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A simple way to turn a good profit on the stock exchange is to back the companies of serial entrepreneurs – those successful, multi-talented executives who have fingers in many pies and whose commercial track records are rich with success. Just be sure to avoid the media-savvy, headline-hugging 'blue chip' prima donnas. Christopher Spink reports

Serial entrepreneurs, those rare British beasts that have built up not just one but two, three or more successful businesses, fall into two categories. Those that investors should avoid and those that they should embrace.

The ones to avoid are easy to spot. They are high-profile, very famous and despite their reputations as business men and women with the midas touch, they have delivered very little to investors on the stock market.

The most celebrated member is Virgin creator Richard Branson. He has had a tempestuous relationships with the City since he first floated his Virgin empire in the 80s. Following a troublesome time he bought back, at a discount, the stake in his business he had earlier sold to the investment public.

Sir Richard's only other encounter with the public market (up to now) has been on AIM, via Victory Corporation, which operates Virgin's cosmetics and clothing arms. This perennially loss-making concern has undergone several changes since joining the market in late 1996. And, although the business has recently become profitable, after paying back loans to Virgin, the shares trade at a tenth of their flotation price.

Both these sobering experiences will no-doubt be bearing on the minds of those taking more than a passing interest in Branson's latest project, the flotation of Virgin Mobile. Interestingly, this venture has already hit pricing turbulence even before it takes it takes its first public flight.

Another famous flying man, Stelios Haji-Ioannou, lasted only two years at the head of discount airline Easyjet, after floating the company in 2000. Shares in the company, at 149p, now trade at half the price at which they were floated less than four years ago. Haji-Ioannou, who retains 41 per cent of the company, has admitted he is considering taking the group private again.

An intriguing high-profile member of the famous entpreneur club is Anita Roddick, the founder of the cosmetics chain Bodyshop. Those who bought into this seemingly successful retailer ten years ago have seen the shares drop significantly from their 247p entry price. At the start of 2003, they had tumbled to an all-time low of 56p, and even after a revival trade at just 150p now.

The reason these acclaimed entrepreneurs (and others like them) may not be the best people to back is simple. All three, not unreasonably, have built their business around their own personality, values and unique skills, but much of the value has been created before these businesses join the market, leaving little for outside investors to tap into.

Such entrepreneurs are often viewing the stock market not just as a means of raising funds for future growth but also as a way of selling some of their business.

Only a few of the elite club have delivered for investors – examples being Sir Martin Sorrell at advertising giant WPP and Sir Ken Morrison of the eponymous supermarket chain, both of whom now preside over FTSE 100 operations that they started from scratch.

Aiming low

In the serial entpreneur hall of fame, failure isn't restricted to the uber-famous. For instance, Roger Saul floated leather goods retailer Mulberry on AIM in 1996 only to see its shares shed two thirds of their value after a profit warning within a year. Saul was eventually forced to cede control of the group at that low level two years ago.

Another example is Peter Simon, who controversially moved his women's clothing chain Monsoon to AIM last year. It has yet to see its shares regain the 200p level at which they floated six years ago.

However, some lower profile serial entpreneurs (and their investment followers) have found AIM a happier place to build their businesses.

Bob Holt – outsourcing specialist

Bob Holt of support services group Mears could justifiably top the premier league of AIM entrepreneurs. Mears, which specialises in providing maintenance services to social housing owners and Government departments, has seen its shares jump 16-fold since joining the market in October 1996. This happened on the back of a 43 per cent compound annual growth rate in earnings per share. Holt retains a nine per cent stake in the company.

Recently Holt has prospered from another venture he chairs: outsourcing payroll services group Supporta. Earlier this year the company acquired larger payroll entity Parys Snowdon and is now in talks about purchasing two other businesses to complement its existing operations. Supporta's shares stood 13p above their 38p starting price of two years ago just before they were suspended ahead of these talks. Holt also chairs risk consultant Wyatt, which has yet to move into profit.

Larry Lipman – property guru

Property dealmaker Larry Lipman has seen his spin-offs perform better. Lipman's primary vehicle is fully listed Safeland, which nowadays is essentially a collection of commercial and residential property assets. However, Lipman has created three companies providing ancillary services in this field.

Hercules Property Services, which manages property and offers insurance services amongst other things to property owners, has given shareholders a roller-coaster ride, but the shares, now listed on the Full List, are almost five times above their 46p AIM starting price. The group is still exhibiting strong growth, with recent interims showing pre-tax profits up 81 per cent to £1.3 million on turnover ahead two per cent to £18.9 million.

Lipman also set up, in 1998, self-storage concern Safestore, convincing currency speculator George Soros to back the venture. The group was taken off AIM by private equity backer Bridgepoint last year in a £40 million deal. Lipman is planning to create a European self-storage business via AIM-listed cash shell Tecc-IS.

