Paul Lindley, founder of Ella's Kitchen, emphasises the importance of businesses making decisions with values at their core
Ahead of his discussion at the CA Summit 2022, entrepreneur and children’s campaigner Paul Lindley talks to Lysanne Currie about lessons learnt from the last financial crisis, the power of purpose and how we need to transform the economy for future generations
Paul Lindley remembers the last financial crisis well. He launched his premium children’s food business, the award-winning Ella’s Kitchen, not long before the crash. He was the sole shareholder but struggled to get long-term credit.
“Cashflow was tight,” he says. “I funded the business by remortgaging our house – luckily, mortgage rates didn’t cripple us at that point. I was lucky that I didn’t have investors demanding short-term dividends or results. But I did have to make all sorts of adjustments around cashflow along the way. We were launching a premium product – but then again, it was baby food, which is the last thing people want to sacrifice when they’re making decisions with tight budgets.
“We were very different to other baby food products. Everything else was in a jar [Ella’s Kitchen products come in recyclable pouches] and we launched in 2006, with a price premium of about 50% on other baby foods. The challenge was growing in an environment where the economy was shrinking. Fast growth for a start-up brings its own cashflow challenges.
“Companies that fail because of cashflow problems are either the bad ones that don’t have any cash in or the really good ones that are growing so fast they need the cash to fuel that growth. That was the thing I had to manage – but I was a chartered accountant by training, so I had a good handle on the importance of cash over P&L and I made sure I managed that.”
Lindley made personal sacrifices – he didn’t take a salary for two years, paring down his lifestyle and “living off savings and my wife’s income”. The former Nickelodeon Deputy Managing Director used his media nous on a barter deal with his previous employer, taking airtime on their channels, in slots they would have struggled to sell, in return for a share of any revenue that came direct from advertising. “I had to think creatively around how I could grow on minimal cash,” he says. “I didn’t want to dilute my marketing and the banks wouldn’t lend.”
It paid off – by the time Lindley sold the business to the Nasdaq-listed Hain Celestial Group in 2012, Ella’s Kitchen had become the biggest baby food brand in the UK, with presence in 35 territories, a 28% market share and global turnover of more than £85m.
Adaptability, creativity and agility are key ingredients for succeeding, Lindley says. But if there’s one key message for surviving tough times that he offers to the companies he advises, it is to go back to basics – to revisit the company’s values and purpose.
As an investor, he puts his money into businesses “trying to improve the lives of people of the planet” – Smash, LovedBy, Climate Smart Foods, Toast Ale and Brompton Bikes. “There isn’t a one-size-fits-all company,” he says. “It’s up to each individual company to do the evaluation themselves. It’s important to see yourself in a wider context to start with: what is your company? What is your company for? And that comes back to the vision of the company, its values, its purpose. In my view, they’re sacrosanct. So how you cut costs – if that’s what you have to do – flows back to why you are in the market in the first place, and what your values are.
“If the reason you set up a company was to empower people, then you’ll lose your values if the first thing you seek to cut is salaries, diversity or recruitment. Start with your values and vision, why the company exists, and then look at your company in the context of everything around it. There are some things you will be able to control and some you won’t. And act as a team – take all perspectives on board and stack your management team and your advisers with diversity – in a very broad sense – of skills and viewpoints.”
Once decisions have been made with values at the core, Lindley emphasises the importance of clear communications, internally and externally, and wise investment. “Investment in data was big for a small company like ours, but that data was invaluable when making future decisions,” he says. “I also learnt the importance of an HR department: getting someone very senior in, very early, to manage people was key.
“My heart and my whole belief around, not just business, but life, is people first. We need to get more humanity back to business. Decisions and actions to be taken around people and the impact on people. Success in business isn’t because it had a great business plan. It’s because it had a great business plan and great people to implement that business plan.”
From an early age, Lindley has felt he is on a mission to empower people, and the common thread that runs through all his interests is to “make our world a better place for our children to one day inherit”. It’s a conviction inspired in part by his family history. In 1862 his paternal great-great-grandparents signed their marriage certificate with an X, as they were illiterate. “My maternal grandparents emigrated to England from the Irish Free State in 1931 with only coins in their pockets and my father left school at 16 because the family needed the income,” he adds.
“Each generation has striven to fulfil that essential promise that we make to our children,” he says. “To give them a stronger foundation to live healthy, safe and fulfilling lives with more hope and opportunity than we had ourselves.”
He feels passionately that the current economic system simply isn’t working. He is currently writing his second book, A Child Powered Future, which argues that the best possible future for this country depends on giving every child the opportunity to live their life to its full potential. “In many ways, the way that our economic system operates – driving short-term business decisions – plays exactly against the thesis of my book,” he says.
Lindley believes strongly that capitalism needs to change. “We have to change the system – or at least aspects of it,” he says. “The system is loaded. There are a whole load of decisions [being made] that go against our societal interests. Business is just made up of people, who are voters and everything else. And those people have wider interests in society than just the short-term success of the business that they happen to work for.
“We need to evolve the economic system, we need to reset it. It should be designed around the interdependence of a healthy planet, healthy people and healthy profits. You can’t divorce one of those from the others.”
Business also has to address its expectations of growth, he insists: “We live on a finite planet. We can’t continue to expect 5% growth every year. Because, within 10 years, we’re almost doubling the amount of resources that we’re using. And assuming there’s no significant change in productivity, we’ll run out at some point.
“The interdependence of healthy profits, healthy people and healthy planet is not baked into the rules around how businesses can operate and be rewarded. Likewise, the relationship between the private sector and government and civic society is not harmonious. It’s not designed to evolve, to maximise the benefit to society of creating wealth. We’ve never had more inequality.”
Lindley is an active changemaker – every one of his portfolio roles is aimed at changing the system. Naturally, he is a strong supporter of B Corp (Ella’s Kitchen is accredited), saying: “B Corporations have started to change their own internal constitution so those companies are accountable to stakeholders. They measure success in different ways.”
Lindley also invests his time in causes he believes in. He is Chair and founder of the UK arm of Robert F Kennedy Human Rights, Chancellor of the University of Reading, a trustee of Sesame Workshop and has been a counsellor at One Young World. And in 2019 he founded Just Imagine If..., a global competition for social entrepreneurs with business ideas to address the challenges the world faces.
Lindley believes that business and government need to work more closely to bring about this change. He has recently joined the Labour party and is working with the Shadow Business Secretary, Jonathan Reynolds.
“Government is really important,” he says. “Since I sold Ella’s Kitchen, I’ve spent the last nine years believing business is the solution to so many things. It’s the place where innovation happens. Thriving businesses are needed, but business needs that interdependence with government and civic society to make sure that it’s providing goods and services that help that society. And in partnership with the government that can set the rules that provide stability and regulate the economy [to prevent] things that ultimately are bad for society.
“We need a plan for a stable future, so that businesses feel confident we’re going to be able to attract talent and secure the capital, and they’re going to have stable inflation and interest rates so they can make long-term investment decisions. Government plays a big role in that. We have got to evolve capitalism together – it’s not a nice-to-have, it’s essential.”
Paul Lindley will expand on his vision for the future at CA Summit 2022. Register now for your free place.