Lord Bilimoria: ‘We had too much debt. I didn’t see the financial crisis coming’
Why and how did you become an entrepreneur?
I should have ended up working for an investment bank. I was fortunate to have a good education, with two degrees, one in commerce and one in law, and I qualified as a chartered accountant. But it’s been a phenomenal journey of ups and downs, achievements and failings and mistakes.
I realised that what appealed to me about being an entrepreneur was the freedom to be in control of my own destiny and the opportunities where the sky is the limit.
Then I had an idea that came from being dissatisfied as a consumer with fizzy, bland, bloating lagers. I loved real ale but found that I couldn’t drink it with food. I found the ale delicious and smooth on its own but I used to visit Indian restaurants a lot and I found it too heavy and bitter to accompany the food. I wanted to produce a beer that had the smoothness of an ale and the refreshment of a lager.
What was your biggest challenge starting Cobra?
In the early days, raising finance was the biggest challenge. I had £20,000 of student debt to pay off so we had to raise everything. When we started the business in 1989, we had a bank overdraft and then used a variety of different forms of finance, including trade finance. We didn’t have things like crowdsourcing in those days. We used Victorian instruments like bills of exchange and convertible preference shares.
Cobra was in crisis after the recession. How did it survive? Do you have any advice for businesses in a crisis?
I nearly lost my business three times; the last and I hope the final time was 2008/09. We had received financing from a large strategic investor who pulled out two months before Lehman Brothers went bust. When we went into the financial crisis we were growing very rapidly and that growth had a lot of value. After the financial crisis, growth didn’t seem to have any value – cash became not just king but emperor. We had too much debt. I didn’t see the financial crisis coming. I had hired some wrong people. I have to take responsibility for that.
Good judgment comes from experience and experience comes from bad judgment. There is no shortcut sometimes to making the mistakes and, hopefully, learning from them.
But what I did find was that there were three factors that saw me through each of those crises. The first was the brand. Cobra sales didn’t drop once throughout those difficult times. The second was having a strong team and family support. I met my wife a year after I started Cobra and she has supported me through the whole journey. My director of sales has been with me for 23 years and without him by my side I wouldn’t have got through. The third is having the right values – integrity every single time.
What are the main opportunities for UK businesses abroad?
UK businesses have phenomenal opportunities abroad. Every business now, however small, has to start thinking global from day one. There are enormous opportunities for businesses to partner with Indian companies providing professional services – manufacturing, for example, like I did in the country. The big accounting firms are already partnered with Indian accounting firms. The consumer market there is only going to increase.
What would an exit from the EU mean for small businesses? Should we stay or should we go?
I am an openly declared eurosceptic. There is a lot about the EU that I really do not like – the regulations for example and the euro has been a disaster. Now with the migration crisis and the terrorism threat, Schengen needs to reform. Border checks need to be reintroduced across Europe.
But the trading zone has been excellent and, on balance, I do think it is worth staying in because I think the alternative is very risky. A lot of countries like India see the UK as the gateway to Europe. We would lose that perception of being part of this huge common market. We’d have to renegotiate trade deals.
But, on the other hand, we’d have the opportunity to negotiate our own trade agreements. To think we can leave the EU and negotiate on the same terms that we have now is not realistic. We’d still have to contribute – maybe not £8bn net a year, perhaps £4bn or £5bn a year. The safer bet is to be part of Europe and continue to try and reform it from within.
Also the peace we have in Europe has been brought about not just by Nato but by the European Union. And it’s worth paying £8bn a year just for that.
You’ve been chancellor of the University of Birmingham, president of the UK Council for International Student Affairs and chair of the advisory board of the Cambridge Judge Business School. Why have you taken on these posts and what do you think is the role of education in creating the next wave of entrepreneurs?
When I started my business, for the first eight years I was totally focused on it with no time for anything else. Then I attended Cranfield School of Management. That changed my life. It engaged me in lifelong learning. I realised the value of it and when I was out of my business I realised how much I learned just from my peer group of other entrepreneurs.
I then did a course at London Business School and at Harvard Business School. It got me engaged in education and one thing led to another. I’ve always been passionate about higher education and I started lecturing quite a lot. Teaching students is a great privilege. Every time I give a lecture I learn from the class.
