Does Profit Matter Any More?


That seems a ridiculous headline. Of course profit matters. Of course profit will always matter. Without your business making a profit, how are you going to pay the mortgage? Not to mention all the other mortgages that now depend on you.

But bear with me. I think there are some worrying straws in the wind… 

Flipping briefly through the news headlines on Wednesday lunchtime two stories struck me. 

This month will see the Wall Street debut of Uber, which is generally expected to be valued at $90bn – that’s around £70bn. But Uber – as the eager shareholders queue up – now says it ‘may never make a profit.’

Meanwhile here in the UK, hapless Transport Minister Chris Grayling has cancelled the contracts with the ferry companies that he’d put in place in case of a No Deal Brexit. The cost to the taxpayer? Just £50m…

Uber, Slack and Pinterest 

Uber was founded in March 2009. We’ve all taken an Uber, we all jealously guard our 5* – or close to 5* – passenger rating. To say that the company has ‘disrupted’ the taxi and private hire industry is one of the world’s greatest understatements and its IPO has been long awaited. Early estimates of $120bn have been scaled back to $90bn. But as above, that’s £70bn – or more than 15 times the value of Marks and Spencer’s which, despite its recent problems, still made a significant profit in its last six months’ trading. 

But now Uber says it ‘may not achieve profitability.’ The company says that annual sales rose to $11.2bn and losses narrowed to $3bn. But, it warned, it expects operating expenses to “increase significantly.” 

Meanwhile, shares in Pinterest – best described as a ‘social scrapbook’ – soared 28% on its first day of trading, valuing the company at $16bn. The good news is that last year losses at Pinterest fell to $62m, down from $181m two years previously. But the company is heavily dependent on advertising and warned that a downturn in the economy could harm it. In fact, Pinterest warned that it would “incur operating losses in the future and may never achieve or maintain profitability.” 

And then we come to Slack. Most of us have used – or seen someone use – Slack, which does a handy job of replacing intra-office e-mail. What do you know? Slack is filing for an IPO and expects to be valued at $7bn. The good news is that revenue is growing rapidly – up 82% to $400m in its latest financial year. But is it making a profit? What do you think? Losses for the last year were $139m. Like so many tech firms, Slack is spending money to make money. Or to drive revenue growth…

No wonder they’re called unicorns 

As many of you know, a ‘unicorn’ is the term applied to a tech start-up that’s valued at a billion dollars. A unicorn is also a mythical animal and you just have to wonder if some of these valuations have far more to do with myth than reality. 

Call me old-fashioned but I thought the purpose of a business was to make profits? To do it ethically, to give back to the local community, to grow the people within your company: but at the end of the day have the bottom line in black, not red. Damn it, in the olden days you bought shares – invested in companies – because they made a profit and paid a dividend to their shareholders. 

But increasingly the businesses that make the news seem to be valued on fashion and potential. On market share or revenue growth or potential earnings in 2023. And I think that’s a worrying trend…

A short detour into the public sector

At the beginning of last year, Carillion collapsed. Despite the warning signs, Government ministers continued to ply it with contracts. The inevitable eventually happened – and when Carillion went bust it owed money to 30,000 small businesses. 

Now we have Crossrail delayed until 2020 at the earliest and a massive overspend is looking far more likely. I doubt there is a person reading this blog who expects HS2 to be delivered on time and within budget. Maybe there was a reason HS2 hired 17 PR agencies

And as I mentioned above, Chris Grayling has just cancelled the No Deal contracts with the ferry companies, landing the taxpayer – you and me – with a £50m bill for which we have received nothing at all. 

Why all this matters

As every single member of TAB UK knows, Tesco do not accept market share or your projected 2023 earnings in exchange for bread and cheese. Neither do projected earnings pay wages. 

Why does profit matter – apart from the fact that it buys bread and cheese and pays wages? It matters because profit is how you keep score. It’s how you say, ‘we’re doing this right: ‘we’re doing it better than last year’ and ‘we’re competent to run the business.’  

When Mags and I were buying TAB UK the organisations who supplied the funds were rightly concerned with two things. Could we service the borrowing – that is, could we generate the necessary cash – and would we make a profit? 

That is something that certainly feeds through to the TAB boards. Profit, cash flow and margins are the key metrics. And if yours are moving in the wrong direction then your colleagues around the table will be very quick to ask what you’re doing about it. 

But once we get away from the idea that profit matters then things start to slip – and slip quickly. Profit goes hand in hand with fiscal responsibility. Does Wall Street care that Uber, Slack and Pinterest are losing hundreds of millions of dollars and may never make a profit? Apparently not. 

And more and more we see the same attitude in the public sector. Chris Grayling has just tossed away £50m of our money. Well, let’s keep the maths simple: assuming a nurse is paid £25,000 a year that £50m would have paid for 2,000 nurses. 

