A difficult business decision helped me create the Virgin Group

This story is part of CNBC does this The Moment series, where successful people reveal the critical moment that changed the trajectory of their lives and careers, discussing what inspired them to take the leap into the unknown.

Richard Branson is a thrill-seeker. He traveled into space in his own rocket and crossed oceans in a hot air balloon.

So if you ask him about one of the hardest decisions he’s ever had to make, you might get a surprising answer: a moment where he chose to “play it safe.”

He’s referring to the sale of the Virgin Records label to Thorn EMI for nearly $1 billion in 1992. The deal made business sense, but the idea of ​​selling one of his first companies , which started as a brick-and-mortar record store in London in 1971 – left him in tears, he says.

“It was a really sad day,” Branson told CNBC Make It. “I remember running down the street with tears streaming down my face, past a sign that said, ‘Richard sells for a billion.'”

Branson needed money to focus on a new business, Virgin Atlantic. The new airline needed resources to fight a legal battle — which it ultimately won, as he details in his new audiobook, “Losing and Finding My Virginity” — over an alleged smear campaign perpetrated by British Airways.

He had two choices: sell his label or risk the bankruptcy of his airline. Emotionally, selling Virgin Records was like getting rid of a piece of himself, Branson says – but the company was established and successful enough to continue thriving under new ownership.

Meanwhile, Virgin Atlantic’s failure is said to have damaged its reputation and threatened the expansion of its business empire, which today spans from telecommunications to spaceflight. Virgin Group is largely responsible for Branson’s estimated net worth of $2.5 billion, according to Forbes.

The billionaire’s affection for Virgin Records still endures: he reportedly considered buying the brand as recently as 2012, even if the deal did not come to fruition.

Here, Branson discusses the difficulty of abandoning one beloved business to boost another, how the decision helped shape the future of the Virgin Group, and why you need to balance instinct and caution when We are seizing a great opportunity.

CNBC Make It: How did you come to the decision to sell Virgin Records? What was going through your mind?

Branson: Virgin Records was the largest independent record label in the world. We had just signed the Rolling Stones and Janet Jackson. It was going incredibly well.

Virgin Atlantic was a kid at school who was being bullied. I had to really focus on the child who was being bullied. What I decided was: if I sold Virgin Records, everyone’s jobs would be secure. I could then use that money to build and protect Virgin Atlantic.

Unfortunately, sometimes in life you have to make tough decisions. It was the right decision to make at the time.

Of course, the record industry then went through some upheaval and everyone thought we had been very clever. Now I hear our music everywhere – it’s making a comeback – but at the time it felt like the right thing to do, as difficult as it was.

Did you consider trying to keep both, or would that have caused Virgin Atlantic to fail?

I don’t think we’ll ever know, to be honest. Obviously it would have been nice to keep both, and we might have survived by keeping both.

But sometimes you just have to play it safe – and normally I don’t play it safe.

I just felt like I had to protect the downside, (which) was seeing a new kid, Virgin Atlantic, disappear. And I wasn’t going to let British Airways beat us.

So, is it fair to say that the Virgin Group would have been very different today if you hadn’t made this decision?

Yes. With the resources of (the sale of) the record company, we launched into trains, cell phones, cruise lines and fitness clubs. Tens of thousands of jobs have been created thanks to the record company’s resources.

I don’t think I would have gone into space in my own spaceship if I hadn’t made that decision.

I don’t complain about any decision I’ve made in the past. I think we were lucky. Every year of my life has been a rollercoaster. It has been enriching and fascinating.

How do you balance emotions and money when making a business decision? Do you find it difficult to make these decisions today, when selling or splitting other Virgin brands?

I think when people sell their business, they can sometimes feel a little empty. It’s important to know what they want to do after selling it. It’s important that they have something else to sink their teeth into, whether socially or commercially, because people can feel a sense of emptiness, even if they have money in their bank account.

What we like to do is create things. We will always retain 100% of the first company, the Virgin Group. Then we have subsidiaries, some of which we’ve gone public, some of which we’ve kept private, and some of which we may have sold a large number of.

This means I can still do bold things, like go to space or start a cruise line. By having the subsidiaries, we can bring in other shareholders and this money comes to the top to allow us to continue in business.

When you make a risky decision, how do you prepare for both the best and worst case scenarios?

It is very important to protect the disadvantages. (Launch) Virgin Atlantic 40 years ago is a very good example.

My instinct was that if we created a top-quality airline that crossed the Atlantic, it would survive. I knew it was very risky. I have personally said that the best way to become a millionaire is to start as a billionaire and get into the airline industry.

So, in case my instincts were wrong, I negotiated the right to return (Virgin’s first plane) to Boeing at the end of the first year. The most the airline was really going to cost – aside from my reputation, which is obviously very important – was about a year’s profit at Virgin Records.

This interview has been edited and condensed for clarity.

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