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An open letter to the public sector

Dear public sector employees,

I am writing this on the eve of what promises to be the harshest budget in thirty years, possibly in living memory. It certainly needs to be.

And I notice that some of the more militant unions; Unite, for example, are already flexing their muscles ready for a summer of discontent. Here’s why that is a bad idea.

It won’t achieve anything. It doesn’t matter how much you gripe, strike, or throw toys out of the pram. Britain is broke, we’ve spent 30 years living beyond our means, and it has to stop. I know there are some disgraceful bankers with their noses in the trough; but there are some very tasty deals for Unionistas too. As the recession bit in 2008-9, Unite chief Tony Woodley’s pay went up by 30%. I can’t say the same for my pay packet!

But my real issue is with the gulf in employee remuneration regimes between the public and private sectors. 

Under a Freedom of Information request, a national newspaper recently found that local authority staff take almost twice as many days off sick as staff working in the private sector. Employees at the worst-performing councils take over 12 days off per year on average; and even the best-performing council, Calderdale, is worse than the private sector average. Sick pay policies in the public sector generally pay out on full pay for longer than private sector schemes, and absenteeism is often not a part of local authority appraisals and assessments. Now, I’ve been to some council offices, and they’re pretty dreary. But not dreary enough to account for a doubling in sick days.

Then there’s working hours. The Policy Exchange think tank says that employees in the private sector work 23% more hours – that’s over 9 years more across a lifetime – than those in the public sector. As an entrepreneur, I don’t have official working hours of any sort: I stay at my desk until whatever needs to be done gets done!

And finally the elephant in the room: pensions. Outside the gilded halls of the public sector nursing home, the idea of a final salary pension is all but entirely anathema. And with corporate pensions running at an alarming deficit, I’ll be amazed if companies in ten years time will be able to honour their commitments at all. The government’s responsibility is even greater: its total future commitment is three quarters of a trillion pounds. It’s simply not possible and not sustainable for either sector to honour its pension commitments, and, here especially, I expect promises to be broken by successive administrations.

I’m not prepared to commit an opinion on the most obvious differential between the public and private sectors: basic pay. I don’t think there’s any legitimate comparison to be made, as the waters have been muddied too much by:

• Outsourcing public sector services to the private sector (e.g. refuse collection)
• And the move of some highly paid private sector job to the public purse (e.g. the nationalisation of Northern Rock)

…all of which makes pure pay differentiators very tough to judge. Even so, the best analytics I could find (an outfit called Straight Statistics) suggest that for median payscales in comparable jobs, public sector employees enjoy 7% more cash than those working for businesses.

This budget is going to be painful for everyone. The last thing we need is a wave of strikes and union militancy on the basis of dogma rather than genuine unfairness.

Yoodoo brings business to Barking

Is business the province of the Suits on Dragons’ Den, or is business actually an opportunity for many more people than you might think?

I spent the first week of June in Barking, East London, finding out.

I have been involved for three years now with a company called Yoodoo, whose website gives people bags of advice and encouragement on how to start a business; all packaged up in a highly personalised and entertaining way- so it doesn’t feel like being back at school.

The hunch behind Yoodoo is that millions of people want to start businesses (apparently 17 million Brits want to be their own boss); and yet only a small percentage ever get round to it. Yoodoo helps them learn business skills without feeling like they have to pitch to Alan Sugar.

To prove the hunch, the Yoodoo team decided to set up shop for a week in Barking and meet some ordinary shoppers who might just have an interest in business, too. If they had business ideas, we’d give them some free advice. If no-one was interested, we’d go home and lick our wounds.

Why Barking? Well, it’s urban, politically contentious (this was the BNP’s target seat at the last election), racially diverse and considered to be poor and under-served.

So: do the people of Barking lack entrepreneurial spirit?

Oh no. There’s bags of it. Across the week I was there, we gave specific business advice to over 400 people; met hundreds more, and heard countless great grass-roots ideas. For every individual who makes it onto Dragons’ Den, there are literally thousands of people who just want a comfortable income for themselves and their families; and the opportunity to decide their own futures.