But here we are, increasingly slipping into a parallel universe where profit and fiscal responsibility seem unimportant. Someone needs to stand up and say that profit will alwaysmatter – before another 30,000 small businesses pay the price. 

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Your Goals for 2019: But What if you Achieve Them?


It’s a safe bet that a significant proportion of the people reading this blog have a word document – or a note on their phone or a page in their journal – with a very simple, three word title.

Goals for 2019.

We’re all ambitious: setting goals and targets comes naturally to us. But this morning I want to ask a question that isn’t often asked: why do so many people feel a sense of anti-climax when they finally achieve their goals? Why – for some people – does achieving a long sought-after goal lead not to elation, but to the exact opposite?

Let me give you a very simple example. A large number of women are depressed after their marriage. Not because of who they married (looks up, glances across the kitchen table) but because of an inevitable sense of anti-climax and a feeling of ‘what now?’ According to a report in the Washington Post12% of women admitted to being ‘blue brides.’

Similarly there are any number of anecdotal tales from sport. The momentary elation of winning the gold medal, followed by ‘now what?’ – and quite possibly the realisation that suddenly you’re back at square one. That four years from now you’ll need to prove yourself again. And there’ll be younger, hungrier pretenders to your crown.

There is no reason to suppose that business is any different. Yes, we all have goals for next year and, for most of us, those goals are a staging post on the road to the eventual destination.

But the statistics dictate that someone reading this post will reach that destination next year. They’ll sell the business they’ve built or they’ll reach a turnover or profit level they once considered impossible.

If that’s you, will you go off into the sunset punching the air? Or will you feel a sense of anti-climax and ‘now what do I do?’

Rest assured that you will be a long way from the only person to be suffering from ‘post event blues’ or the ‘arrival fallacy.’ (No, The Arrival Fallacy isn’t a thriller by Robert Ludlum: the theory is that as you get near to your goal you start to anticipate it, and therefore to discount it.)

Personal Goals

OK, time to make it personal. TAB UK is my life’s work. One day someone else is going to be the MD of TAB UK and I have no idea how I’ll feel about that. It will – absolutely – be one of the moments when I would have sought out Paul Dickinson’s wise counsel.

I have shared this with many people, but let me share it with everyone. What’s my long term goal for TAB UK? My vision is to see us helping 1,000 business owners – and thereby benefiting around 25,000 employees and roughly 100,000 people in their families.

That is a really compelling vision for me and obviously my goals for the coming year represent steps along the way.

Would – at some stage – 900 members of TAB UK be a success? In financial terms, yes. Would it satisfy me psychologically? No, I don’t think so. Both Mags and I want to reach the 1,000 member goal – and, with the support of everyone in the TAB family, we’re determined to get there.

So will I feel ‘post-event blues’ or the ‘arrival fallacy’ when we reach 1,000 members? I don’t think so – but I have no way of telling. What I do know is that there will have to be something after that. It may not be to benefit me directly – but I think I will always need to have a goal in sight.

And that, of course, is the textbook way to beat the ‘post event blues:’ to make sure you immediately move on to something else.

I suspect, though, that human nature doesn’t work like that. It dictates that we do pause when we reach the summit, both literally and figuratively. And that is both right and understandable – you’ve worked to get there, you’re entitled to enjoy the view.

And if you find that the euphoria isn’t what you’ve expected then you won’t be alone. Success, as the old saying goes, is a journey as much as it’s a destination. And that’s what all of us at TAB UK are committed to – your success on the journey. You, and the other 999 business owners that are on the journey with you…

Read more of my blog here:

The Importance of Brand Perception in 2018

How do you Manage a Millennial?

The Seven Ages of The Entrepreneur

Failing Your Way to a Trillion Dollars


I have not failed 1,000 times. I have successfully discovered 1,000 ways not to make a light bulb.

We’ve all heard the famous quote from Thomas Edison – and whether it was 1,000 times, 5,000 or 10,000 (the quote varies) the message is the same: ‘he ‘failed’ any number of times but learnt from each failure until he successfully invented the light bulb.

Edison was born in Milan, Ohio in 1847. He spent most of his life in New Jersey and his inventions – the phonograph, the motion picture camera, the long lasting light bulb – have hugely influenced life today. But my question is simple: would he have been as successful if he’d been in the UK instead of the US?

Failure is celebrated in the US: it’s seen as a necessary step on the path to eventual success. In the UK, failure is all too often seen as failure. ‘Run your own business? Not working out? See, I told you it was too risky…’

why-we-fail-to-succeed-in-ilfe

I was thinking about that as I flew back from California, prompted by the news that Apple had won the race to be the world’s first trillion dollar company – that’s around £770bn, depending on this morning’s exchange rate

The Apple Computer Company was founded on April Fools’ Day 1976: 40 years later it is worth a trillion dollars. It’s tempting to airbrush the history, to think. ‘Oh yeah, they started with those cute computers and then moved on to Macs and iPhones.’

