All You Ever Wanted To Know About Starting A Business
…but were too smart to ask
by
Chic McSherry
Dedicated to my kids - Jamie and Scott
Copyright 2011 Chic McSherry
All rights reserved. No part of this book may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior written permission of the publishers, except by a reviewer who may quote brief passages in a review to be printed by a newspaper, magazine or journal.
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Starting a new business is a daunting and challenging prospect. This little book contains advice on every aspect of the process from the Big Idea to selling out for the best price. A must for every would-be and budding entrepreneur.
2012
Chic McSherry
AchieveMore
chicm@achievemore.co.uk
1/1/2012
Chapter 1
Introduction
My start in business was pretty unconventional.
Basically, all I ever wanted to do in my life was to play my electric guitar in a heavy metal band. I was in one band that was doing pretty well, getting tours and national recognition but we couldn’t seem to make the leap into the Big Time.
Like all struggling working class musicians I was, of course, on the dole during all of this time and in truth the DHSS were pretty good about it.
They set it up so that I got paid dole money for the days I wasn’t playing but they eventually got sick of this and called me in to force me to try to get a job.
This was a disaster! How could I, a sensitive artiste, actually soil my hands and work for a living?
My saviour was college. I was pretty bright and had done well at school so to get out of getting a real job I hit on the plan of going to college to “further my education”.
The man from the dole agreed that this was a good move so I opened a prospectus for Bell College of Technology, stuck a pin in anywhere and chose a course called Computer Data Processing.
During my time at college two things happened; the first being that my band split up so I formed another, better (of course) band and the second was that I actually discovered that I was good at something other than playing guitar. I was actually quite capable at, and even enjoyed, the problem solving part of systems analysis and programming.
After two years, I qualified with an HND but I still didn’t really want to work full time (the new band was by now doing even better than the old one) so I signed up for a third and final year to do an Advanced Diploma. It was make or break time for my music “career”.
Meantime, like all students, I was flat broke; so I answered an advertisement in the local Job Centre for part-time programmers and got an interview. The MD of the company was really charismatic and I thought that it would be great fun to work for him.
He gave me some part-time work doing small programming developments in DBASE and I was now earning some pocket money. The guy may have been charismatic but his business was a shambles and was going down the pan rapidly, although I didn’t know that at the time. So when I qualified from college, and as the band still didn’t have that magic record deal, I agreed to work full-time for him.
I was in for a shock one day, however, as I was called into the MD’s office and told, “Son, I think you’ve got the makings of a salesman.
You’re wasted as a programmer.” So persuasive was this guy that I believed him and agreed to a package which was basically commission only wages…and I even had to supply my own car!
I did feel flattered however that he had spotted this hitherto unnoticed talent in me: it was only later that I realised he spotted this talent in everyone he met and believed that everyone in the world was a natural salesperson. Not entirely untrue you understand, but a tad unscientific nonetheless.
So there I was, an aspiring rock star with an old second hand Ford Cortina and a commission only salary. What a result after 3 years of study. My sales training consisted of being given the Yellow Pages and told to make some appointments.
Whilst on the phone, the Sales Director would listen in on my calls and shout instructions in my other ear. It was a nightmare, but I stuck it out and miracle of miracles, I actually was a natural sales person.
And not only that, because I had a computing qualification, I became that rare animal in the IT industry at that time – a sales person who knew what he was talking about.
So I sold…and I sold….and I sold…and I sold…until I was outselling the managers and even the Sales Director of the firm.
Meanwhile, things were hotting up on the music front. We were getting serious interest from a couple of record companies and one had actually made an offer.
I was now on the horns of a dilemma; I badly wanted to go into the music business but I was earning a comparative fortune! (If you know anything about the music industry you’ll know that the band don’t make real money until they’re superstars.)
What to do? A chance conversation with one of the company’s main suppliers gave me a solution. The company I was with was not only a shambles in organisation terms, it was also a shambles in financial terms and one of their main software vendors was looking to get an alternative supplier.
Since I was selling most of their product, they approached me on the quiet and asked me if I’d be interested in starting a business with their help. Furthermore, they whispered that the accountant at my company was also keen in starting a business. In case that didn’t appeal to me, they also put me on to another dealer in the area who was looking to hire a salesman.
I went for an interview with the competing dealer and met one of their programmers, a guy called Tom Smith and we hit it off immediately. Tom’s expertise was more technical than mine and I could see that we could get along really well with me selling and him doing the technical bit.
But the package I was offered was terrible and I still wanted to get time to rock’n’roll, so I turned the job down. I then spoke to the accountant, a guy called Douglas Paterson, and he said that, yes, he was looking at setting up a business.
