The Unprincipled

A real-life case study into how not to run a business - and still make money.

Chapter one

Palm-Tree Head and the art of conspiracy When you decide to set up a business in competition with your current employer, you are by definition entering into a conspiracy. The beginnings of any business, like any enterprise, require considerable planning, and so you begin a cycle of secret squirrel meetings, at which all possibilities are aired. There are three of us at the outset, soon to become four (we realise we need a creative geezer, so recruiting the agency's studio Head is logical - but I'm getting ahead of myself). We all like a drink, so the idea of using one of the town's many pubs for meetings is hardly unusual. And in the unlikely event that one of the senior managers stumbles across us, it will hardly ring alarm bells. So the Abingdon Arms - aka the Abo's Armpit - becomes for six months or more our planning headquarters. It is also a youth pub, so there is the added bonus of being able to eye up fit totty while conspiring. We are all in our mid-twenties to thirties, so the idea of pulling isn't a total fantasy. Not that it actually happens, mind. Three of us: me, because our head of department, Jimbo, is becoming Managing Director, and it becomes immediately obvious that they are going to try and recruit a heavy hitter from outside to replace him, and are only going through the motions of interviewing me for the job (and when the small organisation that you've joined originally to enjoy the fruits of its planned rapid growth starts to grow above you, it's time to get out); the Cat, who is 10 years younger than me, has no family ties and has only just taken on his first mortgage on a little house for one, and is therefore open to and up for any adventure, especially if there is the potential promise of riches; and his partner in crime (at the time), who for the purposes of anonymity (even though everyone involved knows exactly who he is) will be called Stid - married, mortgage and ambitions. I have mentioned in passing that I have been pretty pissed off with the way things are going and am seriously thinking of jumping ship; the two of them have been talking about doing something independently, and out of that conversation, the conspiracy is born. The premise on which our putative enterprise takes shape is that many of our existing clients have a closer relationship with us than with senior management (or Jimbo, put simply; none of the others have anything to do with them and wouldn't recognise them without a detailed introduction), and therefore are more or less likely to transfer their business to us if we set up shop ourselves. Much of our early discussions revolve round who would and who wouldn't come with us. The only way to be sure, of course, is to ask them, but it would only require one of them to tip off Jimbo, for the whole gaffe to be blown. Any business plan will inevitably be based on informed guesswork and a dose of wishful thinking, which is probably the formula for a large proportion of start-ups - those that bother with a business plan at all, of course. Many just start trading without the first idea whether they have a viable business model, which is also no doubt why so many start-ups fail. At least we can say we got that bit of our enterprise right. Between us, we have maybe half a dozen probables and possibles on the list of potential client defections. The Cat and I work together on one group of clients, and four of the possibles belong to us, possibly because, as the senior operator in the department, I've probably engendered a degree of trust that enables me/us to operate more autonomously. Stid's two, though, include one that he has already labelled as a copper-bottomed certainty and on which we can plan with more than a degree of confidence. This kind of conviction is pretty typical of Stid in general, and does not diminish as time goes by. I guess he's arrived at middle-aged man syndrome* as my wife put it, earlier than most.  To be fair to him, though, his prediction is borne out by events. [* Middle aged man syndrome: occurs when men reach an age at which they magically become unqualified experts on every subject under the sun, regardless of the actual levels of knowledge (or more often ignorance) on the subject.] So the major conspiracy lies in us planning to feather our own nest at the expense of our current employers, by enticing away half of a million pounds of business from them. Some among you may consider this is amoral, if not absolutely immoral; others may shrug their shoulders and say, "That's business."  What it most certainly is not is illegal: not even in the civil courts because, amazingly, none of us has proper contracts of employment (a serious error of management that we all vow will not occur in our new enterprise). Even if discovered before the evil deed is done, the worst that could happen to us would be to be sent on gardening leave for the duration of our notice period, which is only a paltry one month anyway. We have, however, determined that the element of surprise is fundamental to the success of the enterprise, and as the months go by, everyone becomes increasingly paranoid about the possibility of being discovered, with one hand on the lighted taper and a trail of gunpowder leading to the barrels of explosive in the cellar. We begin our conversations in late Spring. The plan is to resign en masse on New Year’s Eve, and to have our new agency operational on 2nd January. All we need for complete success is: A creative facility A company name Motor cars to replace the company cars we all drive now An office with telephones, desks, etc A client list to deliver income, ideally from day one. Doesn't sound much, does it? Rolls off the tongue quite easily, really. Each one of them presents difficulties and challenges though, and the foundations for what could become the company motto are laid even at this very early stage: "What can go wrong will go wrong."  