But along the way, Apple has had some spectacular failures. It’s been perilously close to bankruptcy. In the early 90s the company was in more or less continuous decline, only returning to profitability at the end of the decade. Does anyone remember the Apple Pippin? The Newton? The Macintosh Portable? The Apple Lisa, on sale for $9,995 in 1983 – the equivalent of around $25,000 (£19,200) today?

Apple’s record has not been one of continuous success: exactly the opposite. And as anyone who has seen the Steve Jobs biopic knows, there were a few personality clashes along the way…

What Apple has done so well over the last forty years is learn from failure. Every time something has gone wrong they’ve bounced back. There’s a constant drive to get better, to improve the product. Clearly it has gone wrong a few times: but it has gone right enough times to generate that trillion dollar valuation.

(Interestingly, Apple has achieved that trillion dollar valuation with the  shares selling at 15 times expected profits – that compares to 82 times expected profits for the Amazon shares which have made Jeff Bezos the richest man in the world.)

So what business lessons can we take from the company which – according to the most reliable estimates I can find – has supplied an iPhone to between 1 in 5 and 1 in 6 people in the world?

Clearly there are the obvious ones. Never stop innovating and – as with Jeff Bezos and Amazon – a clear, simple, unforgettable brand.

I was going to add a ruthless focus on delivering what the customer wants but – as Steve Jobs famously said – “People didn’t know what they wanted until I showed it to them.” Maybe the key lesson there is continuous improvement of the company’s core products.

But hidden away in the numbers from Apple’s latest figures are two other lessons we can learn.

First and foremost, the top end of your market is important: don’t be afraid to concentrate your efforts there. The recent rise in the share price came after Apple reported strong demand for its most expensive phones – that sent revenues up sharply, despite just a 1% rise in phones shipped.

Secondly, Apple had a 31% growth in their service business, which includes over 2m apps now available in the App Store. I’m going to cover the ‘subscription model’ for business in a future post, but there’s all the evidence you need. It may only be a pound or a dollar, but if a large number of people are paying it to you regularly, it can add up to something very significant.

By the time you read this I’ll be back in the States, ready for the annual TAB Conference in Denver. So once more I’ll be among people who – like Edison and Apple did – simply see failure as finding another way that doesn’t work.

I love the entrepreneurial, can-do, anything’s-possible enthusiasm in the States and the fact that the general attitude to failure is not schadenfreude but, very often, empathy. ‘Yeah, I was down there once. But I picked myself up, learned from it and look at me now. And if I can do it, so can you…’

The Power of Momentum


I was going to talk about momentum this week – the irresistible force that can carry an entrepreneur and a business forward like a surfer catching a wave.

…But first of all I suppose I’d better comment on the two national sideshows. In their own way they’re both fine examples of momentum in action. But a caveat: I’m writing these opening paragraphs on Tuesday morning. But the time you read the blog Downing Street and the England dressing room may be very different places…

Monday brought us the resignation of David Davis and Boris Johnson. More government resignations are rumoured to be imminent. Her Majesty’s Government most certainly has momentum, but sadly it’s the momentum of a downward spiral. ‘Complete shambles’ doesn’t even begin to describe it and Boris Johnson’s reported comment – “£$%& business!” – all too accurately reflects what most politicians think about the people who produce the country’s wealth.

So let’s talk about momentum of a much happier type. Again, Croatia might have had something to say by the time you read this, but for now Gareth Southgate can do no wrong. As I write, the England team’s momentum is carrying them straight to the Luzhniki Stadium on Sunday afternoon.

…Ah, damn it. It’s now Thursday night: football’s not coming home. At least not until 2020.

Does that mean the momentum of the England team has been stopped dead in its tracks? Far from it: people are already talking enthusiastically about the 2020 Euros. Southgate doesn’t think his team will peak until 2024.

And the nation has fallen back in love with the national team. Southgate himself has a lot to do with that: engaging, honest, articulate – and clearly a great man-manager. He’s trusted his players, believed in them and given them a clear direction. They’ve responded by giving him every last drop of blood, sweat and – sadly on Wednesday – tears.

Colombia-v-England-Round-of-16-2018-FIFA-World-Cup-Russia

But give them a week and the team’s morale and momentum will be right back where it was. Goodness knows where our government’s momentum will be in a week’s time, so we’d better talk about business…

Momentum is a subject that comes up a lot at TAB meetings – whether it is a meeting of business owners or TAB franchisees. No-one says ‘momentum,’ obviously. They’re ‘on a roll,’ or ‘can’t do anything wrong.’ Meanwhile across the table someone else is ‘stuck in a rut’ and ‘doesn’t know where the next sale is coming from.’