I offered my services and told him about this great technical guy I knew, Tom Smith, and before I knew it, we were all setting a company together.
That was back in 1988. Well, inevitably, the band folded months before the first album was released, but the business went from strength to strength.
I was well liked by all of my customers from my old company and they tracked me down and dealt with me for service and upgrades. My old employer got a bit nasty about that, but he was on shaky ground because there were no contracts of employment or covenants in place; basically, he couldn’t look after his customers so they voted with their feet.
My title, at that time, was Sales Director and I really didn’t take life too seriously for the first two or three years. I just went out and sold things and made sure that the customers were kept happy. Fairly simple approach, but it worked.
We made business plans of course and as a team we were pretty serious about what we did, but it was more of a lifestyle affair rather than a real shot at being in business.
Then something just seemed to change. Maybe I just grew up, but I just found that I wanted to be more successful, do it better, get better organised, deal with bigger clients and earn more.
Whatever it was, it resulted in the original team of three being reduced to two as Douglas left to pursue the career he wanted rather than the one I wanted.
Things improved from that point on and by 1995 we had really got to grips with the organisation and the company was running like a pretty well oiled machine.
From 1995 to 1999, our turnover increased by an average of 26% per annum and our profits grew by 28% per annum. In the same period, we averaged a 17% increase in employee productivity and 17% in Asset growth.
Not quite in the stratospheric frame, but pretty impressive nonetheless, particularly for a company that made nothing, owned nothing and relied solely on the skills of its employees.
Our only difference was the service we provided and the expertise of our staff. The quality of our management team was paramount in maintaining a competitive edge and in controlling our growth. In 2000, much of that picture changed as we changed our business from a reseller of other products to a manufacturer of our own and we moved rapidly into the software development market.
We invested heavily in R&D to produce our own web based software product and we launched it in mid-2000; right in time for the DOT Com collapse. It hurt – it hurt a lot. This was followed by the tragedy of September 11th 2001 and our business, like all IT businesses, almost fell off the edge.
But we pulled it round by rebuilding our business in the way we always have: by selling our socks off.
It’s a fact that we need more entrepreneurs in the UK, and particularly in Scotland. It’s also a fact that most small businesses don’t make it past the first five years with many of them foundering in the first year. Maybe this book will help reduce that problem a little. If it helps even one small business get up and running and to survive, then I will certainly count it as a success.
I am a small businessman through and through and so your pain is and was my pain.
I’ve tried to structure the book as a “how to do it” rather than merely a “why it’s s good idea to do it”. There are far too many business books that are full of worthy ideas but light on practical advice.
I also wanted to avoid as much as possible the taint of autobiography; I can’t imagine a more boring topic than the minutiae of my life. But my experiences have obviously shaped my opinion and character so I suppose it’s inevitable some of my lifestyle and beliefs will show through.
The first section of the book deals with the basic premise of your business; the so-called Big Idea. The next deals with the practicalities of getting your idea down on paper followed by a section on getting the right kind of backing to make it a reality.
After that the problems of organising and running a business are looked at from how to sell to where to locate. Then there is a section on the inevitable growing pains that every business experiences in its first couple of years.
The final section deals with how to get out! The latter sections aren’t intended as reference sections to be returned to when you’ve moved on. They're aimed at giving you an idea of what can happen so that you can plan and prepare for it well in advance.
The overall style of the book is petty much the way I would speak, so there are no erudite and long-winded wisdoms here, just brief and, I hope, incisive observations. I therefore apologise for my poor grammar and unashamed use of colloquialisms.
I also wanted to make it short so that it could be read and hopefully re-read as often as required. To that end, I have dropped the case-study approach adopted by many writers of business books. I have peppered the text with short anecdotes and illustrations where appropriate though; after all, nothing but the thoughts of Chairman Chic would be a bit much to take!
The quotations used came from a collection of such things called "The best of Business Quotations" published by Exley publications.
When I set up in business, I’d never been on any formal business training courses. Luckily for me, I chanced upon an advertisement for Leadership Development in London.
Their training is, in my opinion, simply the best that you can buy and it has definitely shaped my ideas and philosophy; although to be honest I was already doing most of the sales stuff they advocate – they just gave me a neat framework to hang it on.
Some of their concepts show through in this book and when you realise that the last LDL training course I attended was almost 20 years ago, you’ll understand just how powerful those ideas and concepts are to stick with me for so long.
A final word about the title: it is meant tongue in cheek. I know that if I am not sure of myself in certain situations, I can feel awkward about asking in case I’m left feeling foolish.