All this is with the benefit of hindsight. At the time, they are just the expected difficulties associated with running your own business, of which of course we have zero experience. When we finally get round to doing the dirty, this is exactly what Jimbo accuses us of: not the anticipated treachery, but the fact that we know nothing about running a business, which I think is a bit rich, coming from someone who has omitted to issue watertight (or indeed any) employment contracts to his own staff, complete with non-compete clauses. Let’s take each of those headings in turn, and remember the “challenges” (god, I hate that word) that they throw up. The creative facility.  All three original conspirators are account handlers – what in advertising circles would be called bag carriers, though in sales promotion circles, the ideas often come from marketing- literate account people and then are creatively executed by design teams.  We can come up with the ideas OK, but we will need someone to handle design and artwork. Prime candidate is Michaelmas, our nickname for the ex-studio head, who has in the last 6/12 months left to set up his own free-lance operation.  We’re all mates; we’ll all get on; and Michaelmas is a dab-hand with the magic markers, to turn ideas into reality.  He’s a cheeky Cockney character from Reading – never been near Bow Bells – but talks as if he’s the original east-end geezer.  So it’s another session in The Abo’s Armpit to tap him up. It turns out his freelancing has been particularly successful, and while he’s flattered to be asked, feels he needs to give his own operation a full chance to succeed in its own right.  We tell him this is an opportunity to be part of something bigger – with a huge potential future upside financially – whereas, as a one-man band, there is a limit to what he can earn.  And every time he takes a holiday, or gets sick, he stops earning.  All pretty obvious stuff, but he’s unmoved and adamant: it’s the bird in the hand argument for him.  So we have to think again. Our alternatives now are severely limited.  The new studio head at our employer has only been in situ for less than a year.  He’s as camp as a row of tents, even though he’s married with kids, (hence his nickname, Gaylord), corpulent,  and patently not ‘one of us’, but there isn’t anyone else who comes close to fitting the bill.  At least we know he can do the work.  And we guess that he hasn’t been with us long enough to develop an enormous loyalty to the new regime – a loyalty that, to their credit, they do engender in their staff through good man management.  Paranoia rules, though, so when we approach him (back to the Abo’s again), it’s with all sorts of scarcely veiled threats about what might happen to him if he breaks confidences, none of which, it turns out, are necessary, because he more or less rips our arms off with enthusiasm to be part of it. So the gang of three has become a gang of four.  We have a viable management team and we can plan our prosperous future with a degree of confidence. It is at this point that I make the next big mistake.  As the senior operator, I am going to be Managing Director, but in the interests of fairness and ongoing motivation, I propose that we should all have equal shares in the equity of our new venture – 25% each.  This is accepted without issue, and it is fair to say that if I had proposed having a bigger share myself, there probably wouldn’t have been a vigorous debate about it at the time.  In hindsight, of course, it doesn’t take a genius to spot the potential problems in gestation for board decisions that are split down the middle – or worse, the other three ganging up on me and forcing me out.  Such cracks are papered over by a general agreement that we won’t proceed with any initiative without unanimity.  The likelihood of this creating major problems at some point in the future sits like a dark cloud on the horizon, but as with so many things, it is put to one side in order not to prejudice present progress.  It will of course come back to haunt us, but by the time it does, much more water will have flowed under the bridge, so let’s get on with the key planning issues. The name.  Surely the easy bit.  Jesus, that’s what we do for a living: create ideas, identities, memorable catch-phrases.  But of course there are four of us, so that means four opinions on everything, including every possible name in the known universe.  We actually have the cheek to run a brain-storming concept meeting to come up with a name in one of the secondary meeting rooms of our current employer.  With a cover story of course, in case anyone barges in on us.  After what seems like several hours of pulling teeth, but probably is no more than an hour and a half, we have a name we can finally all agree on: Marketing Profile.  The one thing we have a reasonable level of agreement on is that the word ‘marketing’ should appear somewhere, on the grounds that “it does what it says on the tin.” A few days later and Gaylord has turned the name into a logo, incorporating four triangles – one for each of us – all with a different primary colour (because we’re all different, even though patently I’m not).  All very creative.  And then the cost implications of four- or five-colour printing on all our stationery sinks in.  Perhaps not such a good idea. Before alternatives can be discussed, however, another bombshell: someone else already owns Marketing Profile.  Well, what a complete bastard, as Vivian on ‘The Young Ones’ would say.  So it’s back to the drawing board. We discover that Marketing Profile is a dormant company, having ceased trading, and briefly consider whether it could be acquired from its existing owners.  