Posts

How well do you know your accounts?

Lesson #6: If you don’t know the key KPIs that drive your business – you don’t know your business!

In this lesson, why you need to know your accounts better than the accountants.

Even though I didn’t have much of a schooling I was always good at maths, I’m sure in no small part thanks to the market-stall education I received, where I needed to be very quick with figures. It was quite an education, and if you’re interested in a bit of a laugh you can read about one of my favourite stories here.

In any case, back to today’s lesson. After a few years under Lionel’s tutelage he thought that I should run the monthly management accounts meeting, which basically told us how the company was going and how each magazine was performing. Lionel would still chair the meeting but I was to run the agenda. At the first meeting under this new structure Lionel did something that he had never done before. He stopped the meeting mid-flow.

“Eddie,” he said. “I want to ask you some questions about this month’s report.”

He then went on to ask me 10 questions about the management accounts reports and specifically about the key KPIs of the business. Although I was good at maths and understood figures, I hadn’t spent much time digesting the reports and could only answer four of his questions correctly. He closed the meeting, calling it a waste of time. As I went to leave (quickly), I heard a soft “Eddie stay behind please.” (Here we go again, I thought.)

He explained that it took the accounts team a long time to provide us with those figures and that they were our lifeblood.

“They tell us where we have been, and where we are going. They are our road map,”he said. “And the best you could do was answer four out of the 10 questions I asked.”

And so he said that I must learn the key KPIs that made Newbourne profitable, and that I must go through the management accounts every month with these in mind. I had to go beyond just reading them. I must understand and question them. And never again ignore them. He provided sufficient stick to get me to do it: warning that at next month’s meeting I would again be asked 10 questions, and he expected me to get nine out of 10 right.

Luckily I did. And this one lesson, more than any other, has stood me in incredible stead for a career at the helm of businesses. From that day I have always scrutinised the monthly accounts; always made sure I understood the key KPIs that make a company profitable (normally there are only two to three really key ones).

Many times business leaders and executives undervalue the role the finance team play in a business. They spend days compiling figures so directors and managers have a real understanding of last month’s result (good or bad) and the trend for the year. They can provide insights and prescriptive information that is so critical to business planning. So when you think about your key players in your team don’t undervalue your finance team and the figures they provide you with. But equally don’t leave it all to them; you should know your business’s finances inside out and what stories these little figures are telling you. Even at the market stall we knew our key KPIs. Do you know yours?

If you could use some help getting to grips with the finances in your business why not let me help you during our five-day mentoring retreat in Tuscany this October?

This is an article series based on lessons learned from my great mentor Lionel Morely Joel. Read the first article to understand the background and then dip in and out of the lessons as you please. 

Next: How listening to your young employees will improve your business.

Have the courage to face the truth about your business

Lesson #5: Don’t be afraid to change course, even when you are in front.

In this article I discuss the dangers of complacency.

Over the years, there have been amazing success stories of companies who knew they needed to make changes in order to prosper. Not many of us know it but Twitter, Pinterest and Instagram evolved from apps that never gained traction in their previous incarnation. Nor that Suzuki’s origins were in looming and Nokia’s as a paper mill. There are just as many who didn’t. Blockbuster and Blackberry anyone?

Within our group of publications at Newbourne we had a publication called The Baby Book (not the most intriguing name), and it was a very successful publication. We distributed 650,000 copies to expectant mums through 250 UK hospitals. Uniquely at the time, we over-printed the front cover with the name of the hospital, and inside the front and back cover we inserted information specific to each hospital, such as visiting times. So to the expectant mum it looked like the publication was produced by their local hospital.

This was 1975 and no small task to personalise a book for 250 hospitals, but it worked really well and was extremely profitable. Moreover, this one publication generated more than 100,000 reader inquiries per annum, from mums asking for more details from advertisers. After five years we had a database of more than 500,000 names, which in turn allowed us to earn additional income from list broking (there were no data protection laws like today).

