Losing My Virginity: How I Survived, Had Fun, and Made a Fortune Doing Business My Way

by Richard Branson

  At the South Wharf Road warehouse, we unlocked the doors and walked upstairs. But before we could reach my office there was a knock on the door. I opened it to find seven or eight men in brown macs.

  ‘Are you Richard Branson?’ they said. ‘We’re Customs and Excise and we’ve got a warrant to inspect your stock.’

  These men were rather different from the two dowdy little accountants I had been expecting. They were bulky, tough men, and very threatening. Some of my cocksureness evaporated as I showed them into the warehouse.

  ‘You’re meant to have gone to Belgium yesterday,’ one of them said. ‘You can’t get back this quickly.’

  I tried to laugh this off as I watched them begin to check all the records with their ultraviolet lamp. They grew increasingly worried when they couldn’t find any marked records. I enjoyed their confusion, trying to conceal my hope that we would get away with it. We began helping to check all the records, handing them the records from the sleeves and restocking them on the shelves.

  What I didn’t realise until it was too late was that they were simultaneously busting our shops in Oxford Street and Liverpool, and finding hundreds of marked records.

  ‘All right.’ One of the officers put down the telephone. ‘They’ve found them. You’d better come with me. I’m arresting you. Come down to Dover with us and make a statement.’

  I couldn’t believe it. I had always thought that only criminals were arrested: it hadn’t occurred to me that I had become one. I had been stealing money from Customs and Excise. It wasn’t some great game about my getting one up on the Customs and Excise office and getting off scot-free: I was guilty.

  At Dover I was charged under Section 301 of the Customs and Excise Act 1952: ‘That on 28 May 1971 at Eastern Docks, Dover, you caused to be delivered to an officer a ship’s manifest, being a document produced for the purpose of an assigned matter namely Customs, which was untrue in a material particular in that it purported to show the exportation of 10,000 gramophone records …’

  And so on. I spent that night in a cell lying on a bare, black plastic mattress with one old blanket. The first part of my Stowe headmaster’s prediction had come true: I was in prison.

  That night was one of the best things that has ever happened to me. As I lay in the cell and stared at the ceiling I felt complete claustrophobia. I have never enjoyed being accountable to anyone else or not being in control of my own destiny. I have always enjoyed breaking the rules, whether they were school rules or accepted conventions, such as that no seventeen-year-old can edit a national magazine. As a twenty-year-old I had lived life entirely on my own terms, following my own instincts. But to be in prison meant that all that freedom was taken away.

  I was locked in a cell and utterly dependent on somebody else to open the door. I vowed to myself that I would never again do anything that would cause me to be imprisoned, or indeed do any kind of business deal by which I would ever have cause to be embarrassed.

  In the many different business worlds I have inhabited since that night in prison, there have been times when I could have succumbed to some form of bribe, or could have had my way by offering one. But ever since that night in Dover prison I have never been tempted to break my vow. My parents had always drummed into me that all you have in life is your reputation: you may be very rich, but if you lose your good name you’ll never be happy. The thought will always lurk at the back of your mind that people don’t trust you. I had never really focused on what a good name truly meant before, but that night in prison made me understand.

  The next morning Mum arrived to meet me at the court. I applied for legal aid since I had no money to pay for a lawyer. The magistrate told me that if I applied for legal aid I would have to stay in prison as I obviously had no money for bail. If I wanted to be released, I would have to put up bail of £30,000. Virgin itself had no money that we could put up as security. £30,000 was the price of the Manor, but using it as security wasn’t an option since it was financed mainly by a mortgage. I had a pile of debt and no real money.

  Mum told the magistrate that she would put up Tanyards Farm, her home, as security. I was overwhelmed by the trust she showed in me. We stared at each other across the court and both started crying. The trust that my family had in me had to be repaid.

  ‘You don’t have to apologise, Ricky,’ Mum said as we took the train back up to London. ‘I know that you’ve learnt a lesson. Don’t cry over spilt milk: we’ve got to get on and deal with this head on.’

  Over the summer I confronted the problem with far less shame than I would have done if my parents had added to the burden. I kept a clear head; I was sorry; I wouldn’t do it again; and I negotiated an out-of-court settlement with the Customs and Excise office. The tax authorities in the UK are more interested in extracting money than going through expensive court cases.

  On 18 August 1971 I agreed to pay £15,000 as an immediate payment, with £45,000 to be paid in three instalments over the next three years. The total was calculated as being three times the illegal profit which Virgin had made from avoiding the purchase tax. If I paid off the sums agreed, I would avoid a criminal record. But, if I failed to pay it, I would be rearrested and tried.

  After that night in prison and the subsequent negotiations with the Customs and Excise office, I needed to work twice as hard to make Virgin a success. Nik, Tony Mellor, and my South African cousin Simon Draper and Chris Stylianou, who had both just joined Virgin, resolved to help keep me out of prison. They knew it could have been them and were grateful to me for carrying the can: we were all in it together and it made us even closer. In a desperate attempt to earn money to repay the settlement, Nik started opening Virgin Records shops across the country; Simon began to talk about a record label and Chris started exporting records for real. Incentives come in all shapes and sizes – usually ranging from a pat on the back to share options – but avoiding prison was the most persuasive incentive I’ve ever had.

