Entrepreneurs Business Academy – Update

Do you think you and your business would benefit if you spent a day with half-a-dozen millionaires sharing with you their secrets of success?

I thought it sounded like a great idea so on Saturday I did just that. I spent the day in the company of around two hundred other entrepreneurs and business owners in London W1. We had all gathered to attend the EBA One-day Total Business Mastery Seminar. The Entrepreneurs Business Academy, for those that don’t know, provides a fantastic range of course, events and materials for entrepreneurs. It is run by James Caan and Bev James, supported by an amazing array of millionaire mentors and backed up by a great range of business experts.

I knew that the day was going to be good but I didn’t realise quite how informative, motivating and inspirational it would be. After Bev’s introduction we were treated to powerful presentations by five fantastic and very successful people.

Nic Rixon – Strategies for growth
Peter Thomson – Retain clients and improve revenue
Steve Clark – Your attitude determines your altitude
Guy Levine – SEO and Social Media Guru
James Caan – How I became a Dragon

It was like getting a micro-MBA in eight-hours flat. The delivery speed is like something out of The Matrix. This is business kung-fu.

I implore you – sign up for this day. In fact, don’t go by yourself but take your entire management team. Send your suppliers and customers. I’d even suggest that you take your Bank Manager.

I seriously don’t know how they do this for the price. If you wanted to spend the day getting the secrets of success from five multi-millionaire business gurus how much would you expect to pay? Well, the tickets for the event started at an unbelievably low £87. Bev and James – if you are reading this the I want you to know that you have got the numbers wrong. This program should not be addressing two hundred people at a time. It should be two thousand at a time.

A word of warning, however: Your head will be buzzing so don’t expect to be able to get to sleep that night.

Sign up here

Just recieved an update from Bev James:  The date of the next EBA Total Mastery Seminar is 19th March 2011.

Book your place now!

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Fred Sirieix

Something that I always find inspiring is seeing passion and great achievement emulating from an unlikely source.

And so, over the last week or so, our house has been spell-bound, mesmerised and overjoyed as we watch the TV.  The program that has had this amazing effect has been Michel Roux’s Service.

Take a bunch of kids with inauspicious backgrounds – the world of ASBOs one parent families, unemployment and broken dreams – and try to turn them into five star front-of-house.  The journey so far has been fabulous.  The fire that has been fanned in the hearts of these guys is a real lesson in what can be achieved by anyone if they have the self belief.

The secret weapon behind this transformation: The passionate mentoring and coaching of the General Manager of Galvin at Windows, Fred Sirieix.

Fantasic stuff!

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Recruitment – It is like a Two Ronnies sketch

I’ve been thinking about the recruitment business and, to be honest, I think it is a very imperfect model.  My thought process has been driven by a real concern about the ability of small businesses to access real talent.

Small businesses are the lifeblood of our economy.  87% of the businesses in the UK employ less than 10 people.  Only 4 organisations in every 1,000 employ more than 250 people.

All enterprises need talent.  In order to start, grow and thrive, small companies need marketing experts, sales people, accountants and (dare I say it) lawyers.  Large businesses can afford to employ these people full time and pay huge fees to recruitment consultants.  Small businesses can rarely afford the fees and often end up with generalists covering all the bases.

Imagine if we bought cars the same way we employed people:

  • There would be no Autotrader or other classified advertising system.  No way of browsing the market to get an idea of what is new or available.
  • All cars would be sold through dealers who kept all their stock hidden from sight.
  • You’d walk in and tell the dealer that you wanted, say, a blue family saloon, and the dealer would give you a shortlist of five blue family saloons that he particularly liked.

Buying a house is another great example:

  • Imagine if there were no property supplements and no details displayed in estate agents’ windows.
  • Imagine if the list you got to see was chosen by the agent from a secret cabinet and you had no access to the countless other properties in the files.

Both of those examples would result in a frustrating and time consuming process that would make it very difficult to buy what you wanted – and that is how recruitment works.  The other thing about both of these examples is that the final buying decision is often one of The Heart not The Head.  An experienced car dealer or agent may well be able to guide you towards a short list that ticks the unemotional boxes but you have to see the wow-factor for yourself.

