I have been in the business of starting companies for a long time, and can only imagine how a profile of the early days might read:
“Rufus started his first company at around 9 years old. It was a sole-tradership; he started it by persuading a friend to create a flyer to go in the window of a local shop. The shop put the flyer in the window, but response was poor. The proposition was that Rufus should perform magic shows for children at their birthday parties. The charge was to be the large sounding fee of £5 per hour.
The advertising model supported by the shop was a weekly fee for display advertising based on the passing traffic to the store. As a health-food store in a rising and slightly trendy area of London the position looked good. The store had one other advantage for this particular proposition which was to prove crucial; the people running the shop liked the little boy who was trying to make some money and failed to remove the flyer after the few weeks that Rufus was able to keep up payments. This was very useful as Rufus could not have afforded the weekly fee for the two years it took before the advert produced it’s first customer.
Once customer contact was established and a fee and a date agreed it became clear that the details of the proposition had been lost over time.
The proposed audience of 2-3 year olds was younger than had been initially envisaged and a different type of content was required. What followed was a panicked attempt to create a full show from an eclectic set of skills and a limited set of props. When this failed new skills were learned, additional help was drafted in and new props were bought. The sole-tradership became a partnership. A puppet show was hastily built and scripted and a sing along was thrust wholesale into the script when Rufus’ mother heard the ages involved.
Due in small part to Rufus himself, and in large part to everyone else who pitched in to make things work, the first show was a success. This led to an unplanned viral campaign of word of mouth, and hence to several more bookings.”
Looking back I can imagine even now how the actual inter-customer conversations must have gone. ‘They kept the children occupied for an hour, and they only charged us five pounds. It was just like having a baby-sitter for the whole party and my child can boast to their friends that they had a magician’. Over time the age range increased and the show became more polished. This was, perhaps, an inauspicious beginning, but it was certainly a good illustration typifying many of the issues that face small businesses. I delegated only what I had to, but I now encourage entrepreneurs to delegate as much as they can. If you can genuinely make yourself unnecessary step back and work on improving the process.
They say that 95% of businesses fail through underfunding, and that is exactly what should have happened to the proposition that I put forward in the 1970s. In effect I received a start-up grant to pay for the advertising space after my funding ran out. The next problem I hit was that I had not researched my potential market. This was followed by a realisation that I had an incomplete vision of the product I was going to supply. Next came understaffing, a skills and funds deficit, and the lack of a growth plan. Finally came a complete lack of control of the brand image and hence of the company market presence and direction. All of these are things that should be included in your planning if you are considering starting your own company. In fact the only thing that was done right was that the founder was an entrepreneur and so when each set-back came along it was quickly overcome in any way that would work rather than allowing it to slow delivery or kill the company. Remember:
Perfect is the enemy of Good!
That does not mean that you always need to plan in order to start a company. If you have read other books about starting a company this may sound like heresy. The fact is there are different approaches to starting up, each of which tends to lead to different types of company. The meticulous-visionary approach requires detailed planning but organic growth just requires proper evaluation and testing as the company progresses. There is even some research to suggest that having goals and a more flexible approach is actually more successful than knowing from the start exactly how everything is going to work. Sadly people investing time and belief in a company are much more likely to be convinced by the latter approach regardless of which is more likely to work in practice.
Perhaps this is a good time to talk about the different types of company you might form and the different levels of planning required. I am not, at this point, talking about sole trader-ships, limited liability companies and the like. These are just different sub-categories of what most people think of as ‘proper companies’. What I am talking about is the differences between lifestyle companies and scalable companies.
When I started my business as a conjuror I was creating a lifestyle company. Had I been slightly older I could have created it with no business plan at all. It could have been an expensive hobby that started paying for itself, while I supported myself through other means. If it was successful it could then have become my sole means of support in an almost organic fashion. While this is in theory possible as a route to a scalable company it almost never works as we shall see later.
So what is the essential difference between the two types?
A lifestyle company is based around a particular person or small set of friends/relations.
A scalable company is independent of the people involved.
This means that a lifestyle company has some built in limitations; it may reach any level of profitability but will never become a big company without a fundamental change in philosophy. A scalable company, on the other hand can bring in new people and replace people who leave, it can grow.
To put this another way, a lifestyle company is something you do and a scalable company is something you own. “I am a builder and I manage a bunch of other builders” is a very different statement to “I own a small construction company”. These could both describe the same set of people taking on the same jobs but one of them can scale and the other cannot.
This book is mainly concerned with scalable companies. Scalable companies require a lot more planning to assure success; a lifestyle company will benefit from the planning but does not require it. A builder who does not plan is a builder without much work on, or maybe even an out of work builder; a construction company that does not plan is bankrupt. If your plans are for a lifestyle company by all means read this book and use the information. If you have ambitions to scale then you need to take your planning more seriously than that, and no single book is likely to be sufficient.
This is a good point for reflection. You want to start a company. Ask yourself why do you want to take this step? Once you have set your company up do you want to run it? Some people are so devoted to their idea they can never bring themselves to let go, others so enjoy starting companies that they cannot see themselves staying in a going concern. Will you enjoy the prestige of your own company or the adrenaline of creating something new? Do you want to become rich or to live comfortably? Do you want to take risks or play safe?
A bit of soul searching at this point can make things much easier later on.