John Hays presides over a North-East empire worth £200m a year. But the spark of innovation that grew his travel business was born 25 years ago, in the back room of a County Durham store. Deputy Business Editor Dan Jenkins reports.

AS the saying goes, from little acorns, mighty oak trees grow. And you cannot start much smaller than the back room of your mother's childrenswear shop.

When John Hays set out 25 years ago to establish a travel agency in his home town of Seaham, County Durham, he had no industry experience and precious little cash.

"I started with a blank sheet of paper," he said. "It was a classic business school thing to do."

The Seaham Grammar School pupil had left the North-East several years earlier, going on to graduate in pure maths at Pembroke College, Oxford, before completing an MBA in business administration at Manchester Business School.

A promising career in the City beckoned, but the son of a pit worker soon found it was not to his taste.

He returned to Seaham in 1980 determined to be his own boss, but not sure what type of business to run.

After nearly becoming an undertaker, he settled on travel and set up in the back of his mother's shop in the town centre, his joiner father providing the basic furnishings.

"It was a very low budget operation and as far from classy as you can imagine," he said.

"All I had was some brochure racks and a high counter, like one out of a chip shop.

"The first few years were really, really tough. But with hindsight, what helped to drive the business successful in the long run." But real growth was his rivalry with the company across the road, in Lincoln butcher's shop, which opened two weeks after Hays.

In order to compete in the coastal town, Mr Hays knew he had to innovate, and came up with the idea of free insurance.

"We were probably the first agent to run that promotion and it has become something we are known for," he said.

He first saw the true potential of the promotion when he expanded, opening a second shop in Sunderland in 1982.

"Running the free insurance was kind of a defensive move, but in Sunderland it gave us a real competitive edge," he said. "The shop took off like a rocket from day one."

The operation has grown to 32 shops, plus call centres in Sunderland, Newcastle, Stockton and Middlesbrough.

He has 600 staff and a home working operation that is now the third largest in the country.

The company has thrived by diversifying.

"We try to cover every possible route to market," he said.

This has included last-minute deals through call centres and Forex4Agents.

This provides independent agents with their own foreign currency bureau, and it already operates more than 60 outlets.

Success has brought Mr Hays awards - Business Executive of the Year for Wearside and Durham in 2002, and the Entrepreneurs Forum chose him as its first North-East Entrepreneur of the Year last year.

Hays also runs the Independence Group, offering back office services to independent travel agents.

Set up in 1995, it is the biggest ABTA consortium of its kind, with a membership of 110.

"We have now reached a size where we can offer economies of scale," he said.

"It frees them up to concentrate on booking holidays, which is what they want to do."