Latest / The Enterprisors / The Myths of Building a Business
Transcript
- Tim Meadows-Smith: Welcome to the flip. Every successful CEO faces a choice. Keep doing what got you here, but no further, or flip to building what gets you there. Two 20 million pound businesses make different choices. 10 years later, one is worth 35 million, the other is worth 4.4 billion. That's not luck. That's not market timing. That's the flip. From founder dependent to enterprise, from hero to architect, from 35 million to 4.4 billion, this is the flip. And I'm Jo and I'm with my host, Tim. Tim, hi. Hello, Jo. Hi. So in this week's episode, we're going to talk about the myths behind building a business that each CEO could potentially face. Do you want to take us through them? Well, look, the myths are societal. We have a series of governments who use the term SME as if it means something. Small and medium sized enterprises. It encompasses five and a half million businesses. Nearly 15 % of the working population lead one of them. Wow, okay. A massive number. About five million of them are only employ one person. About two million of them are on benefits because they can't afford to live without the support of the state. At the other end, the medium size, depending on whether you're defining it by turnover or by number of employees, is anywhere between about 13 or 60. ⁓ 60,000 people. Literally, there are only that number of medium-sized businesses in there and at the top end of that they're turning over 350 million and employing over 240 people. How is it that the government can... rattle off a phrase, SME, where nearly everybody in there is just one person, but some of them are proper grown up businesses. Do we really think their needs are the same? Absolutely not, because an SME at the very bottom of the scale, the S, the very, very weaned S has created themselves a job. Yes, and that possibly needs propping up. Exactly that. so government policy is all geared around how do we support the startup? How do we celebrate these heroes who are brave enough to get up and start something for themselves? And they are heroes, but they are heroes who are underdeveloped, need a lot of support, need a lot of guidance, and don't get any unless they find it for themselves. And of course, people don't go looking for something that they don't need. Indeed. And so the first myth is that the engine of the British economy is founding new businesses and then leaving people lost trying to work out what to do with them. Because after five years you've got a 90 odd percent... failure rate in terms of not yet able to properly sustain the person who founded it. Just that one person? Well, yeah, just the one. I mean, most of them have actually gone out of business. But you can't call it success if the person who started it can't afford to live on what they started. And so the idea that this is the engine of the growth of the British economy is utter nonsense. Yeah, it is. And then when you look at, so most of the people who are out in chambers of commerce and instituted directors and local networking are people who are trying to reach their first million a year in revenue, not profit, revenue. nearly all of those so-called active, seemingly successful micro businesses are trying to break their first million. And it's less than 3 % will actually achieve that. And then taking that on from the 1 million to just 10 million, which is really the start point for being the engine of anything. It's the end of the runway ready to take off. less than half a percent get to that stage, not yet ready to hit down the runway and take off. And then to get from there to a hundred million or beyond, you're talking again only about half a percent getting to that level. And so the numbers are really tiny. But actually, if the government really wanted to know where the engine of the British economy is, is those 13 to 50,000, depending on whether it's revenue or employees, capable of really driving growth and really driving productivity is where it sits. those 50,000 do half the total sales of the five and a half million who are smaller than them. 50,000 do half what five and a half million people are trying to do. That's a bit like the way the tax works as well but if you were to take just those 50,000 businesses and say to them, could you please improve your productivity from about 30 % and double it to about 60%, you would increase the corporation tax take by 30 billion a year. So you should talk to the Rachel. you know, our chancellor was looking for about that number when trying to tax people that really could not and should not have been taxed. And created a whole raft of unfairness and unworkable situations. And exodus, mass exodus. And all it would have taken was a little bit of pump priming focused on a relatively small number of businesses to achieve the whole of the problem, not just for this year, but for every year thereafter. That's a tragedy. Let's not get into politics. last episode, you mentioned that the myth is that the difference between 10 million and 100 million is five and a half inches, i.e. between left and right ear. Indeed. Can we unpick that a bit? Well, yeah, so most of us get our understanding, young people get their understanding of what it is to be an entrepreneur from two sources. The education system, which leads people to believe that you can be anything you want to be and you can start as a career choice, a business from scratch when you leave university. And Hollywood that has this idea that young