Sharing out the business cake

Never, ever, under any circumstances give away any shares in your own business. Period.

I'm paraphrasing Felix Denis, the late publishing billionaire here. He believes that business owners and entrepreneurs should hold onto their share capital as their greatest opportunity to retain wealth and as a fair reward for their enterprise and risk.

That's not to say he didn't believe in rewarding his employees. He argued that rather than through shares, this should be done by giving them a fair 'slice of the annual pie' of profits.

As a general rule I agree with Felix. Including employees and others as shareholders adds complexity and creates tensions. It also takes some incentive away from the entrepreneur to drive the business forward.

Are there exceptions to Felix's golden rule though?

I think there can be in cases of succession or exit or in exchange for providing finance and specialist knowledge, skills or contacts (Dragon style) but the entrepreneur should tread carefully and consider the pros and cons before taking this step. Once ownership is diluted things will never quite feel the same again for the founder so my default view is, 'Don't do it' unless there are compelling reasons.

As Felix says, 'Getting rich all comes down to ownership. Every single percentage point counts'.

Of course there is more to creating and running a business than getting rich but his point is well made. As the owner you are the one who has made sacrifices, had sleepless nights, strained your personal relationships, worried about paying the mortgage. If you give away the fruit of your endeavour lightly you may have a long time to regret your decision.

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Grinding it out

Ray Kroc, the founder of the McDonalds empire has always been one of my business heroes.

I didn't know much about him until recently, apart from the fact that he started McDonalds at the ripe old age of 52. As a late starter to business myself, that was enough for me, along with the ingenuity of the McDonalds concept - simple, effective processes, brilliantly executed can make for a great business.

So I was delighted to stumble upon Ray's autobiography, 'Grinding it out' in a second hand bookshop a couple of weeks ago. It's an honest, fast paced read about his rise to fame and riches. As the title suggests it wasn't an easy ride and success didn't fall in his lap. He earned it.

His work ethic was incredible. Ray was first and foremost a salesman. But he had other attributes as well. Not least he was an accomplished pianist.

In his early years he sold paper cups. Rising at 6am to pound his beat looking for new orders. He finished around 6pm and dashed off to his evening job - playing piano on a radio show. After the 6 to 8 shift he nipped home for a couple of hours to have tea and spend some time with his wife. Then back to the studio for the 10pm to 2am shift!

I've had periods of working fairly hard every now and then but Ray was at another level.

Of course his obsession with business left casualties. He was married three times and had some big business dust ups too. Business came first, rising to the top of his industry selling paper cups and mixers and then building McDonalds.

So why isn't McDonalds called Krocs? Well the McDonald brothers had already opened a successful burger restaurant with the signature attributes of simple processes, well executed and quick and friendly service. They were happy with their one successful store and had no desire to expand. Ray saw the opportunity, did a licencing deal with them and the rest is history. It was a fraught and strained relationship but the McDonalds brothers became rich beyond their wildest dreams when Ray finally bought them out many years later.

Like many super successful entrepreneurs he was multi-faceted. He was tough and driven but also had strong values of honesty and trust and had a knack for creating a strong, loyal team. He was also good at giving his team independence and freedom to make their own mistakes.

So this book in putting some flesh on the bones of Ray's life didn't disappoint. By today's standards he wasn't politically correct but it was a different era and I'll cut him some slack for that. He has left a thriving and enduring legacy and he remains for me a brilliant and innovative entrepreneur. He is an inspiration for me and other over 50s that it's not too late to do something great. Maybe not something as ambitious as a global food empire but something nonetheless.

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How to finish big

I've just finished reading 'Finish Big' by Bo Burlingham. 

If you've read Bo's other best seller, 'Small Giants' you'll know that he's a journalist who's passionate about small business and entrepreneurs and loves digging into what makes them both tick.

Bo argues that 'Finishing big' or exiting well from a business is one of the biggest decisions that entrepreneurs make, having profound and far reaching implications on the rest of their lives, but many give little thought to it.

The book is full of absorbing case studies of people who have exited well and those who haven't. The emphasis is on the 'Medium' within the  Small and Medium Enterprise' cohort. So for most business owners these will be quite large enterprises with tens or hundreds of employees and multi million dollar turnovers. For British readers there are some americanisms like ESOPs (Employee share schemes) and venture capital played a bigger part in some exits than it does over the pond.

Although the businesses may differ the issues for the exiting entrepreneurs are very similar wherever they are based and Bo tries to distil the common themes which make for a good exit.

Four stood out for me:

1. Start early

Entrepreneurs need time to plan for their exit and to shape the business in a way which achieves the best outcome. Some of the time is needed to allow for making mistakes - finding the right successor was problematic for example in several of the case studies

2. Think about the exit you want

It's not just about the money. What do you wants to happen to your employees? Are you worried if the culture and values in your business change after exit? What kind of legacy do you want to leave? It's important to think about these things before exit.

3. The best advisors have been through it

This was an interesting one. Many advisors have facilitated multiple sales and the more they do, the better they get. The very best advisors though have sold their own business or ideally several businesses. They have the unique advantage of seeing things from the seller's perspective and Bo rates this very highly.

4. What will you do after?

Somewhat surprisingly, this was one of the biggest issues for the exiting entrepreneurs. Those who thought about it in advance and had something to do after exit, tended to finish big and well. Those that didn't ended up a bit lost, without purpose, full of regrets and unhappy, often for many years.

So I'd recommend 'Finish Big' to all business owners. If it gets you thinking about your exit now rather than when it's too late to finish big, it's a few quid very well spent.

https://www.base52.co.uk/services/consultancy

A perfect pipeline

I'm not a marketeer but like all business owners who want to grow their business, I do marketing.

The nirvana we search for is a perfect pipeline. A method or methods of marketing which delivers a steady stream of leads, where we know the cost per lead and we know the liklihood of converting each lead or enquiry into a new customer.

If the cost for each converted lead is justified based on the price of your product or service then, Bingo! That's it! Growth plan sorted.

But its not normally that straightforward.

What I've found over the years is that something works for a while - a networking group, google adwords, telesales, a referral scheme...and then it stops. Sometimes this is an abrupt or sudden change. Your brilliant telesales person moves on, Google changes their algorithm, more competition - something happens to make your trusty lead generation star less effective.

Of course when this happens we try and change things. Find out why it has stopped working so well and try and fix the problem. But often tinkering doesn't work. The moment has passed.

So it's back to the drawing board again

I'm in that happy phase now where I've stumbled upon a lead generation method which has exceeded my expectations and is delivering impressive stats

So I'll be enjoying this while I can. I fully expect that just around the corner there will be a glitch. We will tinker and tweak but it may not be the same again

And then the search starts again for the next big thing...

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