42 Degrees - Business from a different angle

The really intriguing question about James Caan is not about how he made his considerable fortune. Nor is it about how he manages to be so decent every week on Dragons' Den when the other Dragons seem to enjoy pulling the wings off flies and humiliating budding entrepreneurs for sport.

No, it has to be – why does a businessman of Asian parentage have the same name as a Jewish actor best known for playing an Italian gangster? It turns out coincidence doesn't enter into it. "It has everything to do with the actor," laughs Caan. "My family name is Khan but there is no 'kh' in English, so I decided to spell it how it sounds."

This answer tells you much about Caan and the way he works. It shows, for one thing, his desire to fit in. And it illustrates his understanding of the role of image. In fairness, though, you may have already spotted that from his appearances on Dragons' Den, where his suits are always razor sharp and his white shirts immaculate.

But talking to Caan it soon becomes clear that, for him, image isn't something you slap on at the last minute to fool people. It is an outer expression of inner truth. It is what one magazine described as "the fundamental humanity that lies beneath his smooth exterior." No wonder his friend, Harrods boss Mohammed Al Fayed, is said to refer to him as "the people's dragon."

Signs of his decency are everywhere. He is by far the most courteous of the dragons. "Cruelty is completely unnecessary in business and in life," he says. "If you come to me with an idea, I am not God, so the least I can do is be polite."

He doesn't believe that for him to win in business, others have to fail. "To really succeed in the long term you need to make sure those around you win too," he says. And he is a great believer in corporate social responsibility – the power of business to do good in the world.

Caan says that he is particularly inspired by the example of Bill Gates, who has sunk billions of dollars into good deeds. "The point is that he's not just writing a cheque, he is using the expertise he has acquired in running a huge business and applying it to solving important social problems."

But before you become a charitable benefactor, you have to make the dosh to give away. And that seems to be Caan's forte. He started executive search firm Alexander Mann in 1985, built it up into a business with a turnover of £130m and branches in 50 countries, before selling it on in 2002. In parallel, he started executive headhunter Humana in 1993 and sold it six years later. The combined proceeds probably netted him close on £100m.

Having missed out on university, in 2003 Caan rewarded himself with a year on the Advanced Management Programme at Harvard Business School. The experience seems to have turbo-charged his already meteoric career. Since picking up his MBA he has become a 'dragon' in real-life as CEO of private equity firm Hamilton Bradshaw. He has invested substantially in office provider Avanta, bought and then sold on the Benjys sandwich chain and acquired recruitment specialist Eden Brown. And that's before the four major investments he has made as a result of being a dragon.

But, for all his ferocious deal-making, Caan's outlook is a million miles from the macho, dog-eat-dog attitude that many (including, apparently, the producers of Dragons' Den) assume is the key to success in business.

So, having marvelled at his name, you wonder, how does he do it? Thousands of people go into business on their own every year. Most of them stay small. Why for instance did Humana International grow to 147 branches world wide when many other similar companies limp along for decades with just one office?

Caan is very clear about the reasons for his success. First there was an element of image. He could have called the company 'James Caan' or even 'James Khan', but he invented the name 'Alexander Mann' because it sounded suitably 'established'.

But, far more important, he says, was the ability to execute his vision in detail. "I had worked in the recruitment industry for a couple of years. At that time in the mid-1980s there were three tiers," he explains. "High street walk-ins were for junior clerical staff, executive recruitment firms such as Michael Page were for middle management, and at the top were headhunters doing bespoke searches for senior executives."

Caan always encourages people to do something different, to swim against the flow. That's exactly what he did with Alexander Mann. "My strategy or vision for the business was to apply top-end techniques – personal contacts and individual approaches – to the mid market. The mid-market approach used ads costing thousands whereas the top end just used phone-calls to individuals, which cost next to nothing."

Even at the time it seemed like a clear-cut opportunity, although he wouldn't know just how good an opportunity it was for a couple of years. "The trouble is that most people just don't have that clarity of vision to start with," says Caan.

Vision may be necessary for success, but it is not sufficient. In fact, says Caan, the idea is the simple bit. "The trouble is that the idea only counts for five per cent of success at most. We can all say, 'I want to be a global business'. The real test is whether you know what you need to do to make it happen and whether you can do it. Do you understand exactly what needs to be done in terms of employing people, raising finance, manufacturing, selling, managing cash flow and so on?"

One of the commonest problems he encounters, especially with people new to business, is that they may have a good idea or product but often don't understand the practical implications of going into business. Cash flow in the early days, for instance, is an issue that confronts nearly all enterprises – even the most successful – and sometimes in the most unexpected ways.

"Bill Gates told me that the biggest obstacle he had when building Microsoft early on was that he didn't have a financial track record," says Caan. "As a result, he couldn't borrow the money to finance the cars that all salesmen needed and demanded. Consequently, he found it very hard to recruit a sales force and grow."

But the problems change as a business grows and you have to be able to move with them. "The journey of success is different as your business expands. The skills for £0-10m turnover are of one order. The skills needed for a business of £10-50m are of another order, while the entrepreneurial skills needed to handle a business of £50-100m turnover are different again."

The truth is, of course, that by the time a business gets to any size at all, the founder has to depend on others for success. And that, says Caan, has always been his greatest obstacle to growth. "My biggest challenge has tended to be in attracting the best talent to execute my plans," he says. "Many businesspeople don't understand the logic of paying employees more than themselves. The best people will create genuine equity in your company, so they are worth their weight in gold. But finding premiership players when you are in division one is always hard."

At 47, Caan is still a relatively young man and sees no reason why he should slow up. As he says, "I love what I do. That's why I work 18 hours a day and seven days a week. If ever I get tired, I just fly down to Cannes and spend a few days chilling on my boat."

It's true, the world probably does seem a kinder, gentler place from the vantage point of your own yacht in the South of France. But then who would begrudge James Caan the pleasure? You can't help feeling that he's worth it.