The Blog of an Entrepreneur

Last week I made one of the most difficult decisions of my Entrepreneurial Career, I changed my accountant. I’ll tell you a little bit more about that another time, but for now I want to tell you about a disagreement I had with my new accountant .. and why I think he is wrong, although right in many ways.

The case is this, I am in the process of developing a member of my staff to take over the reigns of one of my businesses. This project is likely to take 5 years to complete, by which time she’ll have an equity stake in the business, and received all the training and support she will need to do a great job. She will be loyal, she’ll know the business inside and out, and she’ll share the ethos and ethics of the business to run it successfully whilst maintaining the company image and reputation as I have built it.

My new accountants argument was that I should have recruited a Managing Director to come in at the top to take over the business almost immediately. This would free me up immediately to focus on my other business interests, which is something I don’t have a lot of time to do at the moment but wish that I did.

So why is he wrong? He is wrong because this new MD will be monetarily focused, and will more than likely leave as soon as someone offers more money. This new MD won’t know my business the way someone who has worked in it for a few a years will, and want to make their mark. More importantly for me though, this new person coming in above my staff who have always reported direct to me will upset the balance and probably put a few noses out of joint. I could end up losing some important staff in the process.

However, why is my new accountant right? He is right because in the cold hard world of business when the core focus is profit his method is the right thing to do. If I want to be extremely wealthy, and my businesses are just a way to make myself more money, then I should not be so focused on keeping people happy but more focused in building my wealth.

Unfortunately for my accountant though, that just isn’t me. I make a nice living, I am happy with my lifestyle, so I’m happy to put myself out to further the career of my staff who are loyal and supportive of me. If that means I have to work a few extra hours, if I don’t have the time I’d like to devote to new business projects, I don’t mind because I know in the long run it will pay dividends! My new MD will be a lot more loyal than someone I could poach from another business.

So what kind of Entrepreneur are you? There is no right or wrong decision to make in a situation like this, just a right or wrong decision for you as an individual. Would you bring in a new director to run your business, or would you identify a hungry individual within the business to train and promote?

Those who know me personally, or have read this blog for a while, will know that I firmly believe that our economy is a small business economy and to keep our economy afloat we should all be encouraging the next generation of Entrepreneurs from a young age.

So imagine my surprise after a young lad, Ben, interviewed me on Thursday as part of his dissertation to be told that out of a list of Entrepreneurs he’d already interviewed at 40 minutes my interview lasted the longest. I’d shared with him more insight, stories and information than anyone else, and he even commented that one interview lasted 10 minutes with the “Entrepreneur” answering most questions with “I dunno”! How on earth is that person still in business?

Ben asked me whether I felt that Entrepreneurialsim can be taught, and hoping I didn’t knock the University course he is doing, but I said no I don’t believe it can. I believe Entrepreneurialism is born out of an event that triggers the person to make a decision for themself and make a future for themself. I do, however, strongly believe it can encouraged. To inpire young people of the challenges, the highs, the lows and wonders of running your own business and being in charge of your own destiny.

He also asked me whether I was taught the skills to be an Entrepreneur at school. To be honest I do not believe so. I don’t believe I became a true Entrepreneur until my daughter was born and my first business started to go horribly pear shaped. It was the need to secure a future for my child that drove me to become an Entrepreneur, where failure was not an option. That was my event, my trigger, and if you look through the past of any Entrepreneur and read any autobiography you’ll find similar triggers.

I’m not saying I wasn’t hungry for success before then, because I was. In my working career and childhood I’ve always been competitive and determined to succeed, but it was that one trigger that flicked a switch inside of me and gave me that extra push to take things more seriously. I had a dependant, and her future relied on me.

It is these stories that Ben wanted to know, not big trade secrets to rip you off. So if you are an Entrepreneur don’t treat it like some big secret, don’t be afraid to share your experiences with the next generation of Entrepreneurs. They are our future, the future of our economy, and it is extremely rewarding to feel their enthusiasm as they talk with you about your experiences. Further more, you can also learn a lot from them too.

When a business starts out and you go for that all so daunting meeting with your business banking account manager one of the first questions, after “do you want a loan” is usually, “what is your unique selling point”. And this can be the stumbling point for many a company.

A common mistake so many entrepreneurs make when they start their own company is to set their prices too low in the hope that a low price will attract new customers and they label this as a good USP.

In reality, what this actually does is attract the wrong kind of customer, the kind of high maintenance customer who shops on price alone and drains the supplier for every drop of blood they can get out of them.

What the entrepreneur should be doing is focusing on providing a quality service or product at a price that reflects that quality. This enables you to filter out the chaff from quality clients who you really should be concentrating your efforts and enthusiasm on. Someone who is prepared to spend sensible money on a quality product is a much better value customer than someone who haggles you down to the last penny at cost price.

And to be honest, would you not get more satisfaction if you could spend more time engaging with and helping the customers who truly value your services rather than those who are going to be beating you down on prices every day.

