Stelios Haji-Ioannou: easyJet and easy Group
The easyJet entrepreneur tells Startups.co.uk what it takes
This is a transcript of a speech Stelios Haji-Ioannou (number 7 in our top 50 entrepreneurs) owner of the Easy brand (easyJet, easyCar, easyValue, easyMoney, easyInternetCafe…) and self-confessed serial entrepreneur gave on Wednesday 9th April 2003, at a very select gathering of around 50 entrepreneurs. The gathering marked the launch of a new startup organisation called Ready4growth at the Cass Business school in the City of London.
In what was more a discussion, crossed with a fireside chat, than a full speech Stelios outlined just what it was that had started him in business, and what he saw were the real secrets to entrepreneurialism.
To make things easier to read we’ve turned the speech into a series of questions and answers, so you can dip in and out and get an idea of how Stelios ticks. He was preceded by the host who introduced a new book that everyone would take away at the end of the event that explained in ten simple steps how to be come an entrepreneur.
Where did you start?My first business was a shipping company which was a comfort zone. (Stelios’ father owned a shipping line). I received money from my father to start – I was lucky because my angel was familiar with the industry. But at the age of 26 I stepped down and let a manager run my company. Since then it has listed on the US stock exchange and it now does better after I left. I wouldn’t profess to have the skills that i can find a good manager, however if you look for someone that complements you, don’t get someone that has the same values, you can’t have two entrepreneurs in the company.
What made you start easyjet and how did you research it?My inspiration for easyJet was Branson and a company called Southwest in the US, I do research on trying to understand the business, and in most cases there’s no way of doing it other than kicking the tyres. I looked at starting a pizza delivery company and at the moment I’m eating a lot of pizzas.
Why did you exit your business?Entrepreneurs mess around, once you’ve proven the business model leave it alone and get a manager in, and hire a proven manger
What made easygroup successful ?In easyJet I had two assets the airline and the brand. It was the fact that the name meant something to people, so I separated the brand from the airline.
Why did you start your other projects away from easyjet rather than from inside?To do it (start other companies) from within the company would be a disaster, there would be a lack of focus and the ability for that company to raise capital would decrease and the company would fail. The best way was to create a company put in the capital and let it float. Put all the risk on the company.
What are your secrets for a succesful company?By trial and error and reverse engineering of what worked at the airline I have created this list 1) Look at companies where the consumers are paying out of their own pockets – ie consumer facing B2C. Consumers behave in a rational way when confronted with a value judgement, give them a product at the right price and they will take it. B2B and people spending the companies money don’t work in the same way. 2) Choose a product/service with a price elastic demand curve – a product/service where when you reduce the price more consumers buy 3) Look at the yield management – yield management is the same product given at different prices. 4) Eliminate the frills – the cruise business is ripe for this – out source your work to the customer, think how can we transfer the workload to the customers. At easyJet the customers print out the tickets, they do the catering. 5) Under promise and over deliver 6) Don’t expand too fast. At easyInternetCafe I found out that a flagship store is just another name for a white elephant, I went to all these countries at once (Europe America etc) I opened a store on Times Square, I have the certificate from the Guinness book of records to prove it (It’s the World’s largest Internet café) This (easyInternetCafe) is also an example of Yield Management. We are going to the staff-less model, using vending machines. With easyInternetCafe I felt like a company doctor in my own company. We convinced companies to allow us to work from their premises (companies like Mcdonalds)
What business models work?Franchising is the lowest possible cost model in business, particularly in retail, you effectively make an entrepreneur in each store. And franchising is a huge business, if you think of fast food, hotels and car rental companies they are all franchises. The Post Office is the best franchise and leanest franchise I can think of.
How do you choose your suppliers?Monopolies are bad – unless you own one. Try to have multi-vendors the best way to get a discount is not to put all your money with one vendor play them off against each other.
How do you choose the businesses you target?Car rental companies are car washes in disguise. There are people just employed to wash cars. Now if I was a clever manager I could probably roster things to do it cheaper. However the cheapest person to do this is the customer. With easyCar the renter has the option of returning the car clean or paying £10. 90% clean the car, so 90% of the customers value 30 minutes of their time at less than £10. NEVER overestimate how people value their time. We live in a society that supposedly is short on time. But actually most people have tons of time. I’ve also done away with an office – at easyCar – its now a man in a van, with a laptop.
What’s next?easyCinema is possibly next, it’s a fixed asset, fixed cost business with very little marginal value – labour is fixed , real estate is fixed, and if you can get the films at a fixed cost then you are there. It’s criminal that cinemas run at 20% capacity, and that it should be the same price to see a film on a Tuesday afternoon as a Saturday, and why a premier is the same price as two weeks later. I don’t believe that they make all their profits in popcorn. The error is looking at the gross margin, they have to ask themselves, if I don’t have the food would I hire so many people? would I have a stock room? The system I envisage is you book on web, you printout the barcode membership card on your own home printer, so they outsource the booking to the customer, and you wave the ticket over a turnstile. It’s automation helping the end game of the business.
What are the key lessons you’ve learnt over the past few years?You cannot delegate entrepreneurship – if you are going to make mistakes make them yourself. Pay attention to the detail of a business, those mistakes in the business model may be small now but they are compounded by growth. Don’t over estimate what consumers will pay for something that saves then time Don’t bet the farm on your business, put enough in to have enough skin in the game, an amount that is meaningful but leaves an amount small enough for you to survive.