John Smedley proves that success is not only about growth — here’s why

What comes to mind when you think of a small family business? Old-fashioned, fusty, conservative, unambitious, doomed to fail, ripe for takeover? Or do you think of their resilience, their heritage, their loyalty and their commitment to community? Do you secretly think, in fact, as we enter recession, that there might be something in this unflashy approach to business?

For Ian Maclean, Managing Director of British knitwear brand John Smedley, it is the business’s family make-up that has ensured it has survived wars, recessions and pandemics to become the world’s oldest factory, manufacturing on the same Derbyshire site since 1784.

“We still think quite small, we still think quite selectively, and we’re very conservative,” says Maclean. “I started my career working for a venture capital company. They buy out businesses and they leverage businesses, and they accelerate the growth of businesses and then try and sell them on. Family business is almost the antithesis of that. We’re completely anti-risk because our family values are that we want to pass the business on to the next generation in hopefully a healthier state than when we got it.”

In an industry dominated by huge, rich companies such as Kering, LVMH and Richemont, it’s an unusual attitude. The ambition of many a young fashion company is to be backed or bought outright by one of the big international conglomerates, with star designers becoming creative directors that move from one fashion house to the next with all the fanfare of top footballers.

And while other British fashion stalwarts have been taken over by the likes of Singaporean Christina Ong (Mulberry) and Hong Kong’s Fang family (Pringle of Scotland), with the hope of leveraging British-made prestige to “do a Burberry”, John Smedley has shown a quiet approach to growth that matches the understated knitwear it produces.

“We’re definitely not interested in getting rich quick and buying out the other shareholders and selling John Smedley to some massive luxury corporation. In theory you might consider it an option, but if you look back in history, all my predecessors — my father, my grandfather, my great-grandfather chairman — what a great job they did to hand me this. I want to make them proud, and hopefully hand it on to the future. And that’s kind of what’s driving me really.”

For many family businesses, that personal connection is a double-edged sword. While blood and pride count for a lot, there’s no shortage of companies that have been ruined by entitled or unsuitable heirs, or have fallen foul of family feuds and avaricious hangers-on. It often comes down to a business-trained outsider to rescue or develop such firms. It’s no wonder so few family clothing manufacturers are still at the top of their game after 236 years.

For Maclean, though, the example set by his great-great grandfather, JB Marsden Smedley, who ran the company “like a dictator” for 70 years, means that the whole family — all 55 or so shareholders — has the same approach to the business’s resilience, leaving it in an unusually strong position during the current downturn.

“He died in 1960, and his grandchildren form the largest core group of shareholders, and their attitude is quietly shaped by remembering how he ran the business, and how the intention was to keep the business going for a long time. Therefore they won’t put extraordinary demands on our finances by wanting to take a lot out of the business. So in a sense, I’m lucky, because I can build up a reserve of cash for problems like we’re experiencing today, and not necessarily feel under pressure to pay it all out to the shareholders in the good times. That helps me a lot.”

Of course, it takes more than good financial governance to ensure survival for a luxury clothing brand that’s still made in Britain, while other British brands look eastwards for lower-cost manufacturing and higher margins. Wealth from the textile industry paid for much of Britain’s infrastructure, but the last few decades have seen it shrink drastically, with labour costs that mean only the luxury end can survive.

Yet it is the “made in Britain” cachet that defines John Smedley, ensuring the factory’s 350 employees still have jobs despite the challenges. And it is clear that, despite the commitment to family values, there is a strong desire to modernise and retool not just the factories but the whole business model.

“We charge quite a high price for our product and we have a very loyal customer base who like quality and British made products,” says Maclean. “But we have a very particular challenge, which is that there’s a lot of craft in making our garments. And there is not a lot of opportunity to automate. I’ve got buildings that were built in 1784, uninsulated. I’ve got machinery which dates back to the 1980s. So how do I, with my escalating costs and my big challenges, capture more of that retail margin, without necessarily paying the costs of retail distribution?”

Luckily for John Smedley, back in 2000, it employed an IT “geek” called John Irving who, on his own initiative, registered johnsmedley.com and started trading from it long before e-commerce was a twinkle in the fashion industry’s eye.

“Today, that is one of those pieces of luck that helps us to survive. We do nearly a quarter of our turnover today selling jumpers directly through our website to the consumer. And why is that important? Partly because the margin’s so valuable, but also because in the same 20-year period, many department stores have completely switched their knitwear buying from English mills like us to buying from overseas mills at a 10th of the price and a 10-times mark- up instead of a three-times mark-up. So, based on an element of luck and judgement, we’re still here today.”

Such humility — ascribing success to luck as well as judgement — has certainly helped this company stay the course. But let’s also add careful management of the family dynamics, long term thinking — in generations not in months — and an understanding of where the true value of heritage lies. If these weren’t the first things you thought of when you started reading about this family business, they should certainly be the learnings you take away with you today.

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