A Tale of Two Businessmen: The Shopkeeper and the Tycoon, Or Why Organizations Should Do Better Than Know The Price of Everything and the Value of Nothing

 

Business isn’t simply about spreadsheets and dividends. Business is about people and what drives them. Every business has a story behind it that offers us valuable lessons if we consider it carefully enough. In that spirit, I want to tell you the stories of two very different businessmen, the shopkeeper and the tycoon. Join me to find out about them, and what I learned from both.

The shopkeeper: My father

When I was a kid, my dear late father, John, had a shop in east London from the 1980s to the early noughties. He sold curtains (drapes), linens, bedding, lace and gift items. He left school aged 15 with no formal qualifications and fell into this line of business after numerous attempts at other professions. He was self-taught and he remained an avid auto-didact throughout his life. His was a small, modest family business. Nevertheless, it was successful enough to support his staff and his family, and we had a comfortable way of life, thanks to his honesty, hard work, and respectful approach to everyone he worked with — suppliers, customers, and most of all, staff.

He ran his business with these old-fashioned values. He was a kind and gentle man. A gentleman, in fact.

Lessons from my father. 1. Understand the value of what you’re offering

Like any business, everything in the shop had a price, from the cheapest dishcloth (less than one pound) to the most expensive custom-made, lined curtains (drapes). Everything was priced fairly, but notably, the pricing of any item, even the smallest and cheapest, needed to consider the following before a profit was to be made:

·        Wholesale cost of the item

·        Value-added tax (sales tax)

·        Local municipality business tax

·        Utility costs (water, electricity, gas)

·        Staff salaries and benefits

·        Ancillary costs: staff bonuses, incidental treats for the team, contingency costs, and so on

Most customers saw the prices marked on the items and were happy to pay when they found what they wanted, but every so often, someone would try to haggle. This would irritate Dad, and he’d be quite firm with these customers. It’s clear to me now that what irritated him was that he was offering goods at a fair price. He felt that these people were trying to lowball him and assumed he was taking them for a ride. That’s something he simply wouldn’t do. Furthermore, he had to cover his costs. It upset him that someone would seek to undermine a modest, hardworking business for the sake of a few pence or a couple of pounds.

And here’s the first lesson. Dad was offering high-quality goods with a personalised service. He simply expected the acknowledgment in payment that he was doing so fairly and honestly. Customers could go to the chain stores or the street markets and get inferior products with no personalised service, but you get what you pay for. You should know the value as well as the cost.

Lesson 2. Acknowledge the value of people

The second lesson is about his staff.

Dad had a close-knit staff who he looked after in a fatherly fashion. He knew that he couldn’t run his business without them. So, he paid them fairly and treated them with bonuses and gifts when he felt it was appropriate. Plus, when they had health or family issues, he understood and supported them, and gave them the time and space to address these issues, even if it meant working longer himself or calling in me or my mum to cover for absent staff. Remember, it was a small business, and there weren’t a lot of staff at any given time.

He gave a job to his friend, Harry, who was skilled and knowledgeable in the business but was older and couldn’t find work elsewhere. He gave jobs to two employees who had left school with no qualifications. He trained and nurtured them and they proved to be excellent members of his team, who worked with him to the end. When a young employee, Annette, got pregnant, he supported her and kept her job open for her to return to, way before companies were compelled to by law. Again, this wasn’t easy to do as a small business, but he wanted to do the right thing. Annette eventually decided to become a full-time mum. Still, she stayed in touch with the company, and sometimes did seasonal work for Dad, to cover holidays or busy times, like pre-Christmas. Dad trusted her. He respected her work and the knowledge he had imparted to her and knew it was valuable.

He advised and supported his manageress, Brenda, to buy her council house after her mother died, when the government was selling off municipal housing stock to the tenants. She was scared to make what she felt was such a big commitment, but he assured her that her job was safe and that she would be capable of paying off the mortgage. Brenda bought the house and Dad encouraged her to take this step that set up her family for life. They had never before owned their own home.

Dad treated all of his staff with respect. What he got in return was loyalty, commitment, and longevity of service. Some of them stayed with him until they retired. Others until he closed the business and retired himself. Retention was so high that his recruitment needs and costs were next to nothing. Customers benefited too. They were greeted by staff who were content, knowledgeable, and genuinely helpful. And customers knew they were getting expert service, so they returned to Dad’s shop time and again. What was good for the staff and the customers — Dad’s commitment of time, training, and resources to his team — was also good for the business.

The lesson here is to pay people what they’re worth, not what you can get away with. Go above and beyond, both financially and in other ways, and you will reap rewards. Invest time and resources in them, show faith in them, and the returns you receive will be worthwhile. Don’t expect rich rewards when you skimp on your staff. Lowball them, neglect them, or treat them poorly, and you can expect much less in return. Ultimately that will detrimentally affect your bottom line.

The tycoon: The hot-shot entrepreneur

My other big lesson came when I worked at one of London’s leading public relations agencies. The lesson came from a client who couldn’t be more different as a business leader than my dad. The agency was a young, hectic, and often chaotic working environment, but we worked with some stellar brands like PepsiCo, Nestlé, Warner Music, BAFTA, Nike, and many others. We were at the top of our game, and the agency remains so decades later.

