… In which we discover that work is something we have to get paid for and how we can achieve real value for ourselves, our enterprise, and reap the benefits of a bit of positive pessimism.

SOMETHING IN THE WOODSHED

Now we can turn our attention to the coffee table builder. This is the enterprise that can make or do things without apparently needing customers. The taxi doesn’t move or work until it has a customer. The coffee table builder has decided that what the world needs is more coffee tables (or brilliant water saving devices, or sausage rolls, or home grown cabbages, or books on business!). I think shops may also be coffee table makers by proxy in as much as you will end up with stuff that costs you time and effort, and needs someone else to pay you for it before you make a living.

Let’s just examine our shy little elf who has decided to become ‘Coffee Tables are Us’. Whilst employed as a bank clerk, sanity (or a fair copy of it) was preserved by the woodworking shop in the garage at the bottom of the garden. Tea trays, towel rails, and cunningly fashioned fruit bowls were presented to apparently delighted friends, but the passion lay in the construction of intricate, marquetry decorated coffee tables. When the dark shadow of redundancy fell across our friend, he was encouraged by friends and family to ‘go it alone’.

“Why not make and sell those lovely coffee tables?”

Why not indeed? But here is a better question. Why? The money from the redundancy has enabled the purchase of some better woodworking machines that would have seemed an extravagant and distant dream before.

THE BUSY FOOL

There are two reasons for reading this book; firstly, as a bit of gentle entertainment on a long flight, and secondly, perhaps with a genuine hope that the content will help you to become successfully self-employed. If it is the latter, perhaps it is time for you to do a bit of thinking.

Very carefully imagine that you are the proud principal of ‘Coffee Tables are Us’. Firstly, what is the job? What work will you be doing? The big pitfall here is to imagine that it has actually got anything to do with making coffee tables. The first few weeks will be ones of pure, unalloyed joy, the greatest pleasure is in the making of coffee tables and you have to stock up, don’t you. Golly, the work has been hard and tiring but as you clamber into bed at night, too tired to brush the sawdust from your hair or even notice the throb of blisters on your hands, somehow deep inside, although exhausted, you are purely and thoroughly happy. The contented happiness of a happy idiot.

Remember, remember, remember, work is an activity that someone else pays us to do. Who is paying you to make coffee tables? Why did you think anyone would pay you to make coffee tables?

OH, WHAT FUN!

A big initial danger is the sheer brilliant fun of first setting up our enterprise; maybe a shop would be fun, hey, why hire a builder – we could paint the place out ourselves. If our whole working life has been spent in formal business attire, a pair of dungarees and a paintbrush will feel so new, so liberating. Let’s crack open a bottle of rich red wine and on the rug by an open fire think up that clever twee name. What fun, what larks, what a slippery slope to disaster.

It’s hat stand time again. While we fart about with paint brushes, stupid names and spending money, we don’t have to face the fact that no money is coming in. I know, opening a shop is great fun; you have an empty shop and your savings. This makes everyone love you. The shop fitter wants your money, the landlord wants your money, the till salesperson wants your money, and last of all, the people who sell you the stock want your money. They will treat you like royalty – you are a customer – and spending money is fun. However, this thunderous outgoing tide has to stop and reverse pretty smartish or you will be high and dry.

THEN WHAT?

The coffee table builder will be locked in that garage every night doing ‘work’ until they cannot move for coffee tables or until they are buried under coffee tables. Then what? Remember, this is your exercise. Then what?

Planning is something that should be done. It is something that I will show you how to do, to predict trouble before it happens, to see what is the correct enterprise to start and where to start it, and to avoid risk as much as possible – none of which has been done in our coffee table exercise. So let’s take it from where it is now, which is, to put it simply, ‘up the creek’.

Why this is a valuable exercise for us is that it goes to the core message of this book, and that is our value as a person. The object of this book is to increase our value to a point of easy prosperity for you, the reader. The wage slaves’ oft-heard cry is that of being undervalued. As I have already stated, in purely financial terms it is unlikely that a shrewd or successful employer is likely to pay you more than you are worth but then, what are you worth? Again, in very basic terms, it is very easy to value the coffee table maker. That person is worth precisely what the public will pay for the coffee table. Forget raw materials (which we shouldn’t do because if you get that wrong you will be in trouble), but if it takes 10 hours to make one table we can divide those hours into the price to get a simple idea of our value. Our hero can try for £400, giving a comfortable £40 per hour. This price may never be achieved but pride tells him to stick to his guns until concerned neighbours find his starved and desiccated corpse surrounded by hundreds of unsold coffee tables.

He could, on the other hand, reduce the price until the tables sell at, say, £50 each, giving a fairly dismal £5 per hour. Although this may seem disappointing, I have seen products that, in the end, could not even be given away.

A DIFFERENT WAY

So let’s take another look – we have opportunities. First question, are the tables selling easily at £50? Does that mean you can sell all you can make at £50 each? Please note right here that we should not be in this situation. We should have discovered before we started making the stupid things that the market price for coffee tables is £50. If we knew that, we may not have started but now we have, what can be done? If you could make them twice as fast that would double the income … even better, with unlimited demand for £50 tables, send the designs to the Far East and have millions of them made for £5 each.

