Okay, we’ve started the ball rolling on this website with the controversial claim that entrepreneurs should only hire freelancers…
Next, I want to tackle one of the biggest fallacies in recruitment and that is …
…that you have to hire the best. … and hiring the best means you have to offer the full time employment – the best package – a full time employment contract and for CEO’s golden handshakes to welcome them and golden parachutes should they fail, share options if they don’t etc.
And therefore, you might think, if I don’t offer a full employment contract why would they ever leave their current employment to join my organisation?
Let me be blunt about this. This is rubbish. People will join your organisation mainly for the opportunity and excitement you offer – much less for the terms of a contract.
Here are six reasons why freelancers are better than employees;
Firstly, freelancing and contracting is more fun and the freelancer earns more money. The freelancer gains by being treated as an equal – they are in business too – albeit for themselves and the relationship between you and the freelancer is a much more grown up one. No longer do freelancers expect you to provide for them – as a parent might to a child – instead, it is a relationship of equals. This benefits the person hiring the freelancer just as it benefits the freelancer him or herself.
Luke Johnson, a successful entrepreneur, wrote in the FT last week that it is important to fire your existing management team if you want your business to discover reinvention. He says that gradual revolution is not enough and that when systems are broken small steps won’t work.
Whole swathes of businesses no longer work the way they used to. Book publishing and local newspapers are at the top of the list, but other business such as estate agencies, state education, financial services are all looking for new ways to do things.
We are not looking at a gradual revolution here - we are looking at business models that no longer work.
What does the successful entrepreneur do?
So, in these situations, how does the successful entrepreneur respond? Fire your management team, says Johnson.
In effect, the proposal is that you should remove your entire management team that was linked with the old business model. Why?
Firstly, turn around situation are short on time and demand decisive action. This is hard for anyone to implement, but particularly hard for a management team that have been working hard to save the existing model – or adapt it gradually to the new circumstances.
Therefore, existing management is weakest at performing major surgery.
I saw this happen in my previous business, where it was extremely difficult to get the existing teams to accept that things had changed radically and a more direct approach – removal of all management – might have brought about change faster.
Goal Setting is powerful. And I’m a big fan of setting goals… but…
… goal setting can have plenty of unintended consequences.
Like the back of bottle containing powerful chemicals – perhaps for clearing a blocked drain – they should contain the warning ‘use with caution’ and ‘discard when passed the use by date’.
A classic goal for first-time entrepreneurs – who are building their first business – is to sell the business for a set amount – say ?5million – in 3 years time.
This goal has both good outcomes and some nasty consequences – so let’s have a look at each.
This goal can be shared with a team. Typically it is used to encourage shareholder partners or sometimes suppliers to buy into the business plan and ambition.
If you have no credibility as an entrepreneur – say you have just left full time employment and not previously had a profit & loss responsibility within your ex-company – then this goal is a clear sign of your intentions.
As a result, it can help to make people take you seriously.
Alan Sugar, a UK entrepreneur with more than his fair share of grey hair, stoked controversy by stating that 85% of UK businesses that failed to receive bank finance had nothing to complain about.
Amid the controversy of whether he actually said this or not, we can still ask ourselves whether he has a point.
Essentially, he is saying that the reason that businesses don’t get finance is because they aren’t good enough.
His description is that many entrepreneurs are living in a Disneyworld.
Okay, let’s start with what did he actually say. He said
“The problem is that some younger people who have lived through the last 10 years or so of business and prior to that 10 years they may have just come from education, they lived through that period of the last 10 years where they think the irresponsible manner in which the banks dealt is the norm.
Digital business (previously called Internet businesses) are still all the rage and therefore the majority of new start-up business plans are digital business plans.
In some ways this is good – as it is a fast growing sector with very high levels of innovation (and failure rates). On the other hand, it means that we see the same errors of strategic business thinking repeated again and again.
So, to help out, I’ve laid out the three key mistakes that I’ve seen after 11 years working in digital innovation.
You may have some of your own – so please feel free to contribute.
1.) 1 in 100 Chinese customers
Many business plans start with this fallacy. They begin with the population of the world, or a country or a business sector and then say – ‘if we could only get 1% of that market’ then we’d have a business worth ?x million.
Of course, this is designed to make ’1% of that market’ sound tiny. But this is because you are working top down.
Take China for instance. The population is 1.3bn people. Okay, so 1% is 13 million. Is that a lot? Well, it is greater than the population of London. It is around half the UK’s working population. 13 million is also around about the peak level of TV viewing in the UK of the England vs Slovenia world cup football game.
So, when a start-up business begins with a huge numbers and asks if you could take just a tiny part of it – 1% say – they are making the mistake of working from the top down.
Instead, it is better to ask, what does it cost to gain a single customer? From which you can then ask what it would cost to reach 13 million viewers – well advertise around a major England football match – but to win 13million customers is going to require constant marketing and conversions of leads from your advertising. To give you an idea, a single 30 second TV slot reaching 13 million world cup fans would cost ?300,000.