The potential for delays, uncertainty and cost conspire to convince us to start afresh with a new name, and after more lengthy concept meetings, we come up with Marketing Principles.  Actually we’re all glad that Marketing Profile is already taken, because the new name is a lot better, and the new name is the dog’s bollocks.  A little older and wiser, however, we don’t feel too self-satisfied until someone has been dispatched to check that it is in fact available.  There is a discernible sense of relief when that someone returns with good news.  So now we have a name - and a logo, but not in four or five colours: Gaylord is sent off to come up with a creative compromise (we’re just like all our clients really) which turns out to be silver foil blocking.  Ruinously expensive to produce, naturally, but don’t we want all our communications to shout quality. For a start-up with no track record, it really shouts delusions of grandeur, but we stand for it.  It won’t last much beyond the first reprint, but at this stage it’s one less thing to think about. Motor cars.  Surely to god this can’t be a big deal.  We’re going to need wheels.  Our current employer will want theirs back.  We’re talking about a time, in the mid-80’s, when the company car isn’t just in vogue and a genuine tax advantage – it’s a status symbol and statement about how successful you are.  That’s why I’m driving an Alfa Romeo GTV (adding another inch to my knob in the process), and the others are driving Vauxhall Astras, apart from Gaylord who has a BMW 3-series – all black.  Anyone who ever has to deal with the vexed question of year-on-year salary reviews will tell you that more discussion goes (or used to go) into the make and model of motor car the employee aspires to than their actual salary.  With the gradual removal of the tax breaks, this is much diminished, but we’re in the middle of the 1980’s Thatcher’s Britain. Magnanimously, I agree to equality: we’ll all drive the same vehicle (alright, the same make and model).  Sadly, we won’t be affording Alfa GTV’s all round, just yet.  At the same time, everyone has aspirations to something a bit sportier than a Ford Fiesta (which in al honesty would have been perfectly fit for the purpose).  Anyway, we’re all 20/30-somethings with more testosterone than you can shake a stick at, so it’s got to be something with a bit of grunt, as Jeremy Clarkson would no doubt inelegantly put it. After much debate – at least as much as the name issue – and deep study of 0 – 60 performance over several more pints at the Abo’s (drink driving is still barely on the agenda: our previous studio head, Michaelmas, used to get home from particularly beery do’s by putting a hand over one eye to prevent him from seeing double, and didn’t mind everyone knowing), we eventually agree on Vauxhall Astra GTE’s – the classic hot hatch at the time for Jack the Lads.  This choice will backfire (no pun intended) over the years, as the local Oxford youths purloin them on a regular basis for “hotting” purposes, though mine escapes the general trend and doesn’t even have its radio/cassette nicked – another common occurrence. We’ll lease them over three years, and rather than get them from the local dealership – where we know the owner quite well – we’ll go to the next town, on the paranoid grounds that word might get out to our superiors.  When we finally take delivery, in the first week of the New Year, we have sequential number plates: C546 – 549 GBM – two red ones, one white and one black.  The Cat has the white one; Stid the black one; and Gaylord and I have selected red.  Driving in convoy, we look like a second-rate rally-cross team. An office.  For the first time, we start to get an appreciation of the difficulties of starting a business from scratch.  It’s relatively easy to decide on the basics: how big – big enough for half a dozen people initially, ideally with room for another half dozen, as we (hopefully) start to grow; style – as a creative marketing agency, we can’t afford to look shit, so there does have have to be a degree of style to our business address, and we’ll need a proper meeting/presentation room; location – we’re all agreed on Oxford: it’s far enough away from our present employer to avoid the risk of bumping into them in the street, it has the ring of class, quality and excellence about it, and there’s no other comparable organisation in residence, to our knowledge. So off we go for a tour of business premises estate agents, where we discover two unpalatable facts: 1. There is a dearth of good office accommodation generally around the city, though there are quite a few crap-holes that we wouldn’t be seen dead in.  And parking – or the lack of it – is a major issue. 2. We are not ideal clients, because as a start-up we have no track record and are therefore high-risk.  This is a theme which will recur with any supplier arrangement we try to establish in the next 12 months. After several weeks’ fruitless searching, we finally see something that appeals: the top floor of a 3-storey office building on the edge of the city centre, where access and on-street parking is reasonable, and with all the necessary space for business operations, meetings, storage, etc. We offer the asking price and are beaten to it by an existing company with a track record.  Bugger. Back to square one.  With two months to go before we supposedly open the shop, we still don’t actually have a shop, but a new development in Cowley looks like it could be a candidate.  It has a few drawbacks, but beggars can’t be choosers, so we express an interest, only to discover it won’t be finished in time.  Do we want to put back our start date?  Do we hell.  On the other hand, we are still homeless, with only weeks to go. It is at this moment of desperation that we finally get a break.  