people get into business, are enormously successful and have ⁓ wealth unbounded and fast cars and fancy holidays and private jets and all this stuff. ⁓ of simply having an idea. And it doesn't work that way. Really? The idea of being the lone hero simply does not work as a business model. But it is how roughly five and a half million people behave when they are leading ⁓ a fledgling business. And they're perceived as being the hero as well, aren't they? Because they're the brave person that goes out and battles against all odds to become the hero who created themselves a job. There are local awards there, the local newspaper, the local radio will celebrate the fact that you went out and won a big order or you managed to open a new branch or you managed to do some small thing that has taken you from nowhere to a little way. But that's not... going to provide you with the freedom or the lifestyle that you probably imagined when you sat out on this journey ⁓ to be ⁓ self-sustaining, freedom of choice, wealth to do the sorts of things that you really want to spend your time doing. And it just doesn't happen. And even when you get to the beginning of opportunity at about 10 million, you're still incredibly busy. stressed, overworked and virtually no disposable income. So it really isn't the dream that people imagine and the only way you can make it that way is by understanding that the leavers... of performance and the mechanism of leadership. People are not born leaders, they're trained to be leaders and most people who set out on the entrepreneurial journey spend all of their time focused on building the business and almost none of it on building themselves and developing their capability as leaders. But that's because, as you say, we get to the end of our education, be it the end of the bachelor's or the master or the PhD, and then we're done. we go. We are destined to bigger and better things. The more education you have, the more likely you are to succeed, which is a myth. It is. Yeah. But it's a myth, not just in business. That's a myth in life. Yeah. The idea that when you graduate, you're now the finished article that you can largely dispense with further self development or education is nonsense. mean, the people who really succeed are the ones who say, thank you, I've now got all of the building blocks and now understand how to learn. And I'm now going to focus on learning more every day to achieve a definition of success that is created for themselves. And don't get me wrong, don't, I don't think that everybody should have the same definition of success. There are people who are quite happy being looking after others and living broadly in poverty themselves and their definition of success is how many other people they make happy and absolutely fantastic you're absolutely right to decide that and who says who's right and who's wrong if it's right for you it's right the difficulty is when people have an idea of success that's given to them by probably other people yeah that is way beyond their current capability of achieving unless they focus on what you have to do to achieve it. If they do that, then over a period of time, you can learn the skills and compound it and get to a place where you can achieve that particular definition of success. My big warning is just make sure that it is your definition of success that you're chasing. most of us take somebody else's definition of success and almost on a daily basis get diverted from, you know, to the right and then to the left and then up and then down, anything but the direct route to where we think success should be because we haven't thought about it. True. And we don't know what we don't know as well. And indeed, of course, you do need to keep re-evaluating that because we can all remember those days when we were teenagers and some aged aunt would say, well dear, what are you going to do for a career? And you'd I don't really know. Because you've no experience on which to base it. And that's true all the way through your life. You've only got your own experience and the things that you've seen and touched and felt to base your vision of success on. Businesses, if they do things properly, and they're very big businesses that are dominant and remain powerful for decades, all review it every year. They redefine success themselves every single year as part of a process of making sure that they remain dominant and strong. Which is vital in this ever-changing world. And we are changing in tech, with AI, we're changing globally. Every time Mr. Trump opens his mouth, we're changing, so we have to pivot. And I think the key is actually is if you are able to go back to the previous episode, the questions of what's coming next, what don't I know, what should I know, then you are able to do that. That is all part of your development. And look, I'm already a pensioner and I'm still trying to work out what I'm going to do when I grow up. me too. So, know, this is a lifelong problem. We've both been on the same course that we did in Living on Purpose where Craig, who we both know, talked about the Anthony Robbins six human needs and one of them, which is a spiritual human need, is growth. Yes. So every human being needs to grow everything needs to grow otherwise they wilt away. Atrophy. you know if you've achieved the point where you've seen everything you want to see, experienced everything you want to experience and have got everything that you might want to buy or have, it's time to die. Yes, time to lie down. Absolutely. The