My Biggest Mistake: Maurice Segal

The Channel Islands hotelier and chairman of Expotel, the hotel reservations group, took a detour outside his core business to market an arm-wrestling machine. He ended up empty handed and out of pocket but much the wiser.

ABOUT 15 years ago I was approached by two people from the North-east who wanted to hold a darts event in the Channel Islands. The event went very well, and afterwards we discussed an idea they had for an arm-wrestling machine to sell to the amusement trade.

They had already designed a primitive version - basically a beer barrel with handlebars on top - and it had sold quite well in Africa. I could see the idea had potential in Britain's pubs and working men's clubs. But obviously we were going to have to start from scratch; we couldn't just start promoting beer barrels as a revolutionary new machine.

I really didn't know where to find a designer of arm-wrestling machines, so I spoke to the Design Council and they sent me a list of companies. The specifications were fairly hi-tech, but eventually, after many meetings, we chose a designer.

The design stage seemed to last forever. Meanwhile, I formed a new company with the two people who had come up with the idea in the first place to promote the product.

We had a variety of meetings with the amusement industry to find out how the Arm Wrestler would be received, and the response was that there had been nothing new like this for years.

In fact, everyone was so enthusiastic that by the time we finally held the launch party, we had already sold 1,200 machines.

The PR campaign was brilliant; we got a massive amount of publicity, not just in Europe, but in America, Australia and the Far East.

There was just one problem. When the first machine was installed, it didn't work. It turned out that there was a problem with one of the microchips, so all 1,200 had to go back to the manufacturer - the design company.

Meeting after meeting took place, andeventually we accepted an offer from the MD to put things right by giving us the first 24 machines free of charge, once the fault was sorted out.

And that turned out to be my biggest mistake of all. What I didn't appreciate was that, although they were indeed able to fix the fault, the amusement industry had lost confidence in the product. Now they would only take them on sale or return.

There was no way that my company could afford to deal with suppliers on that basis, so negotiations with the designer broke down and we took legal proceedings.

The project had already cost us pounds 400,000; now we had lawyers' fees to cope with on top of that. The final straw was when we discovered the design company had no public liability insurance.

I was shattered; I couldn't believe it. If the company had been insured, we would have got all of our money back. As it was, we ended up settling for pounds 100,000.

The whole saga cost me a total of pounds 350,000, but I learned several lessons. The first was that I should never have got involved in an industry that I didn't understand. My core business was hotels.

Second, I should have checked whether the design company had public liability insurance before commissioning it to do the work.

Finally, when the first machine went wrong, I should have talked to a few of the machine suppliers to find out what they thought before I accepted the MD's offer.

(Photograph omitted)