Cottoning on: Steve Smith and Fran Cotton

Company: Cotton Traders
Founders: Fran Cotton and Steve Smith
Age at start: 40 and 36
Background: England rugby captains, worked in the sportswear marketing industry
Start year: 1987
Business: Clothing distributor

Former England captains Fran Cotton and Steve Smith teamed up in 1987 to provide quality rugby shirts via mail order as they noticed an increase in demand for casual sportswear that was not supported by retail companies.

Now, Cotton Traders have more than 2.2 million customers on their database and enjoy an annual turnover of over £68 million. Fran and Steve were remarkably fortunate during the founding years of their company and benefited from great support that helped them tackle situations head on.

Rugby roots
Fran and Steve met at Loughborough University where they were both studying for a joint honours Physical Education degree with Maths and History respectively. Their friendship extended into a partnership on the rugby field and the pair appeared together in numerous high profile games, playing for local clubs, the Barbarians and the British Lions.

They excelled on the international stage and in the 1970s they participated in numerous tours with the England team, Fran captaining the team in 1975 and Steve in 1981 and 1982.

While a career in rugby may not be a standard entrepreneur's background, and taught the pair nothing about running a mail-order business, Fran believes it gave himself and Steve the people skills to succeed.

They learnt, without being aware of it at the time, leadership abilities and motivation techniques that can be directly translated to the business field.

Fran and Steve were playing in the amateur era of the game and so both men also had full-time careers.

Playing days: Fran Cotton on the rugby pitch

Steve went into teaching and lectured in Physical Education at West Cheshire College. He eventually took a post with the Distributive Industry Training Board where he lectured in management and personnel issues. Fran also went into teaching until he began working as regional sales manager at the Royal Doulton Group.

After retiring from rugby, Fran and Steve were reunited, this time in the business field. In 1983 they joined Bukta Sportswear as account managers and within two years the pair had been made joint managing directors.

When French Connection bought Bukta in 1985, Fran and Steve found that their new owners had very little interest in the sports division they had purchased and the pair became frustrated with the lack of interest French Connection showed towards their new developments.

Rugby shirts down the pub
Fran and Steve believed that their bosses did not understand the changes that were happening in the clothing market. In the mid-1980s, it had become fashionable to wear tracksuits and trainers for leisure.

Fran remembers how his mates used to keep their old rugby shirts and wear them down the pub - this, he explains, was the real "embryo" of the product.

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The initial concept was to market international rugby shirts as leisure garments, which, according to Fran, had never been done before in the UK; other companies had been selling rugby shirts as part of their sports division, but this was only a very small part of the overall retail market.

They became aware that a firm called J. Crew was making a mint selling rugby shirts in the US - and were then inspired by another American firm, Boston Traders, to find the name for their venture by combining the US firm with Fran's surname.

In 1987, after two years of working for French Connection, the ex-rugby players decided to fly solo, create their own business plan and find investors to finance the operation.

They approached accountancy firm Arthur Andersen and worked with them to put together their business plan. Fran argues this was one of the best choices they made while in the preliminary stages of the business. They were able to use excellent professional advice to create a quality business plan, which they could then pose to potential investors.

The founders had envisaged they would have to spend around three or four months presenting their plan to many different financiers, and were pleasantly surprised when a deal was made in a matter of weeks.

The investor, 3i, the largest venture capitalist organisation in the country, quickly responded to their proposal and Fran and Steve snapped up the offer. Fran admits they could have "hawked around" for a slightly better deal, but the offer on the table was fair and everyone was eager to make a start.

In total, the business needed £100,000 in startup capital. 3i invested £65,000 and the partners put in the remainder.

They sourced their rugby shirts from a supplier called Matlock Textiles in Derbyshire who controlled all elements of production. Fran comments that this was the "perfect supplier to be with to start off" as all the shirts arrived ready to dispatch and the founders played no part in the manufacturing of their merchandise.

Fran and Steve had their investment and supplier in place before they officially launched Cotton Traders on 1st August, 1987.