We’ve been introduced to a local accountant (about whom, more later) to help us set up the company and do the necessary registrations and paper-work.  He wears a cardigan and slippers in his office, which is a clutter of little box-rooms and corridors over a shop in Headington.  In spite of his sartorial inadequacies, however, he does have his ear to the ground (actually, if he did that in Headington, his ear would be full of dog shit, but I digress), and he understands that there is an air conditioning and cooling business in offices over the Midland Bank with spare capacity, and they might be interested in sub-letting some space on a cheap and flexible basis.  He also reveals that his own organization is planning to move into a new building, currently on the drawing board, about 200 metres away, and could probably let us have a floor to ourselves, sometime in the next twelve months. We go to view our new home.  The bank is on a busy main road in a secondary shopping centre, and the offices on the top floor are up a lung-busting three flights of stairs (lift not supplied): a wide open space with a half-glazed meeting room in the middle; there are two or three individual offices down each side to about half way, being used by our putative landlord’s management and staff.  In truth it is a pretty depressing spectacle – most offices without furniture that are over two years old are.  Dingy and atmosphere-less, with obligatory strip-lighting to add a veneer of institutionalism, it nevertheless has as much space as we could possibly want, albeit all in open plan, with a separate meeting room; shared kitchen and toilets with the landlord – there are only half a dozen people employed here – and they will let us use (and pay for) other office services, like photocopying and telex (yes, telex: the facsimile machine is still a year or two away from regular everyday business use). It’s hardly ideal in image terms, and someone immediately coins the term ‘camping out’ for how our few desks and office possessions will look, perched in an enormous open-plan square footage, but we are between a rock and a hard place, and if we want to start on schedule – and we desperately do –this is probably our best, if not only, bet.  It’s cheap, flexible in terms of sub-lease term, and we quickly talk ourselves into it. At last we have a base from which to start operations.  Without it, you cannot order phone lines, produce stationery, or do much at all in a practical sense.  Once you have premises, you can start to plan the rest of the detail. Clients.  Having offices, cars, stationery, and all the rest of the paraphernalia is all very well, but without the clients to pay for it, we’ll be in and out of business in six months flat. Here’s a walk through the financial realities, all formulated on a delicious irony: the reason we’re (I’m) doing this is because Jimbo is becoming Managing Director (and I’m not getting his Head of Department’s job, complete with Directorship); the reason he’s becoming MD is because the company is being floated on the AIM market, and presumably the merchant bankers have decreed it would be better to split the Chairman/CEO/MD role, which the company’s owner and 60% shareholder has traditionally held – not unusually in a growing small business; as a result of that flotation, each of us is being given shares in the new listed business, and we are planning to liquidate them as soon as we need to, to give the new business a start-up, cash-flow breathing space (essentially knowing we can pay ourselves for a few months, while we kick-start some business income); so in effect, our employer’s stock-market flotation is funding our own start-up, which will (we like to think) have an adverse effect on its own share price.  Does this count as insider trading? Discuss. Whatever, we have all agreed, at some stage in the discussions, to put five grand in the pot, so we open for business with twenty grand sitting in the bank account.  Our proposed salary bill is £20,000 a year for me (as senior bod) and £15,000 for the others.  We all have mortgages and – apart from the Cat – other mouths to feed, so we can’t afford to be greedy (yet).  Our seed-corn funding might sound like a decent wedge, but in practice, by the time we’ve added in start-up and office costs, it’ll last less than two months, so we’d better be confident we can persuade some clients to give us some business pretty sharpish. It is at this point that the subject of this chapter heading enters the story.  It’s funny how relatively tiny incidents and personalities can intrude on proceedings and lend a colour to your memory of events out of all proportion to their actual significance.  As well as getting together at my place for conspiracy sessions, we’ve also been meeting at the Abo’s on a fairly regular basis in early evenings, discussing which clients are going to keep us in the manner to which we’d like to become accustomed, and we’re used to the young student crowd from the local furniture college who frequent the place.  Indeed, we’re familiar enough to be on speaking terms with a group of them, one of whom one night turns up with this ridiculous haircut.  Heavens knows where he (for it is a he) went to have it done or what possessed him, but it looks like something one of the more outré brothers in Jamaica might sport – a sort of top-knot sticking up from his head.  His mates have obviously been giving him stick about it, so are overjoyed when we join in: “Blimey, what have you been doing with your hair?  It looks like there’s a palm tree growing out of your head.”  And from this throwaway line sprang the nick-name “Palm-tree Head”, a moniker he will be stuck with in perpetuity in my mind, and long after he’s reverted to a less eye-catching confection.  