue 16, February 2003
You can’t go into a branch of Boots, WH Smiths or a high street bank these days without being offered the chance to drive a Ferrari, fly in an air balloon or leave your stressful lifestyle behind for a weekend in an exclusive health spa.
Experiences are the order of the day and big business to all who deal in them. And the person we have to thank for this £120m plus market is Rachel Elnaugh, the woman who was just pipped to the post in the Veuve Cliquot Businesswoman of the Year in 2002.
Way back in the late eighties she was wrestling with the urge to buy the male members of her friends and family circle socks and other manly, but ultimately dull, presents. What she really wanted was to give them an experience they’d never forget.
Filling the void
And in the true tradition of entrepreneurialism she decided to take matters into her own hands, fill the void and make a pretty penny in the process. In 1989 Red Letter Days was born with £10,000 pooled together from the usual assortment of friends and family and 25,000 from her own savings. Fourteen years later the pioneer of the industry employs 150, has been in profit since 1992 and turnover of £26 million in 2002.
But the hook to hang the concept on was the red letter pack. The company needed something iconic, something that would become synonymous with an experience, Elnaugh says, adding that in focus groups it is still the strongest piece of brand collateral. “The key for us was, and is, to find an experience good enough to go into the red letter.”
Pinning down ‘experience’ operators is easier now than it once was when only 25 operators out of 100 in the first year saw any value in offering their wares to the public. “But once you’ve got a start you go back to the 75 that rejected you and chip away,” she says.
Back in 1989 it was just Elnaugh and a phone. The former senior tax consultant rose from office junior with no university education to handling entrepreneurial clients such as Terence Conran and Reject Shop founder Anna Vinton. But she had little to back her instinct that she could run a business and no industry template to base Red Letter Days on.
She left Arthur Andersen’s with the intention of travelling for six months, but came back after six weeks, impatient to get started. Somewhat surprisingly for someone who launched the experiences concept, she didn’t spend the six weeks bungee jumping or white water rafting in Australia. “I’m not really Anneka Rice, but can see what experiences will work.”
In fact she believes it positively helps to not be an adrenaline junkie as turning a hobby into a business brings a twist that would probably exclude mass interest. Instead she concentrated on securing packages covering the entire spectrum, such as sedate but luxurious trips on the Orient Express to high-octane and stomach-churning flights in fighter jets.
Bizarrely, now that she’s effectively made it Elnaugh increasingly considers doing an MBA and claims this is because she doesn’t actually know anything about how to run a business. She recently stepped into the role of chairman at Red Letter Days and brought Simon Vincent, who previously set up Thomas Cook’s tour operator JMC, in as managing director. And talking to her, the respect of his more conventional knowledge is apparent. “I think my god, he’s so much better than I am when I was managing director.”
Showing her more confident side, she claims she revelled in the freedom of inventing her own industry rules and standards, quite happy to back her gut instinct and more than comfortable being the undisputed number one brand in her sector for close to a decade. While convincing some brands proved difficult early on she had time to win them round, ensuring that today Red Letter Days works with many industry leaders.
WH Smith was the first to make an aggressive play for the market, launching its Amazing Adventures in 600 stores. Slightly perturbed but eventually welcoming the big-boy recognition of the industry, she says it impacted positively. “Our turnover increased 30% in the year they did that. I thought it might be the beginning of the end, but we went from strength to strength.”
Since that turning point of knowing the company was resilient enough to survive, Virgin too has come in with Virgin Experience in its V Shops and online and has gone into the corporate incentive market quite heavily. Boots, Firstplace 4, Lastminute.com and Exhilaration.com, the company it recently acquired, have also entered the market.
In Virgin’s case Elnaugh is equally secure, arguing that the company has so many corporate enemies, because of its diverse product range, that Red Letter Days will not lose business to them. “A controversial brand can have a lot of problems when it comes to business to business, whereas our independence is great for that.” And some of the others are not a real threat, she says, because they require fatter margins and scrimp on quality, while Red Letter Days relies heavily on referrals. “There are only two ways to make an experience cheaper – take out elements, such as three laps in a Ferrari as opposed to five, or run them on a Monday morning as opposed to Saturday afternoon.”
Red Letter Days also offers bespoke packages through Debenhams, including multi-choice experience boxes and high value Gold and Silver boxes, which cater for the wedding list market at 175 and 500 a pop. For Selfridges the firm provided an advisor, touch screen and video playing footage of a range of experiences at the foot of its escalators at Christmas, boosting revenue substantially. As well as specific Selfridges branded products customers were able to order anything from the brochure, which includes a trip to space for 15m. The company has also worked with Air Miles since 1994, with Elnaugh admitting she did pitch to new loyalty brand Nectar, but because of the Air Miles association the proposition fell flat.
There are already Red Letter Days branded hot air balloons and many of the event venues are hired out for specific days, with Elnaugh’s team taking care of hosting, catering, gifts and trophies. She also plans to utilise Simon Vincent’s experience by combining experience packages with trips and holidays through a range of partners in Germany, France, Spain and the Netherlands. The decision that remains is when to provide shareholders with an exit and allow Elnaugh to bask in some glory for once. “It’s a career ambition and a logical end point to float, but the more you talk to people the more you realise it’s the start of a new beginning.”
Elnaugh’s personality is no doubt one of the reasons Red Letter Days has grown so impressively. Asked what convinced her she had what it took to run a company, she replies humbly “nothing really” and adds candidly that she’s only recently got to the point where she thinks she’s any good at what she does. It makes you wonder whether starting a business gradually knocks the stuffing out of you until finally you build an impenetrable kevlar skin.
After all she went into it at 24 thinking it would be a “doddle”. “The first two years are very difficult and you do read of so many giving up,” she says. “You get completely ground down and the initial enthusiasm evaporates. But if you can push through what is almost an initiation then it can prove a really good grounding.” The first experience sold was horse riding in Hyde Park and in its first year the company made a disappointing £10,000. Elnaugh was soon back doing freelance tax work to pay the bills.
Peer pressure was also tough to resist, with people telling her to jack it in, go back to £50,000 a year and a BMW in the garage. But what set her apart from others, she thinks, was focus and determination. Interestingly she says it sorts the “men from the boys”. But it wasn’t a desire to gain acceptance in a male dominated environment at the tail-end of the macho eighties.
Fear of failure
Instead it was her fear of failing the friends and family who had invested so much when she couldn’t get bank finance to start-up. “I never treated it as ‘other people’s’ money, faceless people in the City who if it didn’t work out I wouldn’t care about.” On the plus side she didn’t have the interference of banks and venture capitalists to cope with. One of the benefits of having a financial career beforehand was that she had a strong grasp of figures, if few other management skills. The rest came quickly on the job.
And it was the freelance work that led to her introduction to a marketing expert, who redesigned the company logo and advised her to get a good PR adviser. By Christmas 1991 Red Letter Days had been featured in every women’s glossy magazine. Orders came flooding in so suddenly that the company was close to the pitfall of over-trading.
The former senior tax consultant rose from office junior with no university education to handling entrepreneurial clients such as Terence Conran and Reject Shop founder Anna Vinton.