And for every boarded-up shop which blights every high streets up and down the country, there are thousands of people who are itching to try something new.

If just a small proportion of the 17 million ordinary people who want to become business owners did so, it would make a mighty difference to the mood of the country. I met a tiny number of them in Barking, and I think we have every reason to be optimistic.

B-b-but what if I don’t like footie???

It’s that time again. For four weeks, you can’t move for footie.

Now, as it happens, I’m not a huge football fan. I’ll be reasonably interested in the England games, and I’ll almost certainly watch the semis and final games. But I wouldn’t break into a run to get anywhere in time for a match, and I don’t really get into the whole jingoism of football culture.

From the deluge of World Cup themed ads on TV, you’d think I was the only person in the country who wasn’t gripped with World Cup fever; but the truth is, plenty of Brits are as apathetic as I am. We’re not vehemently anti-football, we just don’t really go mad for it.

Which leads me on to a cruel truth: advertising is a very blunt instrument indeed.

If we lived our lives through the prism of advertising, it would be perfectly normal to believe that all men between 18 and 40 live in loft apartments fitted with table-football, drink premium bottled beers every night and obsessively watch the footie on the latest plasma-screen TV whilst doused in a fairly pungent deodorant/aftershave combo.

Ladies, meanwhile, have little to concern themselves with beyond the length of their lashes, although there is now a definite pseudo-environmental/body-positivity concern for beauty products with fewer additives and more natural ingredients. Luckily, today’s ad-ladies don’t need to worry about attracting loft-apartment-man; because they’re happiest in a more female-oriented Sex And The City shopping utopia.

I’m not criticising these ads – they do successfully sell products. But they are a blunt instrument: at best they clutch aimlessly at the most floating of straws of our personalities. They can’t hope in a million years to successfully “identify” with us as individuals.

To do that takes much smarter brains, and these brains ply their trade very subtly indeed. Tesco, the pioneer of loyalty cards, uses the complete purchase history of Clubcard holders to make accurate predictions about their shopping habits and then offer discounts or special offers which are actually relevant and interesting.

Similarly, Amazon stores reams of shoppers’ information to better make recommendations on future purchases (by the way, if this sends privacy shivers down your spine, I heartily recommend the extraordinary Channel 4 documentary, Erasing David).

The point is, getting to know a customer gives you a much greater chance of establishing a mutually beneficial relationship. The miracle is, you don’t need to know much about a customer to massively exceed the quality of relationship achieved by an advert. If someone like Tesco sees that you buy cat litter, they will, for example, offer you a discount on catfood backed up by a nicely personalised letter:

“Dear Mr Smith,

We know that even when money’s tight, you’ll still want the best for your pets…”

You’ll feel much more engaged as a consumer with that supermarket.

Even the smallest of companies can now take advantage of this relationship-building, thanks to CRM (Customer Relationship Management) software. It’s a genuinely useful technology solution, because managing each interaction and purchase is something that a one-man business simply can’t do.

Good CRM packages will:

• Manage your sales cycle – prompting you to call sales leads back, so potential clients don’t get forgotten
• Slice and dice your customers – so you can identify high-value clients, and spend less time on less valuable ones (or timewasters!)
• Prompt opportunities to sell more – did a customer buy a washing machine last week? Why not get back in touch to offer them an extended warranty.

All of this means better sales for you, without badgering your customers – in fact, they will ideally consider your sales effort to be simply exemplary service. Which is why I’m waiting for my local supermarket to write to me as follows…

“Dear Nick,

Since you won’t be obsessing about the football, we would like to offer you the following great deals:

Earmuffs – to drown out the cheering, £2.99

DVDs – because there’s only footie on TV, £4.99 each

Sancerre – well, because every day deserves Sancerre, £6.99

I live in hope…

And if you’d like to know how to get closer to your customers I can recommend a few articles worth reading:

Download: Give your customers some TLC and keep them coming back

Article: Look after your customers with CRM software

Get a free 30-day trial of hosted CRM software

Turning a hobby into a business

New entrepreneurs, on the cusp of starting their own businesses, generally fall into two categories:

1. People with no idea what to do, but the urge to try something new
2. People with a brilliant/hare-brained idea, but no idea how to execute it