fact of the matter is you're blessed if you've got things that you're still striving for right up to your last days. Absolutely. And all of us are on this journey of progression and each of us has a different definition of success. But the thing about people who go into business is they tend to forget themselves and focus only on the business. Those who are going to be truly successful are those who first work out what success looks like for them and then how does that fit with what they're trying to create as a business and if you can pitch that out several years and define that in very great detail and then just work back year by year what you would need to do to get there you can build a bridge from a real definition of success to where you are now and it shows you what to do. have, you've got a name for that, haven't you? I call that Utopia First. Yeah. So it is a, it's a variant on a well-known technique that does it for the business, but it adds in that critical factor. I don't know anybody else who does add it in, either way, that critical factor of doing exactly the same process for you as a human being. Yeah. And if you as a human being know where you are going and you look after yourself, then you are capable of looking after your family and your friends and your employees and contributing to King and Country. If you don't look after yourself, you can't do any of those things. I totally agree in everything. And it's the whole it's a whole aeroplane thing. Put your own mask on first and then help other people. Otherwise, if you can't breathe, you're not going to be able to do that. Exactly that. So you said there are myths about business, about growing a business. Are there any others that we haven't? Well, I mean, there are a number of others that come up. mean, there's the there's a zombie myth, which is effectively where businesses get to when they've grown the business bigger than they are. And so they start to flatline in terms of growth. They are. relatively unprofitable, sometimes loss-making, and they just literally exist to pay the bills. They're zombies. and people don't know how to break out of that zombie state. And some of them feel as though it's a form of success. It's a bit like spending Sunday afternoon in your living room with the fire and your slippers on and you're nice and warm and there's nothing really bothering you. It's all right on a Sunday afternoon. I don't I want to do every you wouldn't want that to be every day. so you've got any number of zombie businesses out there who simply exist to pay the blessed bankers. know, they borrowed money and all they do is service the debt and they employ people but there's no progression for those people. There's no promotion for those people. There's no excitement for them. They just simply live. So there's, you know, a myth that needs understanding, breaking down and then as you say living on purpose so that you break out of that and do something different. in that state as a CEO, you have probably fallen into sort of lethargy, haven't you? therefore, you probably need somebody to go in and pull you out of it rather than actually drive. Essentially, you've suppressed your ambition and you've just allowed life to happen to you. Which if you're comfortable with that is absolutely fine. I don't want to criticise anybody who thinks that's a good way of life. people don't think that's a good way of life they simply don't know how to break out of it and it's not that difficult. They're bored and unhappy. it's not that difficult and then you have this kind of Phoenix myth which is you know companies struggle and struggle and struggle and they say if only we had a bit more money and then from somewhere they get a lump of money and they change nothing in the way they do business. They rise out of the ashes though that's what the Phoenix does. ⁓ Like, you know, Phoenix-like, you they get a new lease of life because they've got a lump of money. Only the money only lasts, you know, a year, two or three years, and then they're back where they started because they changed nothing about the model or the governance or the way that they conduct their affairs that will enable them never to need anybody else's money again. mean, a business is a structure that is there to service. Most founders find the themselves serving the structure. They live to support this creation that was supposed to set them free and provide opportunity and wealth and lifestyle for themselves and all of the people who support them. If it's not doing that, it's not doing its job. Businesses are not something in their own right. They are there to service. They're at all. They're a means of us exchanging what we're good at with other people and what they're good at so that there's money for us to do the things that we chose to do. None of us... on our deathbed looks back and say I wish I'd spent more time in the business. No, nobody does. not. We, you know, we live to do things other than our work usually. So you've got to flip it to the business working for you rather than you working for the business. Yes. mean, essentially, you have to go on this journey of learning how to design a business that serves you rather than creating and running a business that you serve. know, people who run a business are not successful. people who lead a business and create an environment where everybody else's success becomes inevitable have achieved broadly what they set out to do, which is to create opportunities for others and to have the freedom to