Many of you will not know who Brian Clough is. He was one of the best football managers ever and achieved something which I sadly think will not be achieved again – (unless someone like Wenger can do it with Arsenal). That is to achieve greatness without spending a King’s ransom. One of his quotes was that he would only tell someone they were great – if they were. It was cruel in his opinion to tell someone that they could excel as a player when they did not have it in them to be great.

It comes down to honesty and clarity. People like to know where they stand and what is expected of them. It is amazing that we accept this as a rule when it comes to the way we manage and communicate with employees, but not when it comes to business relationships.

Last week a good friend of mine told me of a story that is all too familiar to me.

They were running a great business with real promise and I for one fully expected the business to do very well. They got into negotiations with a Business Angel and the Angel was very enthusiastic about investing. He spent a lot of time with the business and even went on a lot of customer visits. He made it clear before Christmas that he wanted to invest in the business. The entrepreneur was also very clear that failure to get investment by January would have a serious impact on the business. The angel reassured the business that investment would be forthcoming.

You know how the story will go. Earlier this week the investor pulled the rug on the investment. The business is now in a serious position and will probably have to either close down or go into extended hibernation.

There is a school of thought that believes that all is fair in love and war and business. I have never believed this. The ‘strategy’ (if it can be called this) is to say yes to a deal and then wait till the last minute to change your mind. The idea is that at that time, the business will be so desperate that they will do a much better deal (for the funder).

I am old fashioned and I still believe that your word is your bond. Do not say yes unless that is your intention. I have said yes and then said no. But this is because of something I have learned through the due diligence process or basically being told a lie. Simply changing your mind is not an option.

So my advice to anyone looking for finance is to always do your due diligence on the investor. I will write the next blog about questions you should ask potential investors.

But till then remember “trust is good, but contracts are better”. Very sad but true.

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Like finding a suitable name for a new band that you are going to launch, much time is wasted in defining luck and the importance it plays in business success. I like the definition that luck is where opportunity meets preparation.

A successful friend of mine told me that he believes that most of us (but not all) get the same amount of luck in life. It is just that some people are able to take advantage of it and some people pass up on the opportunity.

When I purchased my very first property to rent out, I remember someone close to me at the time telling me not to do it because “if it was that easy, everyone would be doing it”. It is true that you should avoid acting with the herd, but equally, it is not a good reason to not do something.

If you pardon this ego-trip, I would like to share the history of my Canada experience with you and highlight the role that ‘accident’ has played in my latest venture which I am very excited about.

My good friend and business partner, Fergus got off a plane from Portugal and told me that he thought I should write a blog. This was over a year ago – and with a lot of help from him, I started writing a blog.

This blog got ‘picked’ up by some Canadians working at the National Angel Capital Organisation and a guy called Bryan Watson – started commenting on my blog and being very encouraging about the whole thing. Before his comments, the whole thing felt very lonely! I was as a result of this invited to speak at their Annual Conference in Halifax Nova Scotia, 11 months ago.

Whilst there, I met some very interesting people including someone who worked for a great University based there called St. Mary’s University. When I next visited Halifax in February this year, I spoke at the University to some business students. I also met a person there who invited me to have lunch with her and some of her business partners.

At that lunch on the last day of my trip some interesting discussions emerged and it seemed possible that there could be the makings of an interesting business venture between us.

Earlier this year, I was also at a European Angel Conference in Madrid and I met many of the Canadians I had first met in Halifax last October again, including the President of the Organisation.

I then went to Halifax for five weeks in May this year to start this business venture. It was obvious after just two days for reasons that I won’t go into (for fear of being sued!) this venture was not going to work. I then contacted my old friends from the conference and they invited me to a few dinners and networking events. By ‘accident’ at one of these dinners, I happened to be sat next to two company executives who were both looking at the UK market for their business. I was able to help them (and since then I have invested in one of them).

Because of this evening, I was also introduced to some local government officials who were able to put me in touch with other companies that I could help and as a result of this, I was able to get a lot of paid work to help local companies – and am now going back to Canada at least one week in four.

In the interim, I have been able to use this experience of Canadian and UK angels to launch a new venture with the head of the Canadian Angels called www.newmarketspartners.com

This venture will bring 25 of the most promising Angel funded Canadian businesses into the UK on September the 30th. These companies are looking for UK based angels with market expertise and contacts in their chosen fields to help them expand into the UK.