The same goes for people.  It is easy enough to find people with the right qualifications etc., but finding one with the right attitude and the right cultural fit can be a challenge.  It isn’t a case of there not being the tools for the job.  Myers-Briggs, DISC, EQi and TKI can do a fantastic job of objectively measuring and communicating the ‘soft skills’.  However, no recruitment intermediary has ever suggested to me that they would like to create a psychological profile to enable cross-comparison.  Also, when I was last in the market to recruit an employee, I did ask for such profiles and the recruiter was quite taken aback.

So why is the recruitment business so far behind the times and so outdated?  I suspect that it is because society still holds a centuries-old and very outdated feudal view of the employer-employee contract.  A contract that still is based on devotion and servitude, that cannot comprehend the revolutionary idea that you could work for ‘Big plc’ four days a week and ‘Small Ltd’ one day a week.

Both of my examples are very much self service models – a bit like a supermarket.  Recruitment, because it is so imperfect, is very labour & time intensive which leads to very high fee levels.  This, in turn, promotes inertia, market stagnation and prevents SMEs from getting proper access to the pool of talent.  The reality is that the recruitment business really only properly serves around 10% of the companies in the UK.

Imagine an open market of people, freely accessible, with the ability to make proper comparisons.  If people could freely advertise their talents and abilities then, maybe, they could apply their passion across a number of businesses.  Webrecruit have moved in the right direction with their low-fee online model but they have still failed to notice and address the fundamental flaw in the process – they still keep their talent pool hidden and perpetuate the servitude model to the same narrow band of employers.

So, come on.  Let’s see a real open recruitment based on low fees, open access and break the old-fashioned model.  Let’s see an efficent model that resembles Tesco rather than the current version which is like the ‘Four Candles’ sketch by The Two Ronnies.

In the meantime, can somebody develop the property equivalent of MBTI  and DISC so that I can find an INTP beach house with High Dominance?

Finally, here is that Two Ronnies sketch – Enjoy!

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Proactive Positive Laziness – Part two

Pareto is your friend

Pareto was a wonderful guy.  He left us with that wonderful 80/20 rule that seems to apply to just about everything.  A few examples:

  • 20% of your customers provide 80% of your income.
  • 80% of your profit comes from 20% of your products.
  • 20% of your people add 80% of the value.
  • 80% of your reward comes from 20% of your effort.

Going back to that FMCG that I mentioned before:-  We kept hitting situations where the accountants were telling us that a task would take a long time.  For example it might take four hours.  What the accountant was communicating was that it would take four hours to get the task 100% complete.  However, the application of Pareto also meant that the task could be 80% complete in 48 minutes.  Our world, at that time, was both time-poor and information-poor.  We  needed to understand if the answer was 100 or 1,000 or 10,000.  Getting a full picture of the size and a close measure of the shape in under an hour would have been a great help in allocating resources and making decisions.  The detail could come later.

The application of Positive Laziness would have led to an initial analysis of the task to ascertain which 20% of the data should be processed first.  An initial report of the partial answer could then have been made in one hour.

Try this test:  Give an accountant a spreadsheet list.  For example, a list consisting of around a thousand invoices, detailing invoice number; customer; value; age and product etc.  Ask the accountant to verify the total value of invoices that have been paid and keep you updated as to progress.

The methodical approach is to start at the top and work down, one by one.

The smart approach is to sort the list by value and verify the top 20% that make up 80% of the value.  At this point an update would consist of the result of the analysis of the 80% plus an extrapolation of what the same pattern applied to the remaining invoices.

This doesn’t just apply to accountants.  It applies in all walks of life.  I recently witnessed a test whereby 24 managers were given 20 questions to answer in 4 minutes.  The vast majority of the group did not spot that question 19 instructed them to only answer questions 1, 2 and 3.  The examiner had made such a point of the existence of a time constraint that an instinct to work methodically through the list overrode any ability to take the helicopter viewpoint.

We are taught the value of hard work, perseverance and working late.  We are taught that effort is more important than the result.  That it isn’t the winning but the taking part.  Are these the right values?

Recently I had the great pleasure of meeting Gill Fielding.  Gill is a Secret Millionaire and a mentor with the EBA, run by Bev James and James Caan.  As part of our conversation Gill shared with me her ‘White Rooming’ idea.  To quote from one of her articles:

This is how it works:

– You imagine that your business is a blank, empty white room..

– You then review your business and only allow items into the room that really, really fit the business, and that you can wholly justify. So for instance you can do this with products or services, staff, processes and so on.

Many people make the mistake of trying to provide too many different products or service options – particularly in the beginning, and yet my experience is that a business truly focused on one, or a very small range of products well provided, is far more likely to succeed.