  Since there was limited growth left in the mail-order business, we concentrated on expanding the record shops. The next two years were a crash course in how to manage cash. From being a completely relaxed company running on petty cash from the biscuit tin and a series of unpaid IOU notes, we became obsessively focused. We used every penny of the cash generated from the shops towards opening up another shop, which in turn was another pound towards paying off my Customs and Excise debt.

  Eventually I was able to pay everything and relieve Mum of the bail she had put up. Three years later I was also able to repay Auntie Joyce her £7,500, with £1,000 on top for interest. If I had been unable to pay off Customs and Excise, the rest of my life could have been ruined: it is unlikely, not to say impossible, that someone with a criminal record would have been allowed to set up an airline, or would have been taken seriously as a contender to run the National Lottery.

  We knew we had to sell more records, through the shops, overseas and by mail order; attract important artists like Cat Stevens or Paul McCartney to come and record at the Manor, and set up a record label. What we didn’t know was that, even as we set out to do this, our first fortune was quietly making its way up the gravelled drive to the Manor in the form of another van. This time it was not carrying illegal records but bringing a young composer and his folk-singing sister from London to act as backing musicians for a band. He was the third reserve guitarist on the musical Hair, and she was a folk singer who sang in pubs. At the back of their minds was the hope that they might be able to record some esoteric instrumental music when the rest of the band wasn’t using the studio. Their names were Mike and Sally Oldfield.

  6 ‘Simon made Virgin the hippest place to be.’

  1971–1972

  BEFORE THE POSTAL STRIKE nearly ruined us in January 1971, someone my age with a South African accent walked into my office at South Wharf Road and introduced himself as my cousin. Simon Draper had graduated from Natal University and come over to London with just £100 and the idea of staying for a while. He
was thinking of doing a postgraduate degree, perhaps following his brother, who had been a Rhodes Scholar at Oxford, but in the meantime he was looking for a job.

  Simon had sat next to my mother at a family dinner party over Christmas and she had told him to get in touch with me. After Simon had exhausted the hospitality of both sides of his family over Christmas and New Year, he moved into a flat in London and tracked down the Virgin Records shop in Oxford Street. Sandy O’Connell, the manager, told him to go over and see me at South Wharf Road. He arrived just before lunch.

  We went off to have something to eat at the Greek restaurant round the corner in Praed Street. There, over lukewarm meatballs, chips and peas, Simon explained what he wanted to do. While he had been at Natal University he had also worked on the South African Sunday Times. He told me stories of sitting up through Saturday night until the first edition was ready, and then leaving work to go to a jazz club with the first edition tucked under his arm. We swapped stories about journalism and then moved on to music.

  Simon was obsessed by music. Because I had left school so young, and had never been to university, I had missed out on those long evenings spent lying around listening to music. Even though music was playing constantly in the Student basement, I was too busy calling up advertisers and negotiating with printers to absorb it. If I heard a record, I knew whether I liked it or not, but I couldn’t compare it with some other band or recognise that it had been influenced by the Velvet Underground. It seemed to me that Simon had listened to every record released by every band. He didn’t just casually enjoy the latest Doors album: he thoroughly understood what they were doing, how they had developed from their previous album and how this album compared with a whole catalogue of music. He had hosted his own half-hour show on Natal Radio, and I soon realised that he knew more about music than anyone I’d ever met.

  We also talked about politics. Although I had been involved in various political demonstrations, such as the anti-Vietnam War march to Grosvenor Square, this was nothing compared with the brutality of South African politics. Simon was steeped in both music and politics, and saw music as one way to make a political protest. One of Simon’s fellow students at Natal University had been Steve Biko, who was then leading the all-black South African Students Organisation. Simon’s tutor, a Marxist, had been shot by government-backed vigilantes in front of his own children. The South African Government then did not tolerate any form of political dissent. Simon was not allowed to play any song with political or sexual connotations, such as those by Jimi Hendrix or Bob Dylan.

  By the time we were on our coffee I had persuaded Simon to come and work at Virgin, to be the record buyer for the Virgin Records shop and the Virgin mail-order list. There was no awkward salary negotiation since everyone at Virgin was paid the same, £20 per week.

  Tony Mellor had moved from working on Student to compiling the mail-order list. We were still trying to sell Student to another magazine company, and although it had not been published for over a year Tony kept producing dummies of the next issue with which we tried to impress potential buyers. He was therefore happy to hand the record buying to Simon and revert to the more political question of Student’s future. Tony simply gave Simon the one golden, unbreakable rule, ‘Virgin doesn’t ever, ever stock Andy Williams!’, and handed over the first joint of the morning.

  ‘You don’t need to worry,’ Simon said. ‘I’d be the last person to break that one.’