In the second category are a fabulous breed of people: the hobbyists. Turning a hobby into a business is a wonderful idea because:

• It’s something you already love doing, so you won’t get bored
• Startup costs are comparatively low (unless your hobby is something like ‘live space exploration’) because it’s something people already do for fun. You probably own lots of kit and raw materials already
• It’s something that other people are interested in too- and that means there’s probably a defined market, in fact there’s often a thriving community with its own magazine, events etc.
• If you already work, it’s the sort of business you can kick off in the evenings and in your spare time without prejudicing your work or income- and you won’t feel too knackered because you’re doing something you enjoy.
• And if you completely mess up, chances are you won’t feel like you wasted your time.

My friend Sue makes glorious intricate dolls’ houses- originally this was a hobby; now it’s something of a kitchen table business as Americans in particular love historically accurate miniatures. Renata, meanwhile, makes jewellery from beads, and now teaches her skills at monthly sessions. eBay businesses are also a classic hobby business – I recently met a lady who specialises in the import and sale of (specifically) Dutch clocks. Another friend decided that other people might like the same sort of dresses that she likes, and so has started selling them.

All these businesses are about starting small, spending very little upfront, taking low risks and seeing what happens. One of the thrills of eBay, for example, is that there’s basically very little risk at all: pop something up for sale and the world is your shop window for a few quid.

So, what are the downsides? Well,

• Banks are still cruelly resistant to kitchen-table businesses. I use the word ‘cruelly’ because I do think this is unfair. Hobby businesses generally don’t ask for big dangerous loans; in fact they’re often the model of cost-conscious entrepreneurship. I think that banks often like to class hobby business owners as ‘unreliable amateurs’ when what they really mean is ‘people who will be perfectly happy without making banks rich by buying unnecessary financial products’. In other words, hobby businesses are actually very prudent. They deserve to be taken more seriously.
• Occasionally, passion can cloud your business judgement. Hobbyists are often terrible at accounting for their own time, particularly in crafts and design businesses. If it takes you twenty hours to fashion an authentic medieval crossbow, you need to charge for those twenty hours and all the materials- even if you enjoyed every second of making it.
• And the biggest disaster of all… it can stop being fun. Once your hobby becomes a job (which is especially a risk when you become a finance director, marketing director and sales manager as well as the person making the product), it can suddenly lose its idyllic lustre. You need to keep the fun alive by sticking to your roots and expanding only at your own pace.

If you have a hobby which you would like to turn into a business, here are my simple top tips:

• Start small, stay small. Most hobby businesses fall over when they try to scale up. Unless you really do want to become MegaCorp, take some income for yourself and your family, and be happy with that!
• Keep an eagle eye on your costs. In business, money is everything. If you don’t cover the cost of your raw materials and the time you put in, you are guaranteed to make a loss.
• Use your network. You know lots of people- many of whom will be into the same hobby as you are. They are your ideal customers.
• Don’t ditch your day job unless you’re convinced you can make a go of it full-time.
• And definitely don’t ditch your day job unless you’re convinced it will still be fun in a year’s time.

Careless talk costs money and reputation

This week I thought I’d tie together several news stories which all belie the same theme: loose tongues cost both money and reputations.

On Sunday, the News of The World published an extraordinary expose of the Duchess of York, apparently hawking business access to her ex-husband. It’s a grubby little tabloid set-up; but other stories have the same message without any journalistic axe to grind.

The Queen’s Speech, for example, which contains the new administration’s legislative agenda for the next Parliament, was leaked in full to at least two Sunday newspapers.

And then there’s the astonishing story that during heated last-minute talks at ACAS between BA and the Unite union, with a view to averting strike action, Unite’s joint leader Derek Simpson was merrily using Twitter to send out details of the talks. I think it’s no surprise that BA chief executive Willie Walsh was incensed.

I am prone to indiscretion. I find that, in general, a straightforward (sometimes ‘forthright’ would be a better description) approach works best. I certainly find politicking a largely destructive force in business, and prefer to encourage an environment in which everyone pulls in the same direction.