We have all been there – and experienced both emotions. I very clearly remember thinking that I would never, ever sell anything to anyone ever again. I can picture exactly where I was when my phone buzzed with yet another ‘no thanks’ to TAB York and I began to have doubts…

What’s astonishing is how quickly momentum can change. You see it in sport and you very definitely see it in business. And what’s equally astonishing is that it can change with something relatively unimportant: a small sale, someone you’d written off getting back to you – or just getting some exercise and feeling better about yourself.

That’s why mental resilience is so important in business: we all go through periods when we can do no wrong – and we all have those moments of self-doubt. As I’ve written many times, what’s important is consistency of effort: do that and – in the long run – the results will take care of themselves. And when the momentum is with you, then you’ll be unstoppable.

Which takes me back to England, the Euros and 2020. The final’s at Wembley: book your ticket now…

(The end of this month will find the Reid family booked into Hotel California for a much-anticipated family holiday. If you’re going away in the next four weeks have a wonderful time, and – assuming we can check out and want to leave – the blog will be back on August 10th.)

Be Brave


Last week I wrote a Tale of Four Leaders, contrasting Paul Dickinson and Barry Dodd with two leaders who I consider to be far less successful – the Donald and the Maybot.

I’m still coming to terms with Paul’s passing, but gradually the sadness is giving way to what I’ll think of as his personal legacy to me.

Many of you will know the words of the poem by Henry Scott Holland, so often read at funerals. It’s called Death is Nothing at All, and there is a line that is particularly apt: ‘Why should I be out of mind because I am out of sight?’

Paul will never be out of mind for me and – two weeks on from the funeral – I feel a duty to his memory to make TAB UK the best it can possibly be. That means for everyone in the TAB family: our members, our franchisees, our team at head office – and the colleagues we work with overseas.

How are we going to do that? We are going to be brave. What was it Thoreau said? ‘The mass of men lead lives of quiet desperation and go to their grave with the song still in them.”

No-one in the TAB UK family should do that and so – and I know Paul would have approved – the message this week is simple: Be Brave!

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This, more than ever, is a time for brave decisions, on both the micro and macro level. The world is changing at an ever faster pace: AI and machine learning, advanced search and the personalised internet are knocking on the door of virtually any business you can name. Businesses that were once cornerstones of the national and local economy are crumbling away. Brave decisions have become essential.

So let me turn to two decisions – sadly both from our government – which illustrate exactly the type of decisions we should not be making.

A couple of weeks ago Theresa May announced an extra £20bn – from your taxes – for the NHS. That’s a worthy decision: with four out of five people apparently in favour of tax rises to fund the NHS I’m sure the focus groups will approve.

It’s worthy, but in the long run I think it is wrong. And it’s the easy decision, not the brave decision.

Anyone who walks through any town centre will notice that the UK has an obesity epidemic which is getting worse every year. That in turn is leading to an explosion in Type 2 diabetes which is currently costing the NHS £25,000 a minute. Diabetes UK put the cost of treating Type 2 diabetes and its complications at £14bn a year.

Those are staggering figures for what is – in the main – a preventable disease. And quite clearly there isn’t much of the PM’s £20bn left when you’ve paid the diabetes bill: if we carry on getting fatter there very soon won’t be anything left.

The PM’s £20bn is, in essence, a very expensive bucket. There’s a hole in the roof of your factory, the water is coming in ever more quickly, so clearly what you need to fix the problem is a bigger, more expensive bucket…

Yes, that might be the answer while the guys go up on the roof to fix the hole. But as far as the diabetes epidemic is concerned, we’re not sending anyone up on the roof: we’re relying on an ever more expensive bucket instead of making difficult decisions and telling people the unpalatable truth.

Secondly, pot. Or weed, or whatever you might want to call it. Last week the case of Billy Caldwell and an article by William Hague brought cannabis front and centre in the news.

Writing in the Daily Telegraph Hague argued that the war on cannabis has been “irretrievably lost” and called for it to be fully legalised. He argued that cannabis is freely available in the UK, but available in unregulated forms, with a thriving black market bringing huge profits to criminal gangs and putting an unnecessary strain on the police and our criminal justice system.

Some time ago I wrote about the legalisation of cannabis in the US state of Colorado. The state – which I visit every year for TAB’s global conference – legalised  cannabis in 2012. Teenage use of the drug in the state is now at its lowest level for a decade, opioid deaths are down, crime has not risen – but tax revenues have, by an estimated $230m over two years. The population of Colorado is around 5.6m – that is around one-tenth of the UK, so it is easy to project the tax revenues that might result from legalisation here.

Sam Dumitriu, head of research at the Adam Smith Institute says, “We estimate that legalisation would raise at least £1bn a year for the Treasury.” He added, “Just as the prohibition of alcohol failed in the US, so the prohibition of cannabis has failed here.”