Setting up in business is a huge risk, it takes guts and determination and there are not many places where you can get practical help from people with real experience, never mind that you may feel too awkward to actually ask.
So there’s now no need to be too smart to ask, hopefully most of what you need is right here. It’s hard to lead the cavalry when you think you look stupid sitting on a horse…
Anyway, I hope that you enjoy the book and that it either provides the necessary motivation you need to get started or helps to hone and shape your ideas or operations whilst underway.
See you at the top.
Chic McSherry
Chapter 2
Section 1 : The Big idea
"You see things; and you say, "Why?" But I dream things that never were; and I say "Why not?"". George Bernard Shaw.
If you read the introduction to this you’d already know that not only did I not have a “Big Idea” of what I wanted to do, I actually didn’t really have a clue about business at all.
It seems madness now looking back that I was so naïve, so green; yet so absolutely full of self-confidence that I could succeed. Of course, working for a while on a commission only basis and having a really low cost of living did help.
Those who say that they want to be in business but “are just waiting for the right opportunity” or a “Big Idea” always take me a little aback.
I remember reading a quote from the author Stephen King who was similarly amazed at the number of people who told him they wanted to write.
His philosophy on writing is simple: writers write. It’s the same with those who want to start a business: they start a business. I suppose I'm doing both now.
So let’s start by debunking the Big Idea Theory. If you have one, fantastic, but sometimes a thought for the day is more than I can manage so if I waited for The Big Idea, I’d get nothing done.
I started in a market area that I knew a bit about, I had around 18 months experience selling in that market and I had a slight edge over the competition (which was, and still is, ferocious).
For every business I come across which has a Big Idea, there are hundreds where the Big Idea failed because it wasn’t actually a Good Idea in the final analysis. Others with a Big Idea rapidly find that bigger and smarter organisations can gobble up such ideas as fast as they are produced and get them to market faster and cheaper than a small start-up.
Having said all of that, if you have a Big Idea, it’s a terrific place to start and there’s no question that those companies who do start with Big Ideas and, more importantly, hold onto them, can achieve spectacular results in a very short space of time.
Take a look at the phenomenal rise in the early 2000s of IT businesses like Myspace. Meteoric doesn’t describe their rise accurately – but then you have to consider the “where are they now” question. Facebook have effectively squashed them and only the lawyers won in the end.
People who have Good, Big Ideas often wrongly assume that success is permanent. It’s a tough old world out there so be prepared to be in a constant state of change, a state of nervous excitement, pressure and stress, no matter what your idea is.
If you are like me and are one of the herd not blessed with such global insight, you will have to make do with what nature has given you. This is not as dull or as uninspiring as it may seem.
You can do this formally and it’s actually a very good idea to do so. Take a sheet of paper and lay it out like this:
I like doing / I am good at
I don’t like / I am not good at
Fill in the boxes as they are described. It soon becomes pretty self evident where your real skills lie and where you should direct your energies in the quest for a Big Business Idea.
For example, if you put “Anything to do with Sport” in the bottom left quadrant, there would be little point in developing a sports management business. It is, of course, possible to like something but be bad at it.
For a hobby, like big game fishing, and that’s fine, but for a business it represents unacceptable risk: so try to be brutally honest with yourself here.
Think this is too simplistic? Don’t you believe it. I’ve met enough fed-up and demotivated businessmen who hate their job (but love the lifestyle it gives them) and would sell-up and do something that they really wanted to do at the drop of a hat.
Worse, I’ve watched people with successful businesses flush it all away because they wanted to get into a “business” which was really their hobby.
So wouldn’t it make more sense to get into a business that you actually enjoyed and were good at right from the start?
I wasn’t particularly technically oriented, but I loved dealing with people and I loved the buzz of sales. In my case, the IT industry fitted the bill because I also dislike routine and stability and the IT business changes every week.
But that’s a retrospective analysis; no one suggested this approach to me at the outset. Maybe I’d have become a fishing guide if they had…
Once you’ve made a stab at a couple of possible options for your new venture, you need to decide the basics of the business. How it will look and feel.
For example, is it a manufacturing business, a distribution (merchant) business, a retail business or a service business? Is it a people business or is it a product/process business? This is pretty fundamental stuff and it’s important to know the business you want to be in from the start.
I raise this now because of personal experiences. The IT industry can be all of the above, and some IT businesses actually attempt to do all six of them simultaneously.
They develop software (manufacture), sell cheap hardware (merchant), have shop-front premises for passing trade (retail), provide training and support (service), run help desks (people) and are resellers (product). The trouble is that not many of them do all six terribly well.