Meet the Dragons’ Den star who has scaled the UK’s largest vitamin company
Tej Lalvani is the CEO of Vitabiotics – the UK’s largest vitamin company – and an experienced investor and businessman. BL met with the star of Dragons’ Den to talk to him about his entrepreneurial journey, benefits of growing rather than selling a business, and what he looks for when investing.
Can you tell us about your background?
I was born in India, but I spent my early years in the UK, went back to India from the age of eight to sixteen and then came back to the UK and completed my A Levels here. I eventually joined the family business that my father had created, which is a nutraceutical firm called Vitabiotics, after my graduation from university.
Where does your interest in business come from?
When I was young, I created a small business buying and selling computer games, and I have always had an interest in business, which came from my family and background. I was also always interested in medicine at a young age, and I wanted to be a scientist or a doctor.
I would create different sets of formulations and mix medicines together to try and create a cure for mosquito bites.
My fascination was always there for science, as well as business. Many people in my family and extended family were all entrepreneurs too, so I was fortunate enough to be exposed to that environment from a young age.
The mission about helping people improve their lives resonated with me.
When you joined Vitabiotics, was it as part of a succession plan?
In Indian families there is sometimes the expectation that children will come into the family business, so there was not a plan laid out and it was more of something that I fell into, but it is also something that I wanted to do.
Did you start at the bottom of the business?
When I joined Vitabiotics, it was a small business and yes, I started right at the bottom. I helped in nearly every area of the business, including working in the warehouse; and because I was helping the business wherever I could, it meant I could see what needed improving across the different departments.
Following this, I then moved into focusing on international markets and travelling to grow and build the business. I also became very interested in marketing and branding.
Marketing must have been crucial for this type of business?
Yes, it was, and you are working with different types of consumers and different target markets, from pregnant women to men and to children. And it was a great challenge to be able to figure out how do you tap into different audiences and markets, especially with limited resources. We always ask ourselves – ‘how do you stand out amongst the competition?’
You need to remember though, that the concept of vitamins was very new during this period in the 1970s. It really was a whole new ballgame convincing people what it was for, and how it worked versus the traditional methods.
The business has clearly grown to be very large, and I want to talk about what gives you the mindset to want to continue to create an empire and not to exit?
It was my father’s passion, and I do not think it is something that he ever thought he would want to exit from or sell. It was really about the mission of helping people and trying to find inventions and new products that made a positive difference. The focus has always been about thinking how you grow as a business too; and not only that but how can you do this organically.
Has this mindset impacted how you have funded the business?
Yes, it has always been about not taking too much debt and trying to utilise what you have and get the maximum exposure for every pound you spend. The big question has always been – ‘how do you be resourceful and not always rely on other people’s money’?
Why do you feel that many UK companies exit quickly compared to US and Asian businesses?
If you are running a family business and you would like it to be a legacy business and have your children involved, you will maintain that legacy and not sell the business, if you think the next generation would be capable of taking it forward.
When you exit the business though, you do get the advantage of having a capital pay out for the time that you have worked. When you are building a business, you are putting money in and not taking it out, especially in the initial stages.
Following this hard work, if your business is very profitable and cashflow positive, you can arrange dividends or salary increases to be able to get some money, but an exit allows people a significant capital pay out and you can see the appeal.
I am not sure why in the UK, there is more a focus on exit and not legacy. Perhaps people want to move on to the next idea because they feel it has become stale. Or maybe they do not have confidence in scaling the business and it requires a different skillset. American culture is very different – this is something that is ingrained in people there.
I would like to talk about your role as an investor now – what do you look for when investing?
I believe that transparency and integrity are very important. I need to understand that what they are telling me is the truth. And if there is a problem, they will let me know about it. I also believe that I need to get a sense of how resourceful are they going to be. Sometimes getting an investment may not be a good thing because then you can get complacent.
I really want to understand how resourceful has that entrepreneur been on the journey so far. Have they wasted money? And, how much of the business that they really understand themselves?
Furthermore, it is a simple thing, but what are they going to be like to work with? Are they going to take advice?
Of course, the other important factors are is it a viable business proposition? Is the product nice? Does it have a potential competitor? All those are separate things. But in terms of entrepreneurs, the ones I mentioned are the key ones.
You just mentioned again about being resourceful – with so much capital available is it too easy to raise money and do entrepreneurs need to focus more on realising product market fit?
I think there is advantages of doing it that way and being resourceful. Many businesses have become successful through raising significant amounts of money. And that seems to be the common route today. But sometimes what happens is you have a business, you set it up, you get an investment, and then you keep raising and raising money. And on paper, the valuation increases with each raise, but ultimately, a lot of the time it ends up just folding, and then you have £50m that has been wasted.
Some businesses will need to raise money though, and there is no problem with that. I am always a believer in raising enough capital to figure out whether your business model works and whether it is generating money.
I would like to move onto a new topic area – do you think that the e-commerce boom we have seen will be maintained?
The digital age has been fast forwarded by ten years and it is taking away friction for many people in terms of going online, whether it is zoom, buying groceries, or buying clothes. The business world has changed and retail especially. Businesses have realised that they have had to adapt to having a different route to market.
So, I feel that e-commerce activity is unlikely to reduce from where it is now and it is more likely to go from strength-to-strength, as more people are connected and more people are online now. This also means that there are more opportunities for businesses to come up with ideas and to target new customers.
In your business you must be seeing the cost of online marketing going up?
Yes, the cost of marketing and advertising online is going to go up because a lot more people are going to be using it to target customers, and also getting the right talent and team on board is going to be more difficult and challenging because everyone wants digital marketing professionals and programmers.
Moving on to another point – do you think we should be returning to our offices?
Every business is different but for me, I like having people in the office and communicating with them and having people around. I think we will also see people coming back to the office more and more. Video meetings will still take place, and this can be convenient sometimes and cut travelling time, but it is still important to have face-to-face meetings, especially with buyers and customers.
On the economy generally, we have had a tough period and many businesses have deferred VAT, Payroll and acquired loans. Do you envisage tough times ahead when all this needs to be paid back?
A huge amount of loan debt has been acquired by business and I guess it depends if people can afford it because if inflation and interest rates stay low then of course, businesses can manage to grow.
I do feel that some of the businesses that took on loans did not need to, and this will put pressure on them. It is very hard to predict and it’s of course, crystal ball gazing, but I feel that generally, despite the debt and difficulties, that the economy will be OK in the immediate future.
Do you expect to see a boom in people starting their own businesses?
I think there is no better time in history to set up a business than there is today because there’s so much less friction in how you run a business. From registering your company online, to setting up your store online, accepting payments and shipping – it’s easier to get started than in years previous.
You do not have to spend thousands of pounds on marketing either because you can spend low amounts on online marketing, and you can test it to see if there is initial demand for your product or service and then scale accordingly. So, I think that gives the confidence and the ability for people to test an idea, if it works or not, and thereby allowing them to work with themselves and be entrepreneurs more than ever before.
Finally, Tej, where do you see the world of Vitamins going? Will we see more personalisation?
Yes, I think the market will go more towards personalisation, where you send in a DNA or blood sample, and you have vitamins that are tailored to you in the form of 3D printed gummies or a custom tablet.
This is still in the early stages, and it is still very expensive, so it is a smaller percentage of the market that are willing to pay for this now. I think bespoke tailored nutrition is going to happen.
We are also becoming more conscious as consumers and knowing about what health products are available and how they can help us.