Gill and I share a belief that Pareto needs to be applied rigorously to all aspects of business in order provide focus, save waste and drive efficiency.  This is what is meant by work smarter not harder.

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HMV and Credit Insurance

On January 6th, in my post about HMV, I commented that the issue for SMEs will be what happens if or when the insurers pull cover:

When a big retailer sneezes it is the suppliers that catch the flu.  The debt insurers will pull their cover.  The banks will then pull any financing, discounting or factoring that will be underpinned by that insurance.  The retailer will increase their terms and the supplier will suffer a major working capital crisis.

Unfortunately, it would appear that I am correct.  Robert Peston’s Blog has reported that cover has been pulled for new invoices.  In it he quotes from an email sent to one of HMV’s suppliers:

“I need to advise you that our credit insurers have significantly reduced our insured credit limit on all HMV entities. Based on the current HMV balances, the limit is not sufficient to support any sales on an insured basis moving forward.

So, why is this an issue?

A recent government report on SMEs highlighted a couple of interesting points:

Over a twelve month period, one-in-four SMEs went to their bank to borrow money.  That may not seem like a large percentage but bear in mind that each year a different 25% will be going to the bank to access / renew facilities that last for up to 5 years.  The same report also stated that over 70% of all finance (over 80% for overdrafts) was for working capital.  These numbers show us that a majority of SMEs in the UK rely on their bank to fund their working capital.  Now, a bank needs some security and, for working capital, this often means insisting that the debts are backed by insurance.

Lose your credit insurance and you run a serious risk of your bank removing your working capital.

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Proactive Positive Laziness

Some years ago I was contracted to an international FMCG.  There had been a change of management and the new team was not sure of the financial status of the business. I’d been called in to drive the year end close and get the books square.

The US boss was in town and we had just held a meeting of the entire finance department.  It had not gone as well as it could – it was clear that days were passing without any substantial progress on the numbers.  After the rest of the team had left the room, I turned to our US guest and said:

“You know the issue here, don’t you?

“Go on” he replied

“They are not lazy enough” I replied

He looked confused and asked me to explain.

“They are all really happy to spend endless hours getting answers to amazing levels of detail rather than finding the quick way of getting to an albeit slightly less accurate answer”.

So why are accountants not lazy?

Accountants tend to come from two places.  Qualified from an audit background or rising up the ranks starting as a bookkeeper.

Too often I’ve seen a macho attitude in ex-audit accountants.  Driven by the competitive nature of gaining their qualifications in an audit practice they are educated to value the macho, back-slapping attitude of ‘pulling an all-nighter’. It is seen as a good thing to work late into or even right through the night to get the job done.  This translates into a drive to work long hours on a task rather than find the quick method of getting almost there.

As a bookkeeper you are taught to balance the books to the penny. Their diligence and attention to detail is crucial to ensuring that the ledgers are in order.  They are a vital part of any well-run business.  They are educated in ensuring that every last number is properly processed.  However, that level of detail is sometimes not required when  promoted to be an accountant.

Whichever route they take, accountants are educated that tasks are to be carried out in a methodical and repetitive manner until 100% complete.  When faced with such a task and a time constraint the normal option is to just work faster.  This often results in a boss who is frustrated because the answer is both late and difficult to digest.

A good starting point to resolving this issue is to understand the size and shape of numbers.

Take the following list of numbers:

16p     £140   75k      £3.2M

Notice how readable they are?

In each number the zeros, ‘k’ and ‘M’ describe the size of the number.  The shape of each number is defined by just two digits.  That is all it takes and all it needs.  Does the number 25k inform a decision-maker any less than 24,694.13?

When presenting and thinking about numbers just keep to two ‘significant digits’ to fully describe the shape of the number.  Anything more is unnecessary.  So how do we get this right and how does it save time?

The answer is to rely on one of my best friends – Vilfredo Federico Damaso Pareto.

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Mothercare and Clinton Cards in delusional weather warning

Two more profit warnings have hit the press – This time it is Clinton Cards and Mothercare

The Telegraph article opens by saying that shares in Clinton Cards and Mothercare fell sharply on Thursday after they became the latest retailers to say that the snow had hit sales over Christmas.