Perhaps his most interesting AIM venture is Bizspace, a provider of flexible short-lease office space to SMEs. Safeland retains a 25 per cent interest in this spin-out, which is growing quickly. In the year to February pre-tax profits leapt 44 per cent to £1.9 million. The shares have more than doubled over the past year to 38p, which is still below net assets of 46p. The discount may be explained by the group's decision to raise £7 million at 35p a share to allow further expansion.

The Kaye family – rich restaurant pickings

As mentioned, Lipman's fortunes derive from his family-dominated vehicle Safeland. In a similar vein the endeavours of the Kaye family are intimately connected with each other. Philip Kaye was famous for setting up the Golden Egg and Garfunkel's restaurant chains in the 1960s and 1970s. The latter was subsumed within the fully-listed Restaurant Group.

His sons, Adam and Sam, replicated his success by building pizza pasta outfit ASK Central into a substantial chain of 172 restaurants turning over nearly £100 million annually. The group was recently taken over by private equity group TDR Capital for £213 million, more than 37 times the company's starting value on AIM.

Those keen to back the Kayes still have the chance to do so through Prezzo, in which Philip has a majority stake. Another son, Jonathan, heads up this outfit, which now has 34 restaurants and has recently reported a maiden annual profit. Initially after flotation on AIM two years ago, the shares dived but have since recovered and now sit comfortably above their starting price.

Other fertile food ground

Food is a fertile area for entrepreneurs, not only in its presentation but also in its supply. Pieter Totte, who has spent much of his career as a corporate finance adviser to various food companies, now plays an increasingly active role as an executive on several AIM companies. His previous successes include confectioner Glisten and cake maker Finsbury Food.

Now he owns a substantial stake in The Real Good Food Company, which has raised £11 million over the past year. The company has made several acquisitions lately, splashing out £16.6 million in April for Five Star Fish. Totte also has interests in ingredient supplier Napier Brown Foods, which is in the process of paying £17.5 million for James Budgett Sugars. This would be the group's fourth acquisition within a year.

The Rankin family – regional success

The North-East-based Rankin family owns three quarters of the shares in galvanising concern Metnor, which joined AIM five years ago. Since then the group has bought an electrical and mechanical contractor, allowing turnover to rise to £56.4 million and pre-tax profits to hit £5.1 million. The shares have more than doubled to 212p.

Allan Rankin, son of Stephen who set up Metnor, has another role as chief executive of fast-expanding nightclubs venture Ultimate Leisure. The group's strategy of buying freehold sites has ensured its quick growth is underpinned by strong asset backing.

Again the shares have doubled to 239p since joining the market five years ago after recording a 20.7 per cent annual compound growth rate in earnings over that period. A recent trading statement said sales for the year to June would be 35 per cent above last year's £26.5 million level (see page 13).

Fellow Geordie Graham Wilson is currently involved with just one AIM company – holiday park operator Parkdean, but the experienced Wilson has effectively built up several ventures in this sector.

In the late eighties he conducted the management buy-out of Beazer's holiday division, eventually selling out to fully-listed Vardon in 1995. After that he set up Parkdean, which joined AIM two years ago. Since then the shares have doubled and this year pre-tax profits should hit an impressive £9.1 million.

Hidden entrepreneurs

Like Wilson, there are a number of entrepreneurs building AIM companies, who have decent track records of growing previous businesses on the market.

For example Stuart Bruck at Healthcare Enterprise was also responsible for the growth of Barbican Healthcare, which was listed on AIM for two years before being taken over by private medical insurance giant BUPA for £23 million in 1999. When Bruck took over the reins, Barbican, a provider of doctors, surgeries and medical care to various corporate clients principally in the City of London, was worth only £1.6 million.

Barbican was majority owned by property entrepreneur Sir John Beckwith, uncle of the socialite Tamara. This time round Bruck has more control, owning over a third of Healthcare Enterprise. Another major investor is chief executive Gordon Wood, whose SAFA business was acquired by Healthcare Enterprise for £11.9 million last year.

Wood conducted the management buyout of occupational health concern SAFA from Intercare in 1996. The business is an established provider of first-aid kits and other medical goods – principally to companies. In addition, an arm of Wood's business, called SafaTec, has nine promising investments in Israeli healthcare development ventures. One of these is Ebiox cleaning fluid, now used in 50 UK hospitals to help combat the MRSA superbug.

Andrew Wiseman of East London housebuilder Telford Homes previously – together with Jim Furlong – developed Furlong Homes, which pursued a similar strategy on AIM. Furlong was sold for £24 million in July 2000 and only five months later Telford was set up. The group, in which Wiseman retains a nine per cent stake, is now worth £42 million and last year saw pre-tax profits rise 55 per cent to £6.6 million on turnover up 62 per cent to £41.1 million. The shares have almost trebled from 50p to 143p since flotation.