If people aren’t prepared to pay more than £50 for our table, we have to ask why not. Are they prepared to pay more to someone else? Is it where we sell them that’s the problem? Is it how we sell them? Perhaps the customers would pay more for a different design? What is fascinating about this exercise is that the only reason we are doing it is because our coffee table maker is in trouble. As we solve these perceived problems, the person’s value, in other words, our ability to generate income, will increase.

What is strange is that so-called successful enterprises don’t do this. Instead of improving value, they rest on their laurels – and be warned, laurels are a very toxic place to put tender parts of your anatomy. Why the coffee table exercise is provoking so much thought is that it is an exaggeration. This exaggerated position is one of total stuckness that is provoking thought and exploration. It is when the examples are not exaggerated that we could find ourselves in danger.

A SIMPLE ASSUMPTION

There is a truly ghastly saying that comes from the age of the old ‘foot in the door’ salesmen and that is, “Don’t ASSUME because it makes an ASS of U and ME”, but let’s just apply it to my favourite bête noir, twee names.

Imagine you decide to become an undertaker. Wouldn’t it be fun to call it ‘Stiff as a Board’? No, of course it wouldn’t, we can laugh at that crazy, offensive example. Let’s imagine, then, a true professional, someone who has thought things through. Maybe a personal trainer whose careful and well considered programmes can help people get fit and lose weight in the privacy of their own home. Nicely attired in a well cut and badged tracksuit, this person arrives in a clean, modern sports hatchback car with subtle gold lettering saying ‘Call Home Trainer for fitness and gentle weight loss in your own home’. That’s much better, what a contrast to ‘Stiff as a Board’, so much more restrained and well presented. Really? Why do you think that? Possibly the neighbours would peer through their net curtains, see that car outside your home and say, “Just look at that, it’s about time old fatty got some help.” Does that start to convince you that both are wrong? But hang on, maybe ‘Stiff as a Board’ will appeal to the daring and ironic amongst us; perhaps undertakers are just too dismal with all the black and purple and hushed voices. Let’s put balloons outside as well and wear tee-shirts that read, ‘If you gotta go, you gotta go!’ Sound good? The point is that all of the above I just made up. As I explained the benefits and the pitfalls of each of those ideas you may have agreed with me, but the dangerous thing is that I pulled those ideas out of thin air – and that is not a good foundation on which to start an enterprise. Whatever you are planning must be based on hard facts that you have obtained through diligent research; good ideas are a swamp that can suck you down without trace. A huge number of enterprises are started on stuff that’s made up, loads of “What this place needs” and “I’ve got a great idea”. These are assumptions based on very little and yet people bet their homes, their savings and their futures on it.

THE MADNESS OF BUSINESS PLANS

As the wrecking crew of tattooed heavies from my scrap yard demolished yet another dream, I wish that I had summoned up the hard-hearted courage to ask the tearful owner, “What made you think that was going to work?”

There is a little piece of madness that is supposed to help here called ‘The Business Plan’, although personally I think it makes things worse. It leans towards the perception that if it is in writing it must be the truth. The idea is that before you start your self-employed enterprise you write a business plan based on projected figures that are supported by desk research, whatever that is. This futile exercise is usually provoked by a bank or a small enterprise adviser. You may think I am being harsh but what I want for you is success. I don’t want you to lose your shirt and be sad in a few years time because your business plan misled you.

My first experience of these things was, yet again, many years ago. We needed a huge machine that could literally shred cars into fragments (strangely enough, called a fragmentizer). The cost of these things runs into the hundreds of thousands of pounds, so we toddled off to the bank for a bit of cash. Before they would hand it over they insisted on a business plan, so I sat and burned the midnight oil gauging the financial benefits of crushing 100 cars per hour. The Bank looked at my prediction of £30,000 per month in increased turnover and said that it didn’t justify the loan. I asked what would justify the loan and they replied that it would need at least £40,000 so I scribbled over the £30,000 and wrote £50,000. “You can’t do that,” they cried, “where did you get that figure from?”

“Same place as I got the £30,000 from, out of my head. That’s what everyone does with business plans; they make them up to suit the situation.”

“Well, I suppose you’re right,” they grudgingly admitted, “but you’re not supposed to let us see you doing it, that’s just not playing the game.”

PLAN TO FAIL

Ricardo Semlar, a hero of mine, made a very telling point about business plans which actually proves that they are useless. He said, “How come you never find a pessimistic business plan.” I can’t remember his exact words but the theory is something like this. All enterprises write a business plan that is supposed to be an accurate model of how the business will perform. As half of all enterprises fail or underperform, half the business plans, if accurate, should read, “Launch enterprise with £50,000. First year turnover £60,000 less set-up costs, rent and interest payments – break even. Second year turnover £70,000, profit £5000. Third year, double raw material costs, drop in sales, rise in loan rates, turnover £45,000, loss £20,000. Fourth year, call in the Receivers.” As this happens to millions of companies, how come we never see that in a business plan, ever? How many times have I heard the conversation, “I have asked around and there is a demand for at least 100 of these things a week. I can make ten per hour so I could make a week’s supply in ten hours.”