This is a regular hot topic on the UK Business Forums (www.ukbusinessforums.co.uk) where new business owners pop online and ask what the other members feel is a correct price to charge for their new product or service.

I recently spent some time with an IT support and computer supply company where the MD had no time to focus on growing his company as he was always running around dealing with customers all over the county. His profit margins were practically non-existent, so even if he wanted to he couldn’t afford to expand his business.

He had to finish our meeting early because he had to run out and sort out a broadband connection at one of his clients homes. I asked him how much he was going charge, and he replied £10 plus VAT. Taking into account the 30 minute drive there and about an hour on site, followed by a 30 minute drive back, that worked out a whopping £5 per hour charge, not including petrol. It’s no wonder he is making no money, and his excuse was that he didn’t feel his clients would pay any more.

Maybe some of his existing clients wouldn’t, but I responded with the other argument. Find some clients who would pay more. I, for example, would think of nothing about paying £70-80 for an engineer to come to our site and fix our office broadband connection if it ever went offline. My business relies on the Internet and it costs me more than that in lost business if I’m offline for an hour.

I’m not an exception either; I am a typical business client who realises the true value of a quality service from a professional. This is what small business owners should be focusing on, attracting the right kind of client and then once you have them look after them.

It takes courage to be bold enough to set your prices at what you really should be charging, and it will go against every instinct in your body saying “I need every order I can get”, but the realism is that you don’t need every order – you just need the good quality orders. The added bonus is that it puts true value into your service, a quality value that will reflect well when approaching potential clients. I use an example of this when I made the mistake of being too cheap myself.

I was once introduced to a large pharmaceutical company to do a contract as one of the board members at the company was a close friend who had opened the door for me. The deal was as good as mine, so I did my quote making what I thought was an OK profit but not too expensive as I really wanted this order. I was making £5,000 profit. I lost the order to a large blue chip corporate company who went in £19,000 more expensive than me!

When I asked my friend why I lost the order he explained it was simply because I was too cheap. The rest of the board was concerned that I would not have been able to provide the quality of service they wanted because I was so much cheaper than the other price. If I had been just £5,000 cheaper then the order would have been mine, and I would have made an extra £9,000 more profit on that order!

Although an extreme but very true example, the same applies on a much smaller scale. If you are running around trying to service too many customers who are not paying enough, give serious thought to raising your prices and go after a better quality of client. It is better in business to have less clients paying sensible rates and making a sustainable profit, than having hundreds of customers paying low fees and you make a loss.

You may even be surprised to find that most of your clients may actually be happy to pay you a higher fee. I know I sent this IT guys invoice back to him for my laptop repair and told him to double it! I want him to still be in business a year from now looking after my own office network.

The article may be freely distributed and copied subject on the condition that credit is given to myself with a link through to www.ozzy.co.uk

A good friend of mine is always coming up with ideas for businesses he wants to start, and several times has asked me to get involved either on an advisory role or as one of those frequently mentioned “investment opportunities” :).  Unfortunately for him, some of his ideas sound quite promising, and could perhaps grow to be very successful. So why is that unfortunate?

It is unfortunate because he does absolutely bugger all with his ideas. He mentiones them, bounces off all the walls with excitement, but does nothing until a few weeks later all is forgotten.

Originally I got quite involved with some of his ideas and was considering investing in one, but as I got to know how he  procrastinates and never actually does anything I too lost interest and started to see him as a very high risk investment. My money would end up doing nothing more than paying his wages to do nothing, until the pot ran dry and we would eventually fall out.

The world is full of people who talk a good game, but very few actually make things happen and try their ideas. I almost lost my home a couple of times because I took the risk on my business ideas, my friend will never take that risk. He will forever more be what some call a “wage slave”, despite running his own business he always takes the safe long term contracts with the guaranteed income. There is nothing wrong with this though, an old boss once said to me the world needs worker bee’s just as much as it needs leaders.  What kind of person are you, if you are an Entrepreneur then you are a Do’er, and you will make your business ideas happen at any cost.

It never ceases to amazing me how many “business opportunities” find their way to you when you come in to a bit of money. All sorts of people come out of the woodwork with the next Facebook, MySpace or even UK Business Forums! Only this week I was contacted by someone looking to setup another forum with the plans to sell it for hundreds of thousands, and wanted me to give them all the information they needed to achieve that.

Now I don’t mind helping people, and I will help whenever I can, but what I do not like are people who are looking to make a fast buck by leaching onto someone elses success. Those who know me will know that I devote a lot of time to sharing any knowledge with people who I can clearly see putting in the extra effort themselves, burning the midnight oil, trying their best but simply lack a little experience or expertise in a particular area. I do not like leaches or clinger ons. People who hunt out someone who has something they want, take what they want and dump them.

If you want to make a success of yourself then do it yourself. Seek legitimate help from friends and colleagues, but don’t leach off other peoples success. They will spot you a mile off and you could lose potential mentors or supporters. Also, just because it worked for one person it doesn’t mean it will work for others, how many successful eBay clones do you know of?