Clinton Cards, which also runs the Birthdays chain, said that pre-tax profit over the year to July 31 will be “significantly lower” than market expectations. This follows a decline in like-for-like sales of 2pc over the five weeks to January 2. Don Lewin, the retailer’s chairman, described the sales drop-off as “very disappointing”. House broker Numis Securities slashed Clinton’s full-year profit forecast by almost 50pc – from £13.2m to £7m

Ben Gordon, the Mothercare’s chief executive, said: “In the UK, after a strong start to the quarter, sales were impacted significantly by the adverse winter weather conditions which caused widespread disruption, particularly in our out of town stores… We expect group underlying profit before taxation for the full year to be below current market expectations.”

Really guys? It is all about the weather is it?

If these retailers are to be believed then this year, because of the snow and recession, the general pubic cut down on the number of Christmas cards that would be sent. Also, we are being asked to believe that another focus for weather-related-cutbacks has been the most precious family member – the baby.

Well, if we take a little walk down the high street we quickly find that not everyone is telling the same story as we hear that Majestic Wine beats snow with sales rise

In a light-hearted swipe at the chains that have said that the weather prevented their customers from venturing out, Mr Lewis said: “I would like to thank our loyal customers for battling through December’s dreadful weather conditions to purchase their wine from Majestic.”

The heavy snow on what is traditionally Majestic’s busiest time of the year – the Saturday before Christmas – meant that sales were halved that day, compared with the year before. However, Majestic recovered the lost sales in the days directly before Christmas. “The Tuesday, Wednesday and Thursday of that week were our busiest days,” Mr Lewis said.

So, Majestic was also affected by the snow yet, when conditions improved, the shoppers returned. Clearly this didn’t happen at Clinton Cards or Mothercare. The only rational conclusion I can see is that shoppers wanted to shop at Majestic because they were attracted to the product and service offering whereas Clinton Cards and Mothercare are not presenting a compelling offering to the consumer.

It would appear that Mr Lewin and Mr Gordon want us to believe that the nation’s reaction to the bad weather was to cut back on baby toys & Christmas cards and spend more on champagne.

Are you trying to pull the wool over the eyes of your investors or do you seriously believe that you don’t need take responsibility for your poor performance?

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Money has to move to be of value

Stationary money is of no value.  It just sits there.  Doing nothing.  Achieving nothing.  Rotting away as inflation eats into it.

Money needs to move.  Stretch its legs.  Be exchanged for goods and services so that the next owner can then use it to do the same.  My neighbour gets paid a bonus (and the government gets half) and spends the money on a conservatory.  The money goes to a carpenter, an electrician and some shop keepers.  The carpenter is able to pay himself from the contract (and the government gets half) and spends some of the money in the pub.  The girl behind the bar got a tip, which she spent on some flowers… and so on.

There is a very sad misconception that in order for one person to become wealthy then someone else has to become poor.  This is because people seem to think that wealth is about money that isn’t moving.  It isn’t.  Wealth is about money that moves.  In order to get out of this recession, and for the economy to grow, we need money to be moving around.  To be paid in salaries and bonuses so that it can be spent on goods, services and taxation.

This is something that Ed Miliband claims to understand: deficit was caused by a calamitous collapse in tax revenues

Now, I’m going to let you into a secret here, so pay attention.  About a year ago, after the government had announced the new 50% tax rate but before it came into effect, I was at a meeting with the Bank of England discussing the impact of the recession on SMEs in South East England.  We discussed the impending 50% tax rate and how SMEs would act to mitigate the effect of the increase.  What was fascinating was the disclosure that both the government and the Bank of England knew that the effect of the 50% rate would be a net reduction in tax revenues.

So everyone in politics knows that we need greater tax revenues but without killing the golden goose.  The goose in this case being the controversial banker’s bonuses.  My own take is this:

Let us all remember that these bonus payments will be taxed at 40% or 50%.  Add to that the employee’s NI contribution and the employer’s NI payments and you’ll find that the majority of these bonus payments will go straight to the government.

Then you have the VAT, Alcohol Duty, Car Tax, Stamp Duty etc. payable on whatever the bankers choose to spend the bonus on.  Oh, and the added profits and salaries – with resultant tax revenues – that go to the business that supply these goods.

A viewpoint which does not appeared to be shared by many of the contributors on Robert Peston’s blog where a lot of posters seem to think that we would be better off if the financial sector left the UK:

Tax their bonuses at 90%. Call their bluff. Let them go wherever they please – they are bound to run out of countries that will put up with their activities eventually.

