Impulse led to a £50m paper group

EVERY would-be entrepreneur needs a stroke of luck. David Landau's came at Milan airport in 1984. An art historian and enthusiastic picture collector, he bought a copy of a magazine, Secondamano ("Secondhand"), to read on the flight back to London. "I assumed it was an antiques magazine," he recalls.

It was in fact a free-adverts magazine, a species at the time unknown in Britain. Every page was filled with personal classified advertisements printed gratis. The publisher made money from the cover price.

Landau, then 35 and an Oxford don, was intrigued and increasingly excited. "By the time we touched down in London I was convinced it was a brilliant idea. I stopped the taxi at a newsagent on the way in from the airport. I was frantic to find out whether anything like it existed."

It did not. And Landau's copycat product, Loot, hit the London news-stands less than a year later. Ten years on, the London edition of Loot turns over almost £12m and made pre-tax profits of £1.86m last year. More impressive still, it has been in the Independent 100 for five consecutive years, the only company to achieve such an unbroken record.

Meanwhile, the wider Loot group continues to expand. There are Loots for 10 different regions and a total of 24 editions a week. The entire group, recently restructured under a single holding company, boasts sales of around £22m. It is probably now worth around £50m.

The early years were fraught. Landau's sister Elizabeth came up with the name Loot, and his business partner, Dominic Gill, a former music critic and a computer whiz, set up the systems. One newspaper distributor, Surridge Dawson, told them the publication wouldn't work, but they persevered. The first edition was produced out of an office on the tatty Kilburn High Road in London, where the group is still headquartered.

It was a mere 16 pages priced at 50p, but it seemed to work. "We sold 24,000 copies," Landau remembers. "We thought we had it made. We thought we were all going to be millionaires."

But from then on, circulation shrank. The second issue sold 16,000, the third 12,000. After three months Loot hit rock bottom, selling a pitiful 2,845 copies. "The problem was getting the ads. People just didn't believe the ads were free. The concept didn't exist in this country."

Landau, together with family and friends, had originally budgeted to invest £145,000 in starting up the business. But that rapidly needed to be augmented. There began a long struggle to find the money to go on. Eventually Landau had to sell his treasured art collection. Banks were unhelpful. Landau was turned away by both Lloyds and Royal Bank of Scotland, though Barclays eventually agreed an overdraft.

But gradually the concept of a free-ads paper was catching on, and after three uncertain years Landau was confident of success. Loot was being used for selling used cars, finding flatmates, matching lonely hearts and getting jobs.

There have been difficulties. A baby was snatched after its mother advertised for a babysitter in the pages of Loot and ignored the advice of the company to check references. Copytakers - the staff who key in advertisers' instructions - are trained to be on the look-out for everything from stolen goods to paedophile rings. But hoax ads still get in.

The group now employs around 600 people, many of them part-timers and most of them copytakers. There are some thoughtful quirks. Four full-time masseuses are on hand to pummel away the inevitable aches of sitting at a keyboard all day. Staff are allocated 10 minutes every two hours for a massage. Free fresh fruit is available all day. Loot's greengrocery bill was £28,000 last year.

At first glance, Israeli-born Landau is an unlikely entrepreneur. In his twenties, he trained as a doctor - to overcome his squeamish fear of blood, he says. He switched to being a university lecturer to overcome his extreme shyness. The move to business was similarly perverse: "I really despised money when I was an art historian. I thought everything to do with business was crooked and dishonest. I was very sniffy about the world of commerce."

His views have since altered, although he still has an uneasy relationship with his money and possessions. When he eventually sells out - possibly via a stock market flotation - he plans to give most of the proceeds away.