  And from then on Simon was on his own. I rather left him to it for the first few months. I was falling in love with Kristen and trying to prevent her going back to finish her architectural course in America. I offered her the job of further renovating the Manor:

  ‘Come on!’ I said. ‘You don’t have to study for six years to qualify as an architect. Just start doing it!’

  After not too much persuading she eventually agreed with me and set to work. She was a natural, with perfect taste. With her long blonde hair and fine, almost elfin face, Kristen soon became a familiar figure at all the auction rooms around London as she bid for large remarkable pieces of furniture for the Manor.

  While Nik managed the costs of both the mail-order business and the Virgin Records shops, Simon began to define the mail-order list as well as the Virgin Records shops themselves by choosing which records to stock. Simon’s taste in music quickly became the single most critical element of the Virgin ethos. A record shop is not just a record shop: it is an arbiter of taste. I had no idea what music to promote, but Simon was full of wonderful plans to bring in unknown foreign albums unavailable elsewhere. There was a thin dividing line between what was ‘hip’ and what wasn’t, and Simon made Virgin the ‘hippest’ place to be. He started importing records directly from America, flying them in to beat the competition. We only ever dealt in albums because singles were mainly either crass or were loss leaders to promote albums. In the 1970s serious bands such as Pink Floyd, Yes or Genesis rarely released singles. An album was seen as a combination of political statement, art, and a way of life. The serious bands didn’t produce dance music: theirs was music to savour while lying down. There was a good deal of discussion about different recordings of the same songs, something which became especially interesting when the American albums arrived with different covers from the British versions, sometimes even different versions of the songs. These days CDs have been standardised to be mass marketed around the world.

  As well as imports, notably from Germany, France and America, and a furtive trade in live bootleg recordings, we also made a lot of money by dealing in deletions – recordings which had gone out of stock and were being sold off by the record company. Since we operated a mail-order business, we had hundreds of letters every day asking for special recordings. We thus knew which of these deletions actually had some residual demand, and it was quite simple for us to pick up the popular ones cheaply and sell them on.

  Most people assume that a record shop’s success lies in selling records. In fact, Virgin’s success both in mail order and the record shops lay in Simon’s skill at buying records. He was able to pick out bands that did not sell through the mainstream shops and sell large numbers of them through Virgin. He knew so much about music that he knew which bands would sell even before they were a proven success: he was already using the antennae which enabled us to set up the record label two years later. Without Simon, such a move would have been a step in the dark. Our other genius was John Varnom, who did all the promotion for the records and wrote the advertising slogans for the shops. Virgin began to gain a broader reputation.

  With the best music playing in the shops and the warehouse all day, both the staff and the customers lying around smoking dope and talking about how to get hold of the highly prized American recording of Aerosol Grey Machine by Van Der Graaf Generator, and everyone enjoying plenty of sex, there was no better place for any self-respecting 21-year-old to be.

  But beneath that there was a business to run. At the Manor, building work dragged on. I dreaded every call from Tom Newman, who was fitting all the equipment: he always asked for more money to buy some other piece of recording equipment. At the same time I had the customs fine, the mortgage and the thought of prison hanging over me.

  The mail-order business was doing well but mainly seemed to attract the serious music buyers who were looking for quite rare records. It seemed difficult to expand it further. We realised that, if we were going to make money, it would have to come from opening up more Virgin Records shops.

  Nik and I began a programme of serious expansion. Towards the end of 1971 and throughout 1972 we aimed to open a shop every month. By Christmas 1972 we had fourteen record shops: several in London and one in every big city across the country. As well as organising all the records that the shops would stock, advertising the shops, choosing and training the staff to run them, and setting up the accounting systems to keep control of the money, we found that the timing of shop openings was crucial. After negotiating the lease until we were sure that the l
andlord would go no lower, we would push for a rent-free period for the first three months. This was the single most crucial element. We would not agree to open the shop unless this was in place, and as a result we walked away from a great many opportunities. However, when we opened we knew that the record sales in the first three months would help pay for the rent on the previous shop that we had opened. The sales also demonstrated, without committing to a huge overhead, whether the site we had chosen attracted enough people off the streets to make the shop viable.

  As we opened these shops we learnt all sorts of lessons that stood us in good stead for the future. We always looked for the cheaper end of the high street, where we might attract shoppers to come a few extra yards off the beaten track without us having to pay an exorbitant rent. We also chose areas where the teenagers hung out, such as near the Clock Tower in Brighton or Bold Street in Liverpool. We always asked the local teenagers where the best place for a record shop would be. There are many invisible lines in a town which people will not cross: a street can change character in the space of twenty yards.

  The other unique thing about record retailing is the speed with which records move. When a big release is out, like the latest David Bowie record, you can measure its sales in hours. You therefore need to keep right on top of the shop to find out what’s selling that day. You can then use that information to rearrange the record displays in the other shops. If you run out of the key record that’s selling that day, then, of course, the buyer will head off to the next shop to pick it up. Once you’ve lost that chance to sell a copy of Hunky Dory, you never get it back again. There are no repeat sales of the same record. Although you will always stock Hunky Dory, up to 70 per cent of your sales of it will happen in the first two weeks of its release.