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To many people, the number and variety of businesses that the Virgin Group operates is unusual: We’re involved in everything from music to railways to hotels. People often ask me to explain the rationale for our group’s approach, especially how we decide which sectors and countries to invest in. It comes down to our distinct approach to risk.
In life, it’s better to stick to a few simple values and aims; the same holds true for business. One guideline that we rely on is that if a new business has the potential to damage your brand in any way, you should not invest in it.
At Virgin, when we assess new businesses, our first step is to submit every business idea to our “brand test.” We are constantly presented with new and exciting opportunities that might make a lot of money, but if they fail the brand test, we always politely decline and move on. For example, we wouldn’t start a cigarette company or a defense contracting business. After all, life is short — we want to enjoy the experience.
Two related guidelines are deeply linked. We think that there is little point in entering a new market unless it provides the opportunity to really shake up an industry. Almost all our new ventures come about from our thinking up a product or service that we believe people really want. Then, if our entry has the potential to make waves, we’re going to look at it very closely.
You’ll notice that making a profit hasn’t entered the picture yet. It’s rare for me or the team to consider only the money that can be made. I feel it’s pointless to approach investing with the question, “How can I make lots of money? We must bring in the numbers guys and work out some business plans.” No one will ever agree on exactly how to make money. The consultants will say your idea will work, while the accountants will prove that it cannot.
When it’s time to decide whether or not to go ahead, the decision must come from your heart. If you must pursue your passions, your ideas will be more likely to succeed.
I learned to follow my passions at the beginning of my career, when some friends and I created Student magazine to give a voice to young people who were campaigning to stop the Vietnam War. As for the actual business aspects, such as paying the bills ... well, we had to sort that out later. We just hoped that we would sell enough copies to stay afloat and learn the business side as we went along.
With almost every venture we’ve gone into since then, we made the move because we saw a gap in the market. Our airline business is a classic case in point: Before we entered that industry, I had been traveling a lot because of Virgin Music and often found the whole experience to be annoying, if not distressing. I felt we could improve it by focusing on service, on the quality of the flight experience, and by adding some fun touches. It worked.
Over the years, my colleagues and I have developed quite a reputation for risk-taking. It’s true that we have been fearless about taking on new businesses, sectors and challenges even when the so-called experts told us that we did not know what we were doing.
But while, to all appearances, we do have an unusually high tolerance for risk, our actions always spring from another principle: Always protect the downside. I think this should be a guideline for every entrepreneur — or anyone involved in business ventures.
For example, when we made the bold move of expanding from the music industry to the airline business, I set myself one condition: In our negotiations with Boeing, I stipulated that we could hand the plane back at the end of the first 12 months if people didn’t like our business. That meant that I could see whether people liked the airline, but if it didn’t work out, it wasn’t going to bring everything else crashing down. My colleagues at Virgin Records would still have their jobs and a company to run!
We’ve made other bold moves — into mobile telecommunications, financial services and health clubs, in countries all over the world. We just make sure we always have a way out if things go wrong. You have to protect your people. It’s people who make a company exceptional or average.
So, if things don’t work out, don’t hesitate: Take that escape hatch. That way, when all’s said and done, you will be able to gather your team, discuss what happened and then embark on your next venture together.
© 2018 Richard Branson (Distributed by The New York Times Syndicate)