And, moreover, an image that will forever represent for me the many conspiratorial meetings that took place in that establishment. Having ribbed Palm-tree Head mercilessly for a quarter of an hour, however, we eventually remember why we’re here, other than to sink a few pints, which is always the sub-plot in any event, while ogling the odd fit bird who strolls by.  Who can we count on to switch their business to us and in what timescale?  If everyone sits on the fence, waiting till our current employer fucks up (which they will, because we are taking all the experience out of the department, and they’ll never be able to replace us in the kind of timescale they’ll need to), we’ll be broke before they give us a chance.  So we write a list of clients we hope to persuade, in order of apparent likelihood to switch their business to us most quickly, and the likely annual turnover value that we could reasonably expect to generate.  This is that list, with the prime client contact from among our number: CLIENT CONTACT BUSINESS POTENTIAL LIKELIHOOD BUDGET QUOTIENT Lease Plan    Stid Car leasing £100K 100% Hall’s Brewery  Cat Beer/pubs £50K 85% DRG Stationery    Me Paper £50K 80% Harp Lager     Cat/me Lager £100K 70% Lyons Coffee     Cat/me Coffee £150K 60% There are others we are less confident of, because of their familiarity with and ties to the Directors and the other (auxiliary merchandising) side of the business: Burton’s Biscuits Stid/me Biscuits £100K 20% Meat Promotion Exec Me British Meat £50K 10% Hasbro        Stid Toys £400K 5% Bulldog Tools Cat Garden tools £250K 5%   We determine we will definitely not approach these prior to our defection, because of the high risk of their senior management blowing the gaff to our senior management.  There is one possible misjudgement here, because after the event, one of the clients at the Meat Promotion executive sounds quite hurt that we haven’t taken him into our confidence, and maybe there would have been a chance if we had, but you can’t rewrite history (even though that is exactly what I’m doing here).  On balance, I still think the risks probably outweighed the potential benefits, given the importance we attached to the element of surprise.  Sorry, Keith! There are one or two “gleams in the eye” too, but these represent no more than the usual new business hopefuls, that we may be able to subvert, if we can land them at all. We indulge in endless speculation about the likelihood quotient, and how and when to approach them with the news of our defection. Apart from Stid’s Lease Plan client, whom he will tell very soon because he’s confident of his trustworthiness and pliability, we decide that the best course of action is to entertain them to a fine Christmas lunch sometime in December at our current employer’s expense (if you’re thinking ‘How immoral’, much worse is to follow), and break the news to them of our new venture during the course of it. What do we expect them to say?  Well, we’re hoping it will be a bit more than, “Good luck, chaps.” The perfect response would be their agreement to bring their business with us on the spot.  Realistically, however, the most likely scenario is that at some point in the next couple of months, they will either give us a project, to see how we get on with it, or put us in a pitch against our current employer (and maybe others) for a longer-term or bigger project. The reality at this point in time is that sales promotion generally is treated with all the loyalty of a brothel.  It is dealt with on a tactical basis (probably because it is largely a tactical activity) by relatively junior Brand and Product Managers, rather than Marketing Managers or Directors, with little or no strategic vision.  You are vulnerable, at the best of times, to the siren approaches of other agencies offering free initial ideas to get through the door.  The risk is that while we are slugging it out with our current employer for the client rights, someone else will slip in the back door and sneak off with the spoils.  On the other hand, as a new agency, we have the opportunity to do the same thing to our competitors: new agency, fresh thinking, wouldn’t it be worth at least seeing us, etc? Essentially we are counting on the personal relationships we have built with our key client prospects being strong enough to bridge the transition from agency employees to agency owner/managers.  But once we have determined how, when and where to let them in on our little secret, there is little we can do, apart from speculate idly and endlessly – which we do – particularly as we are all effectively gambling the rooves over our heads on the success of our enterprise. *          *          *           * Which brings me neatly to the next obstacle (and I use the word advisedly) to free enterprise: the banks. Watching the slickly produced commercials of any of the major players, you get the impression that they understand business, are supportive of it, helpful to the ends of the earth.  I particularly remember one (not from this era) in which the subject was new business start-ups and the strap-line, “I went to WankBank and everything just seemed simple.”  Needless to say, the ASA never forced them to withdraw or amend the copy, but all I will say, based not just on my experience, but that of nearly every other business owner I’ve ever had a conversation with, is that this is so far removed from actual experience as to constitute corporate mendacity of epic proportions.  The only thing that banks understand is, guess what… money.  They are like that Monty Python spoof on BBC’s then Money Programme: “Tonight on the Money Programme, we’re going to be talking about … money: lots of it, some in crisp bank notes, etc etc.” We, of course, at this stage are delightfully naïve in our hopes and assumptions.  