But there will be times, and inevitably those times tend to be when things are going wrong, where discretion is a valuable commodity. I would love to live in a world where I would be comfortable with, say, everyone knowing everyone else’s salaries. I would love to think that if we needed to make cuts or terminate contracts that nobody would come out of the experience with an axe to grind. But they do – because everyone has a different perspective on events and  it’s natural sometimes to cast blame (it’s a natural extension of having an opinion, and everyone is entitled to have opinions).

The larger a company becomes, the more this is the case. In a five-man organisation, it’s impossible not to be in one another’s pockets, and there aren’t any divergences of opinion. As soon as you hit even just 15 individuals, everything changes. Everyone doesn’t know everyone else, or everything about the company, and division will creep in. It’s a natural consequence. At this stage, almost super-human strong leadership is required to keep the ship on an even keel; and the best solution is a devotion to internal communications. That may mean a newsletter of some sort; although my personal favourite is regular team meetings (either around a particular challenge or subject, or by all means just have a social in the pub). In particular, foster a culture in which at some stage of a working month, everyone is entitled to have an opinion on something- even if it’s well beyond their official remit.

The truth is, we crave involvement far more than we crave money. To be ignored is far worse than to be underpaid. A company is like any other gathering of people (indeed the word “company” means just that – a group of people). And when groups of people come together, as families, businesses, social clubs, campaigning organisations, political parties, football fans or whole societies; every member of every one of these groupings wants just one thing: to feel that their opinion matters, even if it’s in a very small way. You can’t cut the rumour and gossip; but you can manage it by directing it internally. Arguments aren’t the perfect outcome, but if everyone has an opportunity to vent their spleen reasonably openly (and I have quite happily had whole shouting matches at my desk), a host of industrial relations issues would be vastly better contained.

Junior Apprentice v. Make Your Mark: No contest

The juggernaut that is the Apprentice rolls inexorably on; this time with the format franchised out to youngsters. Yep, it’s ‘Junior Apprentice;’ or, so far as I or any of my friends can tell, ‘Where The Arrogant Ones In Senior Apprentice Obviously Come From.’

You can probably tell, I’m not a fan. My issues with The Apprentice are as follows:

• Doing business is about building relationships. You can’t build relationships in a single eight hour day; you can only try to bully people. Therefore The Apprentice is unrealistic and bullying.
• I think Alan Sugar is often wrong about things. There. I said it. I think he gets stuff wrong.

If you really want to see kids learning about business, look for another, much simpler, quieter and massively more effective initiative. I mentioned it here last year too; it’s the “Make Your Mark for A Tenner” competition, and I think it’s brilliant (as is its co-founder, Oli Barrett – see his site for more excellent business advice).

Make Your Mark is very simple: give thousands of schoolkids ten quid, and see what they can turn it into. Genius.
It’s fun; it encourages entrepreneurship and teamwork; it costs less than a single episode of The Apprentice to run the whole thing, thousands of kids participate, and it gives children a much more realistic business experience.

The results of this year’s Make Your Mark for a Tenner are just out, and once again, there are great stories of achievement and persistence.

Take Scott Chapman, aged 11, of Allestree Woodlands School, Derby. Scott designed and constructed his own range of Mothers’ Day cards, featuring his own poem laminated inside.

Quite rightly, he used his £10 to buy materials and make a few cards; and then used the proceeds to buy a laminator and some more materials. Spot on: start small, re-invest, and only take profit out when you can.

Then, he approached a local supermarket to ask if he could set up shop in their local store during the run-up to Mother’s Day. They agreed – but pulled out at the last minute. Undeterred, Scott blagged an interview on his local radio station, and Sainsbury’s came to the rescue. Scott sold almost 800 cards in just five hours; making the profit on his tenner a whopping £537.51.

Scott says “I thought it would be really good to design a gift that people my age can afford with their pocket money, because people do not get much money, something that mums would like and could keep when we aren’t close by and something that I could sell to shops and supermarkets.” That, my friends, is product design in a nutshell.

Every year, Make Your Mark shows kids how real business works – and the kids show us original thinking and eternal optimism. Sounds like a pretty good bargain to me.