There is another trip taking place on November the 25th in Toronto where UK companies looking to expand into North America will be invited to present to North American based Angels with strong market expertise.

The partners in this venture believe that angels add most value when their money is combined with expertise and market know-how.

If you are an angel – please email me and I will be able to send you an invite to the event. If you are a company looking to expand into North America, please get in touch via the website.

Back to the point of the blog! When I talk to entrepreneurs, what strikes me is how fluid their plans were and what an important role accident played in shaping the way their business looks today.

The lesson here is to go with the flow – but always be looking for new ways in which you can help others.

I do hope you found this blog useful – who knows what this may lead to for me or for you!

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Thanks to the guys over at wooshii for sending me this one.

Love it

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In sales we are taught a very important discipline. You have to try and ensure that you are always on your customers mind when they think of their needs that you can fulfill. This becomes your reason to call them at regular intervals and develop your relationship with them.

I was reminded of the importance of this last week when I was in Manchester coaching some businesses (great ones by the way!). I was leaving a company when I received a phone call from someone whom I had met about two and a half years ago through the Enterprize initiative. We had stayed in touch as I liked him and his business idea (which revolved around the taxi business).

I had been helping him with the occasional phone conversation every now and then. When he phoned me, I told him I happened to be in Manchester. He wanted to see me and I explained to him that I was off for a meeting with a fellow Investor who is based in Manchester – and I only had 20 minutes to get to Salford from Manchester, so I couldn’t really talk.

Three minutes later, he came to pick me up (you could never do that in London!) and we had a conversation whilst he was driving me to my next meeting. He basically made a very impressive elevator pitch – but had 15 minutes to do it.

As it happens, the investor I went to see complained that he had not seen any good investment propositions recently. He wanted to see me to ask me if I had seen anything of interest. As he was the last person I had met – I was able to mention the proposition I had just heard. He was impressed when I told him how I got to hear the pitch; here was someone (the entrepreneur) making the most of co-incidence (me being in Manchester) and seized the opportunity.

He is going to meet the entrepreneur and may invest a considerable amount in his business. Of course there are no guarantees – but the entrepreneur has put himself in a great position and demonstrated first hand certain qualities.

I guess the moral is – that I am very cheap - a free lift or lunch will do it!

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1. Never underestimate your internal strength

I have a confession to make which I am not particularly proud of; when I first got to Halifax, I had a bit of a wobble and I wanted to come back home after just two days.

It became clear to me after just two days that the purpose of my trip was not going to be met and I do lead a rather spoilt and charmed life in London so the idea of having to ‘rough it out’ did not appeal. However, with most of us, there is an inner strength that can kick in and make you make the most of a situation.

I left Halifax with a massive smile. I had achieved a great deal and will be going back this month as I managed to get engagements to get some work done. Most entrepreneurs have bags of inner strength and I was surprised that I did find that ability to ‘snap out it’. If you are thinking of being an entrepreneur, look back at situations in the past where you feel you had to find some inner strength to deal with things going against you. If you did – then you have at least one of the qualities needed to be an entrepreneur. The only thing I can promise you is that things absolutely will go against you when you start your own business!

2. Realise how important it is to feel connected – Facebook is a must have for those on extended leave

Being away from home is not easy. I have always questioned the value of social networking sites such as Facebook. Why not just phone people? My view has now completely changed!

I was using Facebook a lot and it stopped me feeling cut off from the world of my friends and it was great to keep up to date. Again, the lesson here for entrepreneurs is obvious. When you start a business, it is lonely and because of the hours you have to put in you will have little time to keep up with all your friends. That is when Facebook can be invaluable as it helps you keep up to date with what your friends are up to and ensure that you do not feel isolated and cut off. And a big thanks to my friends for helping me with Facebook.

3. Setting SMART goals really does work in keeping you happy

Before I went to Halifax, I set myself some unrelated goals for my five week stint there. One was to lose some weight (5lbs) and the other was to learn Italian (through a brilliant 8 hour CD course loaded on to my iPod). These goals were able to really motivate me and make me feel a sense of achievement. I was also able to say that I would have paid a fortune to go away somewhere for five weeks and learn a foreign language and lose some weight. I have now decided to go to Italy next year for six weeks – and immerse myself in the language and the culture – I simply adore Italy (the history, the food, the people and the culture).

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In my last blog, I wrote about the Pareto rule, commonly known as the 80-20 rule. Pareto was the Italian genius who discovered the 80-20 rule over 100 years ago.