One year, I returned from my summer holiday to learn that we had won a pitch to look after a new business that was launching in the UK. Not only was the business and the brand completely new, but the particular kind of business was unknown in the UK and European markets. As the Account Director, I was to be the principal point of contact on the account, alongside my boss.

This exposed me to the CEO and founder of the client company. And, oh boy, was that a shock to my system! He was a brash American, hyper-intelligent, with a degree and an MBA from two Ivy League universities. And he was a seriously shrewd businessman. He had previously set up a similar business in the USA while at college but left it after a disagreement with his co-founder. Nevertheless, he still owned part of the business, so when it was sold for a few hundred million dollars, he woke up one morning in London a multi-millionaire.

When he came to London to establish a European competitor to his previous business, he already had the track record to show he knew what he was doing, he secured significant investment and rapidly cemented partnerships with some of the world’s leading sporting brands and entertainment figures. His momentum was huge and his rise was unstoppable, so much so that some years later, he even took over his old company, his brainchild.

Now, this guy was nothing like my dad. Instead, he was loud, aggressive, irascible, with a hair-trigger temper. His self-belief was so strong that he was dismissive of anybody whose opinion differed from his own. This became clear when he was incredulous that the UK Parliament wanted to question him about his business and whether it could run legitimately. At one point, he contemplated not showing up to give evidence to a Parliamentary Select Committee because it simply astonished him that members of parliament couldn’t understand the benefits of his business and yet could potentially legislate against him. My incredibly calm boss talked him down, I’m happy to say. And this was right for the business.

In short, he was daunting to work for, and to be honest; it wasn’t much fun. It exhausted me and eventually, I left the agency after nearly eight good years because I didn’t want to be exposed to his aggressive style anymore.

So, what could I possibly learn from this guy?

The lesson: you get what you pay for

When I was told about this new client, I learned what he would be paying in monthly retainer fees. It was my turn to be astonished. They were huge. Far bigger than the fees paid by some of the multinational brands I previously mentioned.

It turned out that during preliminary discussions with the client, our chairman wasn’t sure if he would be a long-term client, or even if he could be, so he quoted a high price for our services, for an initial three months. The client agreed, without a blink. We all thought we’d earn a nice bit of money through the autumn until Christmas, and then we’d part ways. What actually happened was that the business launched with a boom, aided by our work, and grew rapidly, with more and more deals announced, so the agency’s relationship was extended, and ultimately continued for a few years.

Initially, we couldn’t believe our luck. What this businessman was paying us per month was almost unheard of.  We wondered whether he hadn’t realised what he’d committed his business to. But we soon began to understand why he’d agreed.

As I said, this guy was super intelligent and super shrewd. He’d done his due diligence and had approached us because the agency was the big name in town. He wanted the best, and he was willing to pay top dollar for it. He was under no illusion that he was paying big money for our services. He also seemed to understand that he was paying bigger money than any of our other clients.

Whether he knew that for certain is a moot point. What’s certain is he knew he had serious leverage. When he wanted to speak to us, we had to drop everything. When he said “Jump,” we had to say, “How high?” If he felt we weren’t performing, or prioritising his account, he’d let us know in strident terms that he wanted more from us, because he knew he was the goose that was laying the golden egg on our team’s profit and loss. Consequently, he got first-class treatment. We sweated bullets for him. And we got results over and above our expectations for a brand that initially had absolutely no equity and a company that had no previous foothold in the UK or anywhere in Europe. We literally turned ourselves inside out for him.

What he knew from the get-go was that if you pay for the best, you can demand the best. He demonstrated that he valued the agency’s reputation, capabilities, and what we said we could achieve by paying us highly. Some of his attitudes and interpersonal skills belied this, but we couldn’t argue with the value he bestowed on our services. So, we responded accordingly, gave him that value, and delivered a healthy return on his investment in us.

Initially, we thought he was crazy when he agreed to pay our fee, but he was as sane and as clear-sighted as could be. He showed he valued us. Then we had to show that we were worth it. The lesson, put simply: you get what you pay for.

Conclusion: Get value by showing value

These two very different men taught me significant lessons about business, which boil down to a crucial consideration for ensuring any business is successful.

In different ways and on different scales, both men acknowledged and rewarded the value their teams brought to their businesses. As a result, they drove high performance from them, which in turn converted into success and profit. Neither of them skimped because they knew that saving a few pounds here could cost a Hell of a lot more later. They understood the value of investing in people to get the best from them.

We are living in tumultuous times for business, and it might seem to many a good idea to cut costs by offering lower salaries, fewer benefits, less flexible working practices, and poorer terms and conditions.  I’ve recently experienced situations where strongly backed and highly valued organizations want to do things cheaply. In the short term, it might look good for the balance sheet, but what they’re really doing is showing that they know the price of everything and the value of nothing. I predict that eventually, with this philosophy, they will lose out. It’s not the best for businesses, employees, and customers. What’s best is maximising the value you get from your people by showing how much you value them. The investment, in all sorts of ways, is worth it.