At the same time, the Midwives Association were very concerned about the amount of advertising material being made available to mums, so they were calling for more and more and restrictions to be put in place. One day Lionel called me into his office and said we needed to start looking for alternative distribution channels to reach mums. He believed within two years the hospital distribution of The Baby Book would be severely restricted if not stopped entirely.

“That won’t happen,” I disagreed. It was our most profitable title, we had good relationships with all the hospitals and the hospitals wanted the book so why change course?

Lionel insisted we start to plan for such an eventuality, so within the next two years we launched two new baby publications, with very different distribution channels. We now had our contingency in place, and of course (as so often happened), Lionel was right. The Midwives Association’s voice got louder and slowly eroded our distribution at hospitals, to such an extent that within three years only 100 hospitals were still taking personalised copies of The Baby Book.

The lesson was very simple. Just because you are in front it does not mean you are going to stay there, especially if circumstances beyond your control are looming in the background.

Thinking of print publishing more generally is another good example, this time where a whole industry failed to look ahead not just a single company. Through the newspaper industry ran “Rivers of Gold” (recruitment, real estate and classified advertising). Then websites started being launched, not by the publishers but independently. I remember a very well-known newspaper publisher saying to me that a recruitment website wouldn’t work. He thought it was a waste of time (how he regrets that statement now) and he was not alone. The Rivers of Gold were deep, many thought endless, and by the time they realised what was happening for many it was too late.

Custom publishing was no different. In 2009 at Edge (formerly Edge Custom Media), where I was CEO for seven years, we were doing really well, winning many new clients and all looked good. But it soon become apparent that custom publishing was going to be affected to the migration to online publishing just as much – or more – than mainstream publishing. So we decide to completely change direction and transform ourselves into a content-marketing agency.

“Why? When you are doing so well, winning all these new accounts. Why change, why reposition?” one of our major competitors asked me when we rebranded. But thank God we did. Edge made it through the transition and through the financial crisis, while many of our original peers were not so fortunate.

So what is it that separates those companies that evolve and prosper from the rest? I think author Steve Tobak puts it well:

“The truth is staring you right in the face. Every company I’ve watched go down the tubes in agonising slow motion – from Sun to Blackberry – had one thing in common: executives and directors living in denial. Don’t live in denial. Have the courage to face the truth and deal with reality.”

The world is changing at such fast pace, what is successful today can become irrelevant tomorrow. It’s more difficult to predict the future than ever before, but if you stick your head in the sand, one thing’s for sure you will get run over.

If you could use some help wrestling with challenges in your business why not join our mentoring retreat in Tuscany this October?

This is an article series based on lessons learned from my great mentor Lionel Morely Joel. Read the first article to understand the background and then dip in and out of the lessons as you please. 

Next: Why you need to know the finances better than your accountants.

The importance of getting over yourself when recruiting

Lesson #4: Don’t be frightened to employ people that may be smarter than you.

In today’s lesson, why you need to get over your own ego when it comes to hiring.

Things were going well at Newbourne Publications. The company was growing and we were making good profits. With a few stern words and being put back in my place regularly by Lionel, I was learning fast. And I had just learnt what compassion really meant in terms of driving a company’s culture.

As I was getting more and more involved in running the business, we determined that we needed a new sales director. And not just any sales director, the very best – although this would be a very large investment for the company.

We had narrowed the candidates to two. Both were very good but one was outstanding: a really intelligent and savvy guy. The trouble for my part was that I felt intimidated. I was worried about him being smarter than me, taking some of my ground that I’d worked so hard to earn. So when I was interviewing him, I could sense that I was trying to challenge him and find faults in nothing – I was certainly not being fair to him.

When it came to the discussion on which applicant to hire, I wanted the very good candidate, not the exceptional one. All my life up to date I had felt insecure, and that insecurity was pushing me away from the making the right choice. But Lionel knew me all too well by this point: he knew what I was doing and how I felt. So he called me into his office, lit a cigar, and told me the following.