I’ve written a business plan, with 5-year profit and loss projections, cash-flow forecasts, a clear explanation of where the business will come from and how we will make our money.  We shall naturally need a bank account for all the basic transactions of everyday life, but it is probable, certainly in the first 6 – 12 months, that we shall also need an overdraft facility for short-term cash-flow needs.  Incidentally, for those of you not of a commercial disposition, the bank makes money (that word again) whatever the state of your finances, right up to and (very often after) your bankruptcy.  If you have money in the account, they use it in the money markets to make money for themselves (and you only get to join in this cash fest once you’ve got enough filthy lucre in your account - and the nous - to justify doing the overnight money markets yourself.)  If you don’t have money in the account, they charge you interest on the overdraft.  But I digress. The only way the bank can lose money is if your business goes bust with a large overdraft in place, so obviously, being the entirely risk-averse characters they are, they can’t have that.  The only way you can get a bank to give (for give, read loan) you an overdraft facility is if you have something of value that they can cash in and get their money back, in the sad (but not for them) eventuality of you defaulting on your responsibilities.  Your house, say.  Don’t own a house – with some equity in it: first-time buyers need not apply – or some other valuable asset?  Don’t waste your breath even asking.  Let’s face it, the only valuable asset most ordinary people have that could raise more than a few thousand in a fire-sale is their house.  We all have houses.  Apart from the Cat, who’s only just got on the bottom rung of the property ladder, the rest of us could probably raise a couple of hundred thousand between us, if they were all sold and the proceeds put into a central pot. We’re going to set up in Oxford, so we as well do the rounds of the big four there – except for Barclays: they left me high and dry in Paris for two weeks as a student, through their administrative inefficiencies, and the difficulties and embarrassments they put me through as a result (without ever a word of regret or apology) mean I still wouldn’t piss in their corporate ear if their corporate brain were on fire.  So we rock up to the first one – let’s call it NatWest, because that’s who it is – and present our credentials, our business plan and our relatively meager requirements: cheque transactions and a maximum overdraft facility of, say, £50,000, with a projected first-year turn-over of £400,000 leading to a break-even scenario. For those of you who know nothing of the marketing services industry, the business model is delightfully simple.  We charge our clients fees for devising and implementing promotional campaigns – typically 10–15% of the budget – so a budget of £50,000 might yield £5-7,500 thousand in fees.  Then we generally make a commission on bought-in products and services, so if we buy 10,000 T-shirts at £2 each, we might charge £2.50 for them and hoover up another £5,000.  And if we have all the design and artwork under our own roof, the margins are in the 60-70% area, even after paying salaries and establishment costs.  So on a £50,000 budget (peanuts these days), we might clear £15,000 gross profit.  We’re only planning to pay ourselves £15-20,000 in year one, so a couple of these for each of us and we’re in the clear.  If you add half as much again to salary costs for all the other overheads (office rent, rates, etc) – a rough rule of thumb that works for pretty much all service organizations – you’ll soon find how much money you need to make to break even. For those of you who aren’t ahead of me here, in our case this means (£65K + 50%) = around £100K. Add in a Secretary/PA and one or two other unforeseen costs, and it’s never going to be more than £130,000.  If we can turn over £400,000, can we anticipate a gross profit of 33%?  Answer: yes (and this isn’t wishful thinking, it’s reality).  In fact we expect to outperform these figures. Now here’s the thing: our first bank manager looks through all this and he can’t understand how we’re going to make money.  It’s not that he doesn’t understand our optimism.  It would be easy to counter that turning over £400K rolls off the tongue very easily but who’s to say we’re going to achieve it? That would at least be a fair point. All we’re really bringing to the table, in truth, is a good gut feeling and the optimism of youth.  But he actually cannot understand the business model.  He turns us down flat. Doesn’t want to discuss it any further.  It’s just a ‘No’, Which brings us up a bit short.  It has not occurred to us that acquiring banking facilities will be anything other than us making the choice of who we go to from the best of the bunch we present our wares to.  We have an attractive business proposition.  We can’t fail (can we?) They’ll surely be ripping our arms off for a chance of our business.  Or not. When we pay a visit to the second one on our list, therefore, it is with a lot less confidence and a bit more trepidation.  This time it is the Midland (now HSBC), whom I’ve personally banked with since the student Barclays debacle.  Incidentally, going to the bank you have a personal account with may help you get the facility you need, but it may not be a particularly smart idea long term.  Banks have a nasty habit of knocking down the walls between personal and business accounts, in the unfortunate circumstances of the shit hitting the fan, and playing fast and loose with whatever meager resources you still (think you) have, in order to recover debt.  What’s yours is basically theirs, unless you can persuade them that maybe a bit of it could be yours, if you’re really nice to them. This time, at least, we get someone who is a bit more business savvy.  