What is the UK government’s position? A flat refusal to even discuss the subject – a refusal, not to make a brave decision, but to even have a brave discussion.

In business, you cannot do that. It bears repeating: we are living in the age of brave decisions. The problem is, there’s no pain in buying the NHS a bigger bucket or refusing to discuss cannabis. The government – like so many businesses – is in a comfort zone.

But you know and I know that it cannot last. We cannot go on getting fatter, we cannot go on seeing young people murdered on the streets of London and we cannot ignore Google, Amazon and Uber when they tap on our door.

Throughout his life – and never more than towards the end of it – Paul Dickinson took brave decisions. That’s the legacy he left me: that’s the legacy that we all – in government or in business – need to follow.

Darker Thoughts from an Old Friend


I bumped into an old friend in York last week. He was wearing a suit. And a tie. This was the man who became bored with dress-down Friday – and dress-down every other day of the week – when the rest of us were still learning not to wear a striped tie with a check shirt…

There was only one possible explanation.

“Congratulations,” I said. “You’ve finally made an honest woman of Claire. Where is she?”

He didn’t laugh. “Other end of the scale I’m afraid, Ed. Funeral. My second in two weeks. And both of them not much older than us.”

We’ve all been there: mentioned someone in conversation only to hear, ‘Hasn’t anyone told you? Last Thursday. No warning, nothing.” And inevitably the person being discussed was ‘not much older than us.’

That meeting with my friend played on my mind for the next few days. One thing I am sure of is that there is an ever-increasing level of stress in the average entrepreneur’s life. A few years ago people e-mailed or phoned. Now there is myriad of different ways of contacting someone: whatever you turn off, something else will bleep just as you sit down to dinner.

And we all know the dangers of stress.

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So that chance meeting with my friend stayed with me – not just because we’d been talking about someone close to our own age, but because the conversation posed a question that’s absolutely central to The Alternative Board.

You’ve started a business. You know what you want to achieve: you know what you’re capable of achieving. And you’re determined to get there.

So what do you do? How do you react when someone says, ‘haven’t you heard?’

Do you take it as a signal to run at 100mph in case the same thing happens to you and you never realise your potential?

Or do you stop and smell the roses? Pay attention to your work/life balance? Remind yourself that no-one’s last words have ever been, ‘I wish I’d spent more time at the office.’

The more I thought about it the more I realised I’d seen business owners – perhaps without even recognising it – struggling with the same dilemma. And not just as a one-off.

It’s a problem that raises it head, in different forms, at different stages of your entrepreneur’s journey.

What should I do? Put in the time? Re-invest the cash? And build a company that will really be worth something in 10 or 20 years’ time?

Or realise that I might not get there – and milk the business for all its worth and take my rewards in the here and now.

The answer, of course, is that there is no right answer. The right answer depends on your own individual personality and how you want to live your life. As everyone who knows me will recognise, I’m in the ‘building a business’ camp – and I’m determined to enjoy the journey along the way, sharing that journey with my family and my friends.

Yes, I could be in the office every minute of every day – but I remember waking up one Tuesday morning early in my TAB York days. It was a morning like today: early May and the sun was shining in through the window. I looked at the pile of paperwork on my desk and went off to play 9 holes of golf.

It was a moment when I suddenly appreciated the freedom the decision to start my own business had given me – and when I knew I’d made the right decision in Newport Pagnell service station.

Not every entrepreneur would have taken that decision: some would have ploughed through the paperwork. The important thing, I think, is to recognise what works for you – and what you want from your business.

Whatever choice you make – whether you take your rewards now or later – remember that the business is working for you. It is emphatically not the other way around.

Carillion: Incompetence on an Industrial Scale


Well, I’ve been through the post three times – yes, home and work. Checked my e-mails. Facebook, obviously… And it’s not arrived. Clearly an administrative oversight. Can’t get the staff I expect. So for yet another year I won’t be going to the World Economic Forum, the annual meeting of the great and good in the Swiss resort of Davos.

But tempting as it is to write about it instead – to spend the next 800 words with Theresa May, Donald Trump and Elton John’s speech on ‘5 Leadership Lessons from my Darkest Hours’ the real story right now is the collapse of Carillion.

Carillion

Like all big companies, Carillion had a strap line: ‘Making tomorrow a better place.’ As everyone now knows, the company went into liquidation last Monday with debts of £1.5bn and a pension shortfall of at least £600m – so for Carillion, there is no tomorrow. For the handful of hedge fund managers who made millions out of betting against the company tomorrow may not be a better place but it will certainly be a richer place.

But for the thousands of Carillion staff, and many, many small businesses, tomorrow looks anything but a better place. I have absolute sympathy for every single member of Carillion’s staff – with the exception of the directors – but in this article I want to concentrate on the 30,000 small businesses that will be impacted by Carillion’s collapse.