Bankers bonuses are a distraction – re-introduce 95%-100% tax rate at say £250,000 – we must reset our big society and ‘enforce’ an increase in equality of outcome.

Bank profits need to be taxed at 100% minimum
Bank employees (and their consultants) need to have a maximum pay cap of say 40K per year.
Watch them squeak, let them run to the airport.

Really?  You do realise that you’d end up with 99% of zero whereas right now the government is getting about 75% of a large number? Somehow you people think that we’d have more money to spend on the NHS, schools, benefits etc without the massive tax revenues that the financial sector contributes!

A few people, however, do have their heads screwed on the right way around:

If you are a builder, plumber, carpenter, electrician, glazier, plasterer (to name but a few) plying your trade in the south-east of England chances are these bank bonuses will be like rain after a drought. The sector has suffered hard the last two years. Maybe now business will start to pick up.

Thank you Damian from Horsham.

As a champion of SMEs I fully support bank bonus payments as I look forward to the increased turnover that my friends, neighbours, colleagues and associates will receive in its wake.

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HMV – three years ago

As a postscript to my blog entry this morning, I thought I’d mention that just under three years ago there was a blog post about HMV on the Interactive Investor site : Is HMV in the ‘buggy whip’ business?

A few quotes:

I bought HMV thinking it would go on growing but the question now is whether, one year into a three year recovery programme, the shares are cheap enough to warrant buying or, at least, worth holding in the expectation the price will improve with the company’s fortunes.

HMV’s five year PE is under seven. For a company that is still profitable, with relatively low levels of debt, and recovery potential, that seems reasonable.

For nearly a year, it’s moved sideways in a channel between about 95p and 135p.

So, three years ago HMV had low debt, two years to run on it’s recovery plan and a share price 4-5 times the current level.

Makes you wonder, doesn’t it!

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HMV – Highstreet Media Vanishing?

Another interesting article in the Telegraph has caught my eye:

HMV profit warning: can it survive?

Now, I am going to have to confess some pro-HMV bias here.  I’ve been involved with them on a number of occasions over the last twenty-five years, I’ve had a beer or two with Mr Fox, and I even know what HMV stands for.

BUT

Now, it seems that the vultures are circling over HMV as it declares that it is struggling to keep within its banking covenants.  Another innocent victim of the recession or a retailer that has lost sight of the fundamentals of doing business?

Let me quote from the article:

It will have sold and banked the proceeds from X-Factor’s Matt Cardle single weeks before it actually paid for it. Positive working capital is how the bean counters describe it.

I refer you back to my post a few weeks ago where I discussed cash & working capital.  In it I revealed how major retailers get paid by their customers long before they have to pay their suppliers.  This is a fantastic place to be.  A place that most businesses can only dream about.

There couldn’t be a business model that is more cash rich.  It is the financial secret behind the phenomenal success of retailers such as Walmart and Tesco.  So why on earth have HMV got huge bank borrowings?

I recall vividly the time back in 2008 / 2009 during the dark days of the banking crisis when both Woolworth and Zavvi went to the wall.  What this did was hand the domestic retail entertainment market to HMV on a plate.  Their two major rivals had gone to the wall and Simon Fox was up for making the most of the situation.  For the next twelve months or so HMV seemed to be opening a new store almost every week.  Steaming ahead to plug the gap in the market left by the boarded up shop fronts of their ex-rivals.

Now, two years later, it seems they are in trouble.  The performance of John Lewis shows that they cannot blame it on the economy so what has gone wrong?

  • Have HMV seriously misjudged the move to online media delivery?
  • Did HMV truly believe that the decline of the high street music store in the USA and Europe was not going to happen here?
  • Is this another big retailer so drunk on the power of their market strength that they have forgotten how to run a business in a profitable way?

So, how does this impact their suppliers?  According to the article:

Spooked suppliers altering their terms would make a bad situation even worse.

Really?  If you’re one of the 98% of businesses that classify as an SME this isn’t going to happen.  SME Suppliers don’t dictate terms to people like HMV.  People like HMV dictate terms to their SME suppliers.

When a big retailer sneezes it is the suppliers that catch the flu.  The debt insurers will pull their cover.  The banks will then pull any financing, discounting or factoring that will be underpinned by that insurance.  The retailer will increase their terms and the supplier will suffer a major working capital crisis.

Try to argue for better terms and you will, at best, be ignored.  At worst, the retailer will simply return all the stock it has of your products and refuse to pay your invoices.

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