They began the business from a very small unit next to Altringham Station, just outside Manchester. It contained some small offices and a little warehouse space. A couple of thousand feet in total.

In the opening week they promoted their new business through two advertisements. The first was printed in Rugby World, a specialist rugby publication. Fran was sure they would be inundated with orders straight away from this advertisement, so he drove to the post office to pick up the sacks of mail - the postman handed him only three envelopes.

They realised that as this publication was sold from the magazine shelf over several weeks, orders from the advertisements would take longer to come through.

However Fran and Steve experienced a very different reaction to their second advertisement, which appeared in You magazine, a supplement in the Mail on Sunday.

Fran remembers he was at the office at 8am that Sunday but was so overwhelmed with calls by 9am that he had to call Steve, who brought various friends along to help man the busy phones.

Described by Fran as an "instant touchdown" and by the end of the first week of trading they had received 1,500 orders.

Initially, Fran and Steve ran the business themselves but it soon became obvious they would need to employ staff to manage the influx of orders they were receiving. In the few months between the launch of Cotton Traders and the Christmas period, Fran and Steve recruited five or six full time staff to organise the dispatch of their product.

Cotton Traders had an impressive first year, turning over around £1.5million, which, Fran agrees, from a "standing start" is very good - Fran and Steve were both very aware that many new ventures fail in the first year.

Fran believes Cotton Traders were one of the businesses that succeeded because they began with a "bloody good idea" that no one else had thought of.

A whole new ball game
After the initial success of the rugby shirts, Fran and Steve wanted to make sure sales did not wane, "because early on it is about survival".

In the second year of the business, they looked to expand the range of products Cotton Traders were offering and began investigating silk products that were being sourced from China.

Fran and Steve decided to approach Next with an offer of a joint venture; however, when Steve arrived at their offices, he ran into their old acquaintance, and advisor, from Grattan, David Jones who had by now been made Chief Executive at NEXT.

The firm teamed up with Kaleidoscope, part of the Grattan clothing empire, in 1989 and a joint-venture catalogue was launched - selling a range of casual leisure wear, ranging from rugby shirts to chinos and denim wear.

Cotton Traders grew steadily throughout the first few years of the company, and were able to buy out 3i's stake by 1990, becoming totally independent with no outside investment.

While this is impressive, Fran admits the fast expansion of Cotton Traders meant the company struggled internally and with hindsight, he feels that they should have expanded in a more controlled way.

He notices that they were so keen to develop the business that their infrastructure could not keep pace with their marketing. Therefore, for a short while, Cotton Traders struggled to keep up with demand and deliver the level of service that it aimed for.

From 1991 the whole operation was brought in-house and they had to find bigger premises, hire more qualified staff and set up an infrastructure tailored for Cotton Traders.

Aware that every business will inevitably hit difficult patches, Fran deems perseverance an essential attribute for entrepreneurs and believes problems must be approached with determination and tackled in a sensible way.

He advises a new business to "get as much capital as possible behind you, so you can ride over any storms - because there will be some".

In 1997, NEXT plc acquired a 33% share in the company and David Jones was appointed Chairman of Cotton Traders, acting as the representative from NEXT. He has since retired from NEXT but is still employed by Cotton Traders as both Fran and Steve greatly value his input and contribution to the business.

Where are they now?
Still very much involved in the day to day running of Cotton Traders, Fran Cotton handles the mail-order operation while Steve Smith runs the company's wholesale division also appears as a commentator for TV, radio and in the press.

Cotton Traders is approaching two decades of business and is today the UK's fifteenth biggest online clothing retailer.

With £4.5million annual profit, their aim is to become a first-class, multi-channel business, with a strong catalogue, strong website and strong store presence - Cotton Traders now has over 50 stores throughout the country.

Rugby clothing only accounts for 2% of the company's sales as Cotton Traders have expanded into the retail market, becoming the UK's sixth biggest footwear retailer, with the introduction of a range of larger sizes, up to 5XL.

David Lester is a successful entrepreneur, the founder of the small business website startups.co.uk and the co-author of How They Started (Crimson Publishing, £12.95)