Business goes to the Fringe: How to make a million before lunch

Entrepreneurship is cool. It’s going to stay cool, because in a recession, business is the most exciting way to turn things around. But how can we bring business to the masses? Rachel Bridge, Enterprise Editor for the Sunday Times is having a go… by taking a one-woman show about entrepreneurship to the Edinburgh Fringe Festival in August. It’s called “How to Make a Million Before Lunch” (as is her latest book, out in August), and whilst Trading Standards might have something to say about the title, both the book and the show are well worth the effort.

I don’t know what possesses a perfectly sane journalist to cast herself at the mercy of a baying Edinburgh audience, but last night I saw the preview of her show, and it’s jam packed with the real-life experiences of businesspeople she has met over the past decade. You’ll meet the baby-foods producer whose nine and ten year old children had to endure her experimental purees. Or the lady who “did musicals” when musicals were a dead loss; creating the phenomenon that is Mamma Mia. Rachel’s show is jammed with anecdotes and powerful advice for anyone looking to go it alone.

You can catch Rachel’s show at the Pleasance, 17th-29th August; but meanwhile I caught up with Rachel for a chat – listen on to find out:

• why entrepreneurship is still “cool”
• why you shouldn’t invent anything
• why there’s nothing wrong with being happy as well as rich

My election message: Time for change? Time for corporate responsibility

It’s going to be an exciting week. For me, election time is thrilling: a pivotal opportunity for us all to have some sort of influence over our immediate futures. I feel that anyone who squanders their right to vote by staying at home has no right to moan for the next five years.

This election, in particular, interests me because, as an entrepreneur, I am interested in business issues. And with our economy in the most heinous state since the end of the Second World War, I believe that businesses of all sizes will have the most important role to play in our recovery. Worried about your pension? Business is what will fix it. Worried about how we’ll support the benefits system? Only business can support taxation. Concerned for the NHS? It’s money from enterprise which will keep the NHS afloat. Entrepreneurship has never been more important; and indeed the challenges with which business must wrestle (globalisation, creditworthiness, business ethics etc.) should all be at the top of the agenda.

Which is why, whichever way you intend to vote on Thursday, I want not only to be an evangelist for business, but also to point out where business has gone wrong. In the past ten days alone, for example:

• Ryanair boss Michael O’Leary tried to wheedle out of his legal obligation to pay compensation to passengers stranded by the Icelandic ash cloud, before finally relenting.
• Goldman Sachs executives have tried to explain the sharp practice of some senior executives to a Senate Committee
• BP is struggling to respond adequately to an oil slick from a capsized drilling rig which threatens to be the most calamitous environmental disaster since the Amoco Cadiz – if not worse.
• And on the streets of Athens, ordinary people are in running battles with riot police because of austerity measures caused by the global banking crisis which they are paying for, sometimes with their pensions.

What unites all of these stories is that they serve to paint businesspeople in a terrible light; as grasping, self-centred and morally bankrupt. I have no right to shout at the telly when Bob Crow and the RMT Union holds commuters to ransom with rail strikes, when there are so many examples of capitalism failing to deliver to ordinary people.

Many large companies (rightly) devote varying proportions of effort to what has become known as “Corporate Social Responsibility” or CSR- activities which allow businesses to put something back into their communities. For some companies it’s a major part of their work- the Co-op, for example, was a pioneer of Fairtrade sourcing; and in this way CSR has become woven into the very fabric of the company’s operations. For others, CSR efforts may simply be the occasional charitable donation.

There’s nothing wrong with any of these activities; but I believe that they’re largely deflecting attention from the real issue: shouldn’t businesses operate ethically in the first place? Each transaction should in any case be morally sound. My point is, you can turn a buck without being unfair to anyone – indeed, the whole point of a transaction is that everyone is happy with the result.

Now, I know that sounds like blissful naivety; but it isn’t. I’m an ageing hippie, but I don’t worship crystals, wear tie-dye pantaloons or make decisions based on how my chakras are feeling. I am a hard-working businessperson, and I make decisions based on what is right for my businesses and the people who work in them. Whereas the stories above leave us with an electorate convinced that business is full of bad guys who will happily pull the ladder up after them once they get to pastures green with cash.