“Newbourne has come to what I would call ‘the make or break time’,” he said. “We can stay as we are – comfortable, making profits – or we can go to the next level. But to do that we must surround ourselves with the right people; smart people; people that can think for themselves. People that will challenge us and question our decisions. If we stay with current staff structure we will continue to grow, but slowly. Or we can accelerate that growth by investing in the very best staff we can find.”

As always Lionel was right (how long, I wondered, before I would ever be as smart as Lionel). So we employed the right person, and wow did he make difference to the company. Was I comfortable? No of course not, particularly early on. But ultimately I now had Lionel and the new sales director (who was 10 years my senior) educating me and helping me to grow the business.

After taking over the helm of Newborne several years later, I went on to sell the business for a not insignificant amount of money). If it hadn’t been for surrounding ourselves with the very best people a successful sale at an excellent price would never have occurred.

So please, if there’s one thing to consider if you want to know how to hire well: don’t be frightened of employing people that are smarter than you, because ultimately they will make you look better.

On a side note: Sometimes when a young company is growing fast and money is tight, it is not always possible to take on the very best staff, because they cost too much. However, there are some very young and clever people that are just waiting for time to prove themselves. Yes they maybe raw, and often inexperienced, but when you give then that opportunity just watch them go for it. So finding the best does not always mean paying for it. Ignore youth at your peril.
Next: Don’t be afraid to change course, even when you are in front.

Would you like a business confidant who could help you improve your ability to run a successful business? Why not join our mentoring retreat in Tuscany this October? Contact me for a chat to see whether I’m the right fit to help you with your business challenges.

This is an article series based on lessons learned from my great mentor Lionel Morely Joel. Read the first article to understand the background and then dip in and out of the lessons as you please.

How to mentor staff

Lesson #1: Getting the best from your staff comes from teaching them how to swim.

In the first lesson in this series I explore how you can mentor staff to enable them to contribute more to your business.

The day after Lionel had surprised me with his offer, I had my first mentor session with him (I was no less petrified at this stage.)

“Before we begin Eddie,” he said. “I think it would be a good idea if you could get rid of the gold rings, the gold necklace and the gold bracelet.” I thought I looked good, but clearly my attire was not working for me.

Lionel then said he was going to teach me how to swim, which I thought was a most unusual start to our first meeting.

However, I soon learnt with Lionel that he was never just going to tell me anything without a story attached.

“There are three ways I could mentor you,” he said.

“I can take you to the pool, throw you in walk around the other side and wait for you, but you may drown on the way across.

“I can throw you in, jump in with you and hold you up until we reach other side, but that would mean you would never learn to swim alone.

“Or I can throw you in, jump in with you, swim alongside you and when you start to go under, gently lift you up.”

As I had nearly drowned several time in my uninspiring career to date the first option didn’t look too good to me. The second sounded ok, but clearly that was not going to work for Lionel. So we settled on option number three, as of course he’d intended us to.

And that is exactly what he did in those 10 years. He left me alone but never let me drown (though I came close several times). He was always there for me, helping me when he realised that I could not make it alone.

We all make mistakes and as a mentor Lionel knew I would make mistakes – and needed to make mistakes in order to learn – but he was clever enough to minimise those mistakes, ensuring limited harm to the business. He knew I could only learn from my own mistakes. If you cannot accept mistakes will happen with staff then you will have a difficult time developing them.

Just like me, every successful businessperson can name the person/people who helped them achieve their success – who’s yours? If you’d like to talk to me about our mentoring retreat in Tuscany this October contact me for a no-strings chat to see if I’m a good fit to help you and your business.

This is an article series based on lessons learned from my great mentor Lionel Morely Joel. Read the first article to understand the background and then dip in and out of the lessons as you please.

Next: Always treat people the way you want to be treated.