Carillion was created in July 1999 by a demerger from Tarmac (which was originally founded in 1903). With the Governments of David Cameron and Theresa May continuing the Blair/Brown practice of using the private sector as the supplier of services to the public sector, Carillion was effectively the Government’s ‘go-to’ contractor.

And yet there was plenty of hard – and anecdotal – evidence that the company was in deep trouble. In 2017 it issued three profit warnings: there was also plenty of gossip.

I have not previously used the comments column of the Daily Mail as a source, but two replies to a recent piece on Carillion are worth repeating:

Carillion have been shaky for ages. We were asked if we would undertake a multimillion pound project [for them] as a sub-contractor. Based on some reliable info we said no – thankfully, or their crash and non-payment would have taken us down too.

[They] have been using ‘dodgy’ business practices for years. Undercutting on quotes to the point where competitors know the figure is unsustainable. Writing that piece Mail City Editor Alex Brummer called Carillion a ‘giant Ponzi scheme…’

Effectively Carillion was using the cash flow from their latest contract to paper over the cracks – or fill the black hole, choose your metaphor – from the previous contract. Ultimately – like Mr Ponzi’s investment scheme – that was unsustainable.

Did anyone pay attention to the profit warnings and the dark mutterings? Yes, the hedge funds did. Carillion was ‘the most heavily bet-against company on the stock market’ and the hedge funds will apparently profit to the tune of £300m from the company’s collapse.

Sadly, Her Majesty’s Government did not pay any attention. Despite the profit warnings and the gossip the Government continued to award contracts to Carillion. For example, a week after the first profits warning the Department of Transport announced that Carillion would partner another construction company on a £1.4bn contract as part of HS2.

There was another profits warning in September of last year – swiftly followed by another key infrastructure contract, awarded at a time when Carillion’s CEO and finance director were both leaving. The Government may not be to blame for Carillion’s collapse but it has left senior ministers looking at best naïve and at worst incompetent.

It has also left them with the lot of explaining to do to the owners of small businesses. ‘It’s got 450 Government contracts, the company must be alright’ is a not unreasonable deduction to make.

But now one industry group estimates that up to 30,000 firms are owed money by Carillion, with the firm having spent £952m with local suppliers in 2016. Clearly many small companies will face uncertain futures and/or will need to consider laying off staff to reduce costs. Carillion may have employed 20,000 people in the UK but the 30,000 firms owed money will have employed considerably more. There are real fears of a ‘domino effect’ among smaller companies, with liquidators PricewaterhouseCoopers saying they will not pay any bills for goods or services supplied before the liquidation date of Monday January 15th. Carillion’s creditors have already been warned in court documents that they are likely to receive less than 1p for every pound owed to them.

Bluntly, that is a disgraceful state of affairs. I am trying to keep calm about this but Carillion captures so much of what is wrong with British business – and which the Government could so easily put right. It’s not just the continuing award of contracts, there is also the small matter of Carillion’s terms of business – 120 days.

I’ve used this line before but it bears repeating. When the boys were little they’d occasionally do something and we’d say, “No, you can’t do that. It is just plain wrong.”

That’s how I feel about 120 day payment terms. It is just plain wrong. At best it is asking small business to finance big business and at worst it is pure and simple exploitation. ‘Do the work in January, send the invoice at the end of that month and we’ll pay you at the end of May.’

Back in September 2016 I took Liam Fox – the Secretary of State for International Trade – to task for his description of small business owners: ‘fat, lazy and off to play golf.’ No, Mr Fox, they are anything but ‘fat, lazy and off to play golf.’ They are trying to plug a hole in their cash flow that your Government could fix with one simple piece of legislation. And some of them are wondering how they’re going to save the business they’ve built from the effects of a corporate crash: one that could have been avoided by a Government with an ounce of business acumen.

Some of the smaller companies affected by the debacle will be TAB members. Carillion will unquestionably be one of the problems brought to future Board meetings.

But amid the rubble there is a silver lining – and that silver lining is the meetings of The Alternative Board, and the accumulated wisdom of your colleagues round the table. ‘We’re thinking of signing a contract with X’ is a phrase I’ve heard any number of times. And on a few occasions I’ve also heard that intake of breath and seen the slow shake of the head – the one the garage mechanic used when you asked if your first car could be fixed – and every time it has proved invaluable.

You’ll never be able to take out insurance against the greed of big business and the incompetence of the Government, but your colleagues around the TAB table are the next best thing.

Bad Customer Service always Hertz


It’s impossible to start anywhere other than the Ryanair check-in desk this week. The lonely and deserted Ryanair check-in desk after one of the more spectacular own goals in corporate history. What is it about the airline industry? Last year United, this year Ryanair.