Pareto is remembered for his work on this and of course understandably; it is a very important analysis tool for every business (and can be used to great effect for personal effectiveness as well). However, I wanted to use today’s blog about another piece of work that Pareto co-authored. This piece was to do with political elites (and led to him falling foul of Mussolini).

Pareto developed a theory that basically stated that power oscillated between two types of leaders (or elites to be more accurate). These two types were labeled lions and foxes. The theory basically stated that leaders have characteristics that make them either behave like a lion or a fox.

It is interesting when you look at the past prime ministers of the UK going back to Harold Wilson – they seem to have held a steady pattern – of a lion being replaced by a fox (it is interesting that every lion has been replaced by a fox – without there being a general election!). The pattern also seems to holds true for US presidents. It is as if the population as a whole seems to choose different characteristics for different times – or they simply want a change.

Many people have argued that the theory of lions and foxes is too simplistic. In terms of the analysis I have done on US presidents, my fox maybe someone else’s lion. And then there is bias; is it really better to be a lion than a fox? They both end up occupying power and it is not a judgment on morality or effectiveness. It is just about the skills they use to get to power and how they may stay in power.

When I think about company leadership, it tends to follow the same pattern. Lions and foxes tend to alternate and they bring different skill sets and different priorities that can help company get through the phase they are in. Lions can be a bit too focused on themselves and the constant evangelical tone can get a tad tiring. Whereas working for foxes can be no fun at all – and you sometimes feel that you are lost in a soulless bureaucracy.

Have a think though about what trait you think comes closer to describing you. You will always be better of replacing someone who is different to your own trait – and equally, if you are a founder of an organization, you would be better served promoting someone to succeed you who is different to you. When you replace someone who is similar to you, you are likely to get clash of the egos.

It also will help the business if different skill sets come to the top of the organization and help it grow. If you are working for a lion or a fox, and they are the same as you – move to another organization!

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Pareto was a genius and most of us will have come across his brilliance when we talk about the 80:20 rule. Pareto was an Italian Economist/ Sociologist writing at the turn of the century (he died in 1924).

Pareto discovered that 80% of wealth was held by 20% of the population across most countries across most time periods. He was then able to find that this rule held true over most things.

Today, retailers know for example that 80% of their sales come from the top 20% of their product range. Or that just the top 20% of their top customers account for 80% of their sales. This ‘rule’ tends to hold true across most businesses and most fields. You may conclude from this that because of the huge cost of carrying stock – why not only stock the top 20% of items. There is a danger in this which a real life example may help illuminate.

It is known in the sandwich retail business that most customers will only ever buy one of three sandwiches (is this true for you?). However, customers like to choose from at least 10! (again is this true for you?). Customers feel very annoyed when they can only choose from a few – even if the ones available for selection are the ones they would choose from!

Customers need variety so there is a danger in cutting back to much, but nonetheless, Pareto optimality is useful in determining a business strategy. I would urge you to use this rule as much as you can. Focus your marketing spend on the 20% of your customers that generate the most profit, focus your stock availability on the top 20% of items. Focus most of your processes on the areas that generate most of the output.

Recalling Pareto always makes me smile as it brings back an anecdote which occurred in the first six months of my post university career. I was working for Mr. Kipling cakes and I went with my arrogant know-it all boss (Mr. S) to see a customer who was stocking our range of products. He explained to us that he needed to look at the range he was stocking.

Customer “I need to look at the range I am stocking. Pareto runs this shop”

Mr. S “And where is Mr. Pareto today?”

I got a telling off for laughing (I know you should not laugh – but it was funny because my boss thought he knew everything)

It was also nice to be able to apply something I learnt at University to my job selling cakes!

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Last week, Gordon Brown, the British Prime Minister changed his ministerial team. It was very much like rearranging the decks of the Titanic. His days as prime minister are numbered.

Companies can be very similar to governments. When things are going well, the CEO can be all powerful and the management team will toe the line and challenge within the right forums. Minority shareholders will not have that much power to challenge the authority of the management team if all is going well (and you may ask – why would they want to if things are going well)

However, given the dire straits that the government finds itself in, Gordon Brown has re-arranged the team rather than do what most companies do which is to change the leader. CEO’s are paid a huge salary premium because there is a recognition that there role is very risky. It is easy to get caught up in the ‘fat cats’ story when talking about CEO’s. But the reality is very different.