do what they want to do and have this structure of a business serve them. Yeah, absolutely. In this country, we don't know how to lead. We're taught about how to manage. back to what we said in the last episode about micromanaging and they're not actually able to step out of it. ⁓ how does someone go from this comfortable... And I'm so comfortable it might not might be uncomfortable, but they that place of knowing I they're either flatlining as a zombie or they've done this Phoenix and they know back into that they they they they're comfortable in that in the environment that they've created. How do they go from that to something else? Because there are there's a psychological barrier as well, isn't there behind all of this? There is the fear of not being enough or not being able to or what if I put my head above the parapet and someone slices it off. To solve any problem you have to recognize there is a problem. ⁓ So you can't, for people who are in denial about there being a problem, you can't really help them and they can't help themselves. For people who've said, I'm in a place that I don't want to be but I don't know why. As long as they ask for help you can find out why and then you can analyze the problem and then you can solve the problem. But most of the people who I meet who for themselves are admitting I just don't like where I'm at. I'm not yet ready emotionally to let that out and share it with anybody else. Interesting. So how do you help someone do that? I don't know. I'm not God. I can only help people who have reached the point where they say, I want to be helped. I mean, in the world of distress businesses, where they owe money to everybody, know, the government, the banks, the credit card companies, you name it, they owe money to, they can be so far in the hole and still not admit that there's a problem and think, if only I could find a more money we could carry on for a few more weeks. They still won't ask for help. It's just... But that is that's psychological isn't it? It's ego. It's ego. well times into... So they think it's safer to stay where they are than to actually ask for help or to admit that they're wrong or... Unfortunately society has taught us to think that we need to behave in a particular way. You see it with... children, you you see teenage girls who need to be a particular shape, you see teenage boys who need to be in the gym and create a particular shape that they aspire to but they can't achieve. There's all kinds of pressures on people from outside that tell us what we have to conform to and none of us is ready to admit that everybody else in the world is like us. and is not the finished article. We are all still learning, we're all still striving to improve and you look at world champions and they have a team of coaches trying to help them get just 0 % better than they were before and their next nearest competitor and the real champions keep saying what's wrong with me, how do I improve and they improve. And yet those of us who are just a country mile off the top somehow need to pretend that we are the perfect, we've got it all sorted, we're in control, we know what we're doing and we can't share with everybody else or just take a little bit of help in solving some relatively simple things that would release us from the trap. So in the next episode... Should we start looking at how to release us from that trap and what that transition is? We should. That'd be fun. And it'd be nice to talk about something positive. Yeah, absolutely. And also in later episodes, we are going to be inviting CEOs in who have made that transition, possibly not to the 4.4 billion mark, because they may well be on their own private island. But we're going to be inviting people in to talk about where they were and how they got there. matter how big the pile of money is, it's still not success. pile of money just makes it easier to live with failure. Yeah, you know, the money is just a means of exchange. I call it freedom tokens. Yeah, well, I like that because it is, you know, it's it's all about creating choices and being able to fulfill our human needs of being able to help other people, you know, having having value for ourselves, having the opportunity to grow, the opportunity to live with change. and to shape change. And those are the things that we actually crave. The money is just a means of being able to do some of those things. that's another myth that we've been taught that money is so, very, very important and you've got to get X amount. Indeed. But the thing that all of us want to do is a bit like playing a musical instrument. You you have to practice for it to sound good. And managing yourself, you have to practice. And you need a little bit of help. showing you you know what the chords are and how to strum or you know how to blow or whatever it is whatever the technique is we all need help. bit of personal disclosure I'm suffering from that learning paddle at the moment I'm useless and I know I know I've got to practice because practice is perfect. know and years ago I gave up playing musical instruments and I keep promising myself that I will pick it up and relearn how to do some of that stuff because making music is wonderful. Isn't it lovely? Lovely. So in the next episode, are we going to look at the utopia working with them? What do call it again? Utopia? Utopia first. Utopia first. So we're look at how we look at utopia and then work it backwards to where we are now. Fabulous. Thanks, Tim. I really enjoyed that. Me too. Thank you.