Michael O’Leary was swift to go on TV and offer profuse apologies. Flights cancelled for up to six weeks: up to 400,000 passengers with their flights cancelled and/or their holiday plans in ruins. But how do Ryanair still manage to give off that air of ‘sorry-not-sorry?’ There’s just the distinct impression of the kid at school – the one who’s apologising with his fingers crossed behind his back.

So Ryanair have thrown a large rock into their corporate pool. I suspect that they have done lasting and public damage to their reputation. And they have done it spectacularly.

But this week I want to talk about what I think was equally bad customer service. It wasn’t spectacular, it certainly won’t be reported in the media and, if Ryanair threw a rock, this was barely a pebble.

But there’s a ripple. And I hope that when you’ve read the blog this week the ripple may be on its way to being a wave. Here’s an abridged version of the story: if you want the full version, just let me know.

In the summer we went to Portugal for a week with another family. The events I’ve related below happened to both Ben and myself: a double whammy.

I’m a Hertz Gold Club member and I booked a car with them in advance – something around the size of an Astra, at £400 for the week.

When I arrived there was no Astra and instead I was offered a Clio Grande. I wondered if that was big enough for two large suitcases. “No problem,” the very helpful guy on the desk said, “You can upgrade to a BMW X3. Normally that would be £150, but you’re a Gold Member so I can do it for £80.”

That seemed fair enough. And we were anxious to start our holiday: I fumbled for my card. “No problem,” he said. “We don’t need your card. Just initial here … and here.”

And I was done – and, at that point, quite happy with the service I’d received from Hertz.

Fast forward a week. Time to hand the car back.

…At which point I find out that the £80 extra was per day. Was that mentioned initially? Not in a thousand years. Hertz presented the extra £80 as a one-off increase on the £400 I’d already paid.

You can imagine the scene. You can imagine the arguments Ben and I had with Hertz. You can also imagine the time I have wasted on this.

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At the time of writing it is still ‘in dispute.’ Hertz have so far refused to take any action: that includes failing to reply to my e-mail of August 20th despite – see the image – telling me that I should ‘stand by’ for a response on four separate occasions. Yep, I’m ‘standing by’ waiting for a response in much the same way as 400,000 Ryanair passengers are ‘standing by’ waiting for a flight. So here we are, in the rather more transparent world of social media…

Will I ever rent a car from Hertz again? Right now I would rather cycle round Portugal with our suitcases on my back. Will you ever rent a car from Hertz again? You may well do: but you will pause before you sign anything.

This is – by some distance – the worst service I’ve ever received in my life. Hertz still have my £500 (and Ben’s) and the words ‘ripped-off’ and ‘mis-selling’ don’t even come close. Worst of all is that – in the best traditions of United and Ryanair – Hertz don’t seem to care.

They may have been around since 1918, they may be the biggest name in car rental, but nothing excuses their lamentable service and their inability to answer an e-mail. I’ll be sharing this post with them: let’s hope someone at Hertz finally wakes up and takes notice. I’ll let you know…

365 Wasted Days


Hesitantly, the young graduate trainee approached the seen-it-all sales manager to proffer his excuse…

“I just don’t think it was the right time for them. Maybe next month…”

The sales manager sighed. The lad showed promise, but he needed to learn a basic truth. “You know what, Ed?” he said. “There’s never a right time.”

“How do you mean?”

“Well quite clearly no-one’s ever going to buy anything in January. Just recovering from Christmas and hiding from their credit card bills. February it’s too damn cold. March and April it’s Easter and they’re all doing DIY or out in the garden. May they’re thinking about summer holidays. June there’s always the World Cup or the Olympics. July and August they’ve gone on holiday; September they’re recovering from the holiday. October it gets dark. Everyone’s always depressed in November and December’s written off because of Christmas.”

“So…”

“So there’s never a right time. Go back and see them, Ed. Explain that there is a right time and the right time is now.”

I’ve never forgotten that conversation and over the last 20 years I’ve quoted it word for word to several potential customers. I was reminded of it last week when the news broke that Theresa May would be demanding our attendance at the polling stations on June 8th.

Yes, the election – and Brexit – is going to happen. Clearly Theresa May wants her own mandate and equally clearly she doesn’t want to be bound by David Cameron’s election pledges.

Sir Martin Sorrell was being interviewed on TV and failing to hide his irritation. The election, he said, was “another excuse” for people in business to stop making decisions. The run-up to the election would see an inevitable slowdown in the economy: “another 50 wasted days” as Sorrell termed it.

Well, by the time you read this there’ll only be 41 more days to waste – but he may have underestimated the problem. My old sales manager would have understand it perfectly…

‘You’re right, Ed. First and foremost no-one can possibly take a decision before Macron is confirmed as the youngest leader of France since Napoleon. Then there’s our election. But by then we’re into the summer holidays. And as soon we’re back from summer there’s the German election to worry about: if Angela Merkel is defeated it’ll be chaos. Then there’s Philip Hammond’s first Autumn Budget (assuming he’s still Chancellor). I mean seriously, given the hints there have been about tax rises it’s safer to wait and see. Then it’s Christmas and staggering back to work in January. And by February/March we’ll have had six months of serious Brexit negotiations with the new German government. It makes sense to wait and see how those are playing out. And then it’s Easter again on April 1st 2018. You’ve nailed it: no-one can possibly make any decisions for at least a year…’

50 wasted days? More like 365.