Most CEO’s only manage three years in their role (for public companies the length of time served is significantly worse). Most of these CEO’s will not be able to get another job at that level again as they will have been branded a failure.

Hence it would seem logical that any person getting a CEO role would want to be paid a significant ‘losing-job’ bonus. This ‘bonus’ may have to last them a very long time as they will probably struggle to get another top level job.

If you are starting a business with external shareholders, just be aware that even if your business does survive, you may not as the CEO. This process can be very painful and I have talked about this before on this blog.

What CEO’s should do though is make sure they have a good blend of skills that fit into the organization. The management team should complement and build on the skills of others in the team. They should all though fit into the organization that they are leading.

For example, Sir Alan Sugar (soon to be Lord Sugar), will be joining the government. This appears to be a horribly mismatched appointment. Sir Alan has achieved great success and is a very clever businessman. However, his style of doing business and management is not one which I would advocate needs replicating. He is a man who appears to dislike education and will now be working in government leading very bright people who have a policy background. I am not saying which style is better – I am just suggesting that is a marriage made in Hell.

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One of the things I have enjoyed so much about angel investing and working with businesses is that you come across people with a very wide variance in terms of skill set. But there is one feature which really marks out successful people in my experience; they are all very bright.

However, being bright in my opinion is not the same as being intelligent. For example, I know many people who have been to prestigious universities or have PhD’s (they are the worst!) who are very slow when it comes to getting the commercials in deals.

As a salesperson, you are often required to think on your feet and work out quickly the impact on your bottom line of discounts etc. I have written blogs in the past about the importance of understanding percentages – yet I am amazed at how many people don’t get them.

As an entrepreneur in an organization you will be required to make lots of decisions quickly without having the time to evaluate all the options. It is here that your brightness comes into play.

The smartest people I know left school when they were 16 – and have been phenomenally successful. Having said that I like to work with people who are what I call graduate-caliber. By that they understand how to plan for growth and are not constantly engaged in tactical thinking.

As with all things, it is about getting the right blend in an organization. I have recently had an experience of working with two very intelligent people but I found it very frustrating because when it came to common sense and the ability to interact with people they were found somewhat lacking.

And yet, intelligence (as in an academic sense) is still regularly cited as a key pre-requisite for success. To me I would say it is actually your ability to apply common sense to a situation and get on with people. With any skill set – if it is sharply pronounced, you may find it difficult to relate to people.

Having said all of this, when you get the winning combination of great intellect, brightness, charm and drive – back it!

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The curious thing about escaping London recently has been that here in Canada, I have been engaged in more debates about the monarchy than during my time in England.

I should declare outright that I am a Republican. That does not mean that I am against the Royal Family – it is just that I find it absurd that in the 21st Century people still want to be subjects rather than citizens.

Max Weber, a German Sociologist, wrote in the early 1900s about how Capitalism seemed to have developed in European Countries that had embraced a protestant ethic rather than the prevailing catholic orthodoxy. There were lots of reasons for this and I cannot do this great piece of work justice in this blog. The very word protestant means that you are protesting against Rome.

Entrepreneurs are people who by definition are not happy accepting the status quo and want to change things for the better. The thought has only occurred to me since I have been out here in Canada, that most of my professional circle in England are republicans or are very soft royalists (in that they believe in the sovereignty of parliament over the Queen).

I am not saying it is hard to be a royalist and an entrepreneur, I just thing it is a strange combination. Royalism accepts the role that accident of birth plays in dictating your place in society. One of the cruelest facts about India is how it still enslaves hundreds of millions of its citizens through the barbaric caste system. The people who believe in this cruel system share the same belief values as royalists. That is that your role in life can be determined by to whom you are born.

I have never thought about this until recently. Halifax has a large number of ex-Brits residing here. They seem to think that part of holding on to their British Identity is being avid royalists. Needless to say, I have not fitted in terribly well in this scene.

I look at vibrant countries like the US and realize that they decided a long time ago to go down the republican route. This allows them to continuously renew and re-affirm the supremacy of achievement over birth right. The argument that is put forward by royalists is that democracy gives you George W Bush. Well it is the right of everyone to choose who they want to lead them. Bush was elected for two terms and people knew what he stood for. The argument that Hitler was elected is simply a fabrication of facts (67% of Germans voted against him, and he was able to manipulate through terror the democratic chamber to give him total control)

I really would like to hear from you if you disagree. Especially from entrepreneurs who are royalists.

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