OK. Let’s imagine at the very worst we get just 10% of that, we could still break even if we sold eight. Oh, I see: “At the very worst”! Let me tell you, you cannot imagine the very worst What ever worst you are thinking of, even worse is waiting for you.

How Big is Your Bucket?

When I was a kid, there was an advertisement in the local paper looking for blackcurrant pickers. The pay was £1 per bucket. That was a huge amount of money. A fabulous new bike was about £20, just twenty measly buckets and it would be a new bike for me. I bet I would have to hurry to the job because surely the world could see it was literally picking money from the trees. Surprisingly, when I arrived at the windswept and muddy field there didn’t seem to be too many people, but mostly craggy weatherbeaten locals who strangely didn’t seem to possess the accoutrements of being the millionaires they surely were. These were the questions I had failed to ask. First, how big is a bucket? Go on, have a think, write my business plan based on your concept of a bucket. Well, these things were the size of an oil drum.

An interesting scientific fact here is that things get bigger faster than you think with more awful consequences. A two metre hot air balloon doesn’t work because it only has a lift capacity of eight cubic metres. You may think that a four metre balloon is twice as big but it contains 64 cubic metres. The relevance of this to me is that the same thing was happening to the blackcurrant bucket. In other words, a bucket twice as big was 64 times harder to fill.

The second thing that I missed is that commercial currant bushes, unlike the nice big garden ones, are about half a metre high. So there I am, dragging a huge barrel through the mud on my hands and knees, and after a backbreaking day of wet misery I had a quarter of a bucket which had mostly blackcurrants, some mud, and a lot of leaves in it. The farmer refused to pay me anything, explaining that although the currents were destined for the jam factory they didn’t require them to become jam in the bucket.

Don’t get down, there are ways of ensuring success without risk, but we can’t depend on good ideas and hunches, we are going to have to collect hard evidence.

There Could Be Trouble Ahead

You may feel that the preceding part was a bit downbeat, and I am sometimes described as pessimistic. To me, however, there are two kinds of pessimism; the sort that so frightens you with all the dreamed-up monsters that you never set out on your journey, and my sort where the idea of monsters is actually quite exciting, the journey is going to be a cracking adventure and a real adrenalin rush, but where a good solid monster-whacking stick is something to keep gently swinging at your side, just in case! The ‘Titanic’ was a great adventure to build and sail, and to be on the fastest and most powerful liner in history to try and beat all Atlantic records was a brave and exciting thing to do, but to fail to put enough lifeboats on it because you thought it wouldn’t sink was just plain stupid. The people you leave behind in your old job are too scared to set foot on another transatlantic liner. You are brave, heroic and intrepid – just count the lifeboats.

I love and enjoy going to a play more than anyone; I get the same pleasure as the rest of the audience, it’s just that I sit near the fire exit. When we plan our enterprise we should try to avoid any predictable (or, if possible, unpredictable) situations that we haven’t got the tools and resources to get out of. Remember again the burglars and their ability as opportunists; if we get trapped in situations that we can’t change, it limits our opportunist flexibility. Even the most successful and lucrative enterprises have not turned out quite the way the founders anticipated. If you tie yourself to a 25-year lease on a fish and chip shop, you may find that your biggest seller is pickled eggs, so maybe you should have started the Acme Pickled Egg Company. Then you find you either have to surrender your opportunity, or try and get into the ghastly business of using the law to unwind the lease, or sell on the business.

The learning points here are detailed below

First, by being modestly careful and, yes, just a little bit pessimistic, you can survive those first months or even years until your enterprise presents its unpredicted opportunities and morphs into a gold mine.

Second, try not to do things you can’t undo, particularly at the start: hire and borrow rather than buy. Negotiate tough rent-free, lease-free periods. When you start your enterprise it can be so much fun giving your money away – people who want that money will be so nice to you. It will be the nicest part of the whole adventure. Think about reversing that, get tough, scrounge, beg, borrow and share, make the front bit hard work and even a bit embarrassing about the amount of brass neck you need to get what you need. Then enjoy freewheeling to the finish with pocketfuls of cash. If, when you are setting up, someone keeps smiling at you, they will probably shortly be trousering your cash. Remember, when you are starting out, receiving smiles cost you money.

Third, become a real nuisance with your enterprise, be embarrassing with your constant talk of it and become a real enterprise here. I know it goes against what you believe and your kind shy nature but that’s where opportunities come from. One day as you recount your pickled egg story for the four hundredth time, someone will say, “Do you know, that’s strange, my Uncle Frank is pickled egg buyer for Wal-Mart. They have just lost their supplier, give him a ring.” And you have realized pickled egg heaven in just four hundred slightly embarrassing steps. We hate those people who blow their own trumpet, those people who insist on giving out business cards at strictly social events, who drive away in their Aston Martins. Maybe, just maybe, a thick skin is something worth cultivating.