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As we all know, there are always reasons not to take decisions. They might be macro – political, economic – or micro, such as staff problems and cash flow, but they’ll always be there.

But making decisions is our job. It’s what we signed up for when we sat in the motorway services, pushed our breakfast round the plate and decided there had to be a better way. Business is about making decisions – and as that as that well-known pioneer of the waste management industry, Anthony Soprano Snr., put it, “A wrong decision is better than indecision.”

He’s right: you can correct a wrong decision. Indecision eats away at you and your business until it does far more damage than a wrong decision.

But making decisions isn’t easy. It’s not meant to be easy. Tony Soprano again: “Every decision you make affects every facet of every other thing. It’s too much to deal with almost. And in the end you’re completely alone with it all.”

Unless, of course, you’re a member of the Alternative Board, and have seven other people to offer their input and their experience and – nine times out of ten – help you make the right decision.

But having last week recommended that the boss of United Airlines joins TAB, perhaps I’ll just stop short of suggesting a new member for TAB New Jersey…

United we Fall


Even if you’ve been living in the proverbial cave at the bottom of the proverbial salt mine the news of United Airlines PR disaster-to-end-all-PR-disasters must have reached you by now.

I’ve covered disaster, catastrophe and the required corporate apology before. But that was something minor – just an oil spill and devastation of a coastline. In PR terms, hauling Dr David Dao up the aisle of the United flight to Kentucky was in an altogether different league.

Why? It’s simple. Devastating a coastline is tragic: of course it’s a disaster. But it’s a news item.

What United did to Dr Dao was personal. There isn’t one of us who – next time he flies – won’t sit in his seat, fasten his safety belt and then glance at the aisle of the aeroplane and think, ‘It could have been me…’

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Was United’s action legal? Sadly, yes. It’s right there in the terms and conditions, in 8pt print at the bottom of page 23. Airlines routinely sell tickets to more people than a plane can seat, counting on several people not to arrive. When there are not enough ‘no-shows’ – that is, when passengers are so inconsiderate that they turn up for the flight they booked – then the airlines first try to persuade, reward or bribe passengers to change their flight. Then…

And the figures are small – almost insignificant. In 2016, United Airlines denied boarding to 3,765 of its 86 million passengers: an additional 62,895 passengers voluntarily gave up their seats. In very round figures, that gives you a 1 in 1,000 chance of being ‘bumped,’ voluntarily or involuntarily.

But none of this matters: because we’ll all look at the aisle of the plane and wonder…

Not surprisingly, United took a savage beating on social media: ‘New United Airlines Mottos’ rapidly became one of Twitter’s most popular hashtags…

We put the hospital in hospitality!

Fight or flight

If you can’t seat ’em, beat ’em

…And several others which have no place in a family blog on a Friday morning.

The stock market was equally quick to react with more than $1 billion wiped off United’s stock market valuation.

United’s response to all this was ‘apology by committee.’ You could see the eventual statement had gone round the company several times, with every department head making sure his own base was covered. CEO Oscar Munoz even tried to deflect the blame on to David Dao, saying that he had been “disruptive and belligerent.”

What would I have done? Four things:

  • Have one person immediately issue a genuine and sincere apology to Dr Dao and the other passengers on the flight, without worrying about any hurt feelings at United HQ
  • Settle Dr Dao’s lawsuit immediately, whatever the cost. United cannot have people constantly reminded of this incident
  • Sack the security team, sack the CEO and sack anyone else who didn’t have the courage and the common sense to say, “Stop. This is wrong.”
  • Announce an immediate end to the overbooking of flights. United – and all other airlines come to that – need to give an absolute guarantee that you cannot pay for a flight and then be ‘bounced.’

But all those moves are simply locking the stable door long, long after the horse has bolted. What they needed – what every company needs – is a culture where incidents like that simply cannot occur in the first place. No-one can legislate for one individual’s erratic behaviour, but in United’s debacle everyone screwed up – and it was indicative of a deeper malaise at the company.

Thankfully as I meet more and more Alternative Board members up and down the UK I see the same commitment to clients and customers, and the same determination to build and empower great teams, that was so evident in York. Dr Dao would be safe with any member of the Alternative Board. (United’s HQ is in Chicago: maybe it’s not too late for Oscar Munoz to sign up…)

That’s it for this week – and yes, before you ask, I have noticed that there’s going to be a General Election. I’ll tackle it next week…