Whoever you vote for on Thursday, there will be swingeing cuts and plenty of economic pain. Politicians, communities and families will be part of the fix; but businesses will have a crucial role to play – and not just big businesses; the thousands of one-man-bands and small ventures on your doorstep are all going to be needed. It’s all hands on deck. But if I’m going to convince you of this, every business needs to rediscover its responsibility to its customers, the environment, and the community in which it operates. Just remember that there are thousands of responsible businesses out there; they’re just not the ones that hit the headlines.

Into the Fox’s Lair 2010

Four Foxes in deep thought

Off to Leicester last week for my annual pilgrimage to DeMontfort University, where the business studies courses include a ritual called Fox’s Lair – a thinly disguised version of TV favourite dragon’s Den. Teams of students put together a business idea, draw up a plan and present it to the Dragons – no, I mean Foxes – who pass judgement and offer advice. Each day (and it runs for a fortnight), four Foxes from various walks of business show up without a clue as to what the students are going to present.

It’s a real exercise, some of the youngsters spend weeks getting it right (and some of them about ten minutes), and it counts towards the progress of their course. Many of the students turn up absolutely petrified.

It’s my fourth year as a serving Fox, and it’s a highlight of my year. It’s a joy to meet possible entrepreneurs of the future, it’s great when genuinely good ideas pop up, it’s hysterical when they mess it up, it’s great to help out, and anyway, they give us biccies and lunch. What’s not to love?

So… what can I tell you about this year’s propositions that might be useful in helping you run your own business? Well…

• Money is always the downfall. This year, as with all the preceding years I’ve judged, money has been the problem. Almost all the teams underestimated the likely costs of getting their business started. The really dodgy ones hadn’t got a clue about what to charge for their product or service. Equally, though, one team looked like they hadn’t done any sums until their nominated finance man surprised us all by coming up with all the numbers (and perfectly good ones, too) from memory. Us Foxes were scrabbling with calculators to work it all out, only to find out that he was absolutely right. Nice work.
• You can’t polish a duff proposition. One team made an excellent presentation, full of graphics and charts; but their idea (a warning system for cars- I won’t go into further detail to spare their blushes) was utterly unworkable. The sad thing is, it should have looked unworkable from day one.
• Teamwork is everything. We saw teams that were beautifully integrated, with tasks and roles clearly distributed across the participants. And then we saw terrible teams; particularly teams with a strong and forthright leader, who had bludgeoned his way through the rest of the group. This sort of dynamic is terrible: it means the CEO will always go unchallenged, even when the idea is bonkers.
• Research works, most of the time. All the participants had been told to conduct some research as part of their presentation; and those that had done so found that they had a far better idea of the likelihood of their project’s success; plus how much people might be prepared to pay for the service. On the other hand, they also learned that the way survey questions are constructed can influence the answer – indeed some people in the street will say anything just to get you off their backs.
• You can’t learn business skills from a book. I’m not denigrating this or any other business course; but one of the benefits of this sort of practical exercise is that what we learn in books is only part of the story- you can’t beat going out and trying to give something a go. At least one team blindly tried to crowbar their marketing strategy into the formula they’d learned from a book – and it doesn’t work. Part of being entrepreneurial and innovative is knowing when to throw the rulebook away and try something different.

What did I like best? Well, congratulations to the team who came up with the idea of vending machines for nightclubs. The machines would contain miniature perfumes and deodorants, bottles of water (apparently many students just drink water these days – and don’t want to stand six-deep at a bar waiting for service when a bottle would do fine), Scholl Party Feet and disposable shoes for tired feet on the way home, and toothbrushes and “other useful things” for people with no intention of going home at all… We all agreed that this sounded like a cracking idea – indeed the only question we had was: why isn’t anyone doing it already? Are nightclubs untrustworthy institutions when it comes to holding cash? Is it hard to re-stock a vending machine at 4am? Would the margins simply be too small? Either way, we reckoned this was a proposition worth continued investigation, and I salute the team which came up with it. I hope they take it further. I can’t wait to see another selection of ideas from the inspirational to the downright crackpot next year.