I’m not convinced he understands the business plan much more than the first one, to be honest, but he can see we’re confident of making a profit, so he’s prepared to let us have a run at it.  Strictly on a no-risk basis to him of course.  He wants all our houses (not just one of them) assigned to the bank on a joint and several basis, so that if the worst should happen, he gets his money back and we end up, jointly and severally, on the street.  So what he’s really saying is, “If you boys want to risk losing it all, then be my guest.  I’m not losing anything.”  What he actually says is, “You do realize, don’t you, that 80% of all start-ups fail in the first year or two of operation?”  There’s nothing like positive thinking, is there?  And this is nothing like…etc etc. At the end of it all, we decide we may as well go with them and not bother talking to anyone else – it’s such a dispiriting exercise.  Lloyds, Royal Bank of Scotland – will they be any different?  Answer, based on a conversation we eventually have with RBS many years later about a potential new business venture we are considering, is probably not.  Mainly it’s about the luck of the draw in terms of the individual you get to see and whether there’s any personal chemistry between you (just like every other business relationship), rather than which actual bank they work for. *         *          *          * OK.  We have a name, a bank account, an office (finally), a creative facility (aka Gaylord), wheels (on order), a start date, a business plan and a list of potential clients. In the intervening six months, my decision to try to go it alone (which is the subject of a TV commercial for Renault cars right at this moment spookily) is fully justified by events at the current employer.  Having been interviewed for my boss’s job, though never in my opinion ever seriously in the running, they have appointed an outsider – an alleged heavy hitter from the London agency scene – to come and breathe life into their provincial little establishment.  I’ve actually been wondering what I would do, in the unlikely event of them actually offering me the job, given the advanced preparations for our own little show, and I know my co-conspirators have fretted a bit too on this front.  If I were to be offered it, and greed and safety-first attitudes prompted me to accept it, I would necessarily know all about the conspiracy and be duty bound to scupper it, as far as I could.  It’s a situation that the word ‘invidious’ was made for. Luckily the decision is made for me, as my gut instinct has always told me it would be.  Even luckier for us, having announced their new signing to the staff, the new guy gets made a better offer by his existing employer and withdraws his verbal acceptance of their offer.  This is brilliant for three reasons: 1. Schadenfreude: no one likes being passed over, and the joy at watching them fuck up is exquisite. 2. It flushes out the reality of the situation.  In going back to the drawing board, there is no longer any pretence that I am under the slightest consideration for the job.  They want an outsider. 3. It buys us another three months.  By the time they finally do have someone in place, it’s going to be the New Year, by which time we’ll be up, up and away. It is in fact absolutely brilliant timing.  A new guy arriving in October would have wanted to meet the clients, get involved, do all sorts of things that might impinge on our ability to feather our own nest.  Now we can plan, safe in the knowledge that we’ll almost certainly never meet the new man (who eventually turns out to be a big tobacco company Marketing Director, with no experience of running an agency; it gives me particular personal pleasure to watch from afar as he fails to make any sort of impact and is eventually dispensed with). *          *          *          * And so we hit December.  (Naughty December: don’t do it again).  Three weeks of fevered client entertainment, long festive lunches stretching into the late afternoon, when we thank them for their business, announce – with a little fanfare of trumpets: “We have a bit of news” – our new business plans and hope for a positive response.  All this new business entertainment is generously provided, needless to say, at our current employer’s expense.  Immoral?  Guilty as charged.  Anyway, they can afford it: they’re all millionaires, on paper at least, since the company was floated on the stock market. I think it’s fair to say that everyone is supportive, in the sense that they genuinely wish us well.  Equally, I don’t think that anyone commits there and then to coming with us, apart from Lease Plan (who, Stid claims, is so fully behind us, they’ve put back the print of their corporate brochure, so we can do it for them in January and get it in our first month’s accounts: now that’s what I call supportive).  You probably wouldn’t expect it of the others, particularly during a boozy lunch, when the news has just been dropped on them.  In some cases there are other people in their business who may have a say in things.  In any event, in their position I would want to think through the implications. Mostly, our likelihood quotient doesn’t change.  We get comments ranging from, “I’m sure we’ll be able to give you a shot at something” to, “We’ll have to see how your current employer continues to service our business, but do keep in touch and let us know how things are going.” (Oh we will, we will).  There’s nothing to be disheartened about.  They probably feel morally bound to continue with the current arrangements until such time as they are given good reason to reconsider.  But if they fail to get the quality of service they are used to, there would be every reason to look elsewhere, and why not in our direction, where previous good service has come from?  Plus, with the defection of the three top account handlers, and the studio head, plus the arrival of new number one with no knowledge of running an agency and no relationship with any of the clients, we have every reason to hope, expect even, that with resources stretched to breaking point, they will fuck up and let us in. As Christmas approaches, we’ve done just about all we can. There is now only the question of how, when and where we tender our resignations. At the department Christmas bash, in Europe’s biggest sauna allegedly, in Stock’s at Tring, I finally tell my secretary what we’re up to – the noise prevents anyone else from hearing – and it’s obvious she’s already smelled a rat, unsurprisingly; she agrees to come with us there and then.  Her husband subsequently suggests she asks for a stake in it herself, which is what you’d expect from the MD of another successful business, but the other guys are not keen.  Actually she ends up deserving it far more than some others I could (and will) name, but that’s for the future.  For the moment the gang of four has become a gang of five, and we have determined to resign en masse on New Year’s Eve.  The days when Christmas and New Year blend into one long holiday are still in the future; Jimbo is a workaholic, whose family life seems a mixed blessing and, we discover, will be in the office on December 31st.  Actually the Cat has to work that day too, having run out of annual leave.  Astonishingly, in hindsight, given what we are about to do, he is planning to go in and work as if nothing is up, and be matey-boy with Jimbo into the bargain.  To no one’s surprise, he finds the two-faced reality of it just a bit on the tense side. And so, shortly before lunch on New Year’s Eve, we meet up at the Abo’s for a last shot of Dutch courage and set off in convoy for the office.  I have phoned earlier in the morning to check that Jimbo is actually in as planned (in the unlikely event that he’s been unexpectedly whisked off to the January sales, we don’t have a plan ‘B’, but predictably enough, he’s there, warbling into his Dictaphone), and to ask if I can pop in and discuss something with him. The office is, as anticipated, deathly quiet.  Who’d want to work, apart from Jimbo? Sitting in his goldfish- bowl of an office, it doesn’t take long for me to outline what we’re doing.  He takes it on the chin, but I can see for sure that he’s had absolutely no inkling of what was coming.  Once he knows the others are in the building – the Board Room as it happens – we all retire there, including of course the Cat, who has been in the office all morning, allegedly working, but skulking sheepishly round the corner for the last five minutes. Finally getting all this out in the open is a relief, to say the least.  Out triumph at being able to drop a bombshell on the current management is only slightly tarnished by Gaylord’s inability to keep his mouth shut.  He can’t resist having to say something to show how clever he is, which inevitably just shows what a twat he is actually.  “We’ve got a proper company formed, and everything”,  “Yes, Michael,” (for that is his real name), “I’m sure you have,” is Jimbo’s withering reply. Of course the thing we’ve been most concerned about is how he treats our notice period.  It may be only a month, but if he can keep us out of action for that period, a lot of spanners might be inserted in various works.  We have speculated that he might try to get us to actually work our notice period, in the warehouse perhaps, doing manual labour, just to keep us out of general circulation.  Or “gardening leave”, though in fact the likelihood of his being able to control what we do in that month, in hindsight, is somewhere between tiny and nil.  In the event, his concerns are of a much more pragmatic, and easily satisfied, nature.  Because he has so little direct contact with the day-to-day client business, it dawns on him that once we walk out the door, he won’t have a clue what precise work we’ve done for the clients or what moneys are due to be billed.  When you think of it, it’s an astonishing lack of process, almost on a par with the lack of employment contracts, but there you are.  Anyway, the simple deal is: if we agree to come in tomorrow (New Year’s Day – ugh!) and get all our invoicing up to date, he’ll let us all go quietly.  Result. The cars of course will have to come back – shall we say by the end of the week?  There may be a slight hiatus in handing in the old and picking up the new, but what’s a day or two in the grand scheme of things?  We’ve all got partners with cars, except the Cat, and we can sort something out.  Only Gaylord demurs.  “We’ve got the right to keep them for a month.  It’s in our contract.” Technically, he may be correct, but looking at the bigger picture and given what we’ve just done, we’re on shaky ground.  On the whole we’ve got off pretty lightly (especially as he doesn’t have to write any invoices tomorrow), so we tell him to shut up. And that’s that.  There’s a ritual of hand-shaking and good-byes.  Jimbo’s only barbed comment is about our lack of knowledge of running a company (which is a bit rich, given the lack of process and employment contracts in his own company), and we’re off back to the Abo’s for a relieved refreshment or three and de- brief.  It is the last time all four of us will ever drink together in that establishment: it has served its purpose – the conspiracy is over. The next day, we go back to our (ex) office and together we write invoices for, as I remember, the thick end of £100,000, thus ensuring Jimbo has a spectacular year-end on paper, even if his resources to repeat the feat in the next few months are seriously depleted. Tomorrow, January 2nd 1986, the journey begins in earnest.
© Hilltop Consultancy 2012
The Unprincipled Book
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