It’s a job for grown-ups

By Mike Southon - Financial Times on Saturday 23rd February 2008.

Read the article below, which followed on from a recent interview with Spencer Gallagher the Founder and Managing Director of Bluhalo

There is also a Podcast of the full interview (and a cut down version) which can be download from The Beer Mat Entrepreneur Website http://www.beermat.biz/ or through iTunes

"It is hard starting a new business. It is even harder growing it, as this requires the entrepreneur to hire people better than themselves. Anyone starting a business has to be versatile.

They have to have enough sales ability to secure customers. Then they have to be able to deliver on their promises, which often involves working long hours. Finally, they have to do their own finances and try to avoid going broke from poor cash flow.

All this can be very hard work and explains why a large number of businesses cease trading in the first year. But if you are successful, you can then start scaling up your business. The problem is that there is a glass ceiling of somewhere between 25 and 40 people.

To grow above this level you need to plan carefully and put some proper business processes in place. Process is the natural enemy of the entrepreneur, so the clever ones hire professionals (or grown-ups as I like to call them), who can do some relatively simple tasks in a systematic and repeatable way.

One such entrepreneur is Spencer Gallagher, who stumbled into web design after a career in clothing retail. He had early success with his company Bluhalo doing simple websites for start-up businesses. His bright idea was to trawl the database at Companies House for newly-registered businesses and offer them a quick service to get up and running.

Business was good and he was able to expand, so Gallagher realised it was time to hire people better than himself to do the jobs he hated the most. Top of the list was finance. Most entrepreneurs have a bookkeeper or an accountant, but these people can only deal with the past. What is required is someone who looks into the future, or a finance cornerstone as we call them in our Beermat model.

This is someone who tells you months in advance that you need to do certain things differently. It is often assumed these people are just there to control costs. This is the easiest part of their job. What they are really there for is to work out how to scale the business, which should involve getting involved in every part of the operation. Some finance cornerstones even make great sales managers.

Gallagher approached finding a finance cornerstone in exactly the right way. It had to be someone whom he liked, who understood the direction he wanted to take Bluhalo. He then told this person they had to pay their way as soon as possible. Reducing unnecessary costs can make finance cornerstones unpopular.

The natural mode of the entrepreneur is to say “yes” to staff, which can lead to a lax regime for personal expenses. It is very common for a new finance cornerstone to attract the nickname Dr No, but increased awareness of the need to control costs is a natural part of the growing-up process for any small company.

The next “grown-up” that Gallagher hired was an experienced project manager from IBM. Small companies usually deliver projects by the seat of their pants. This works for small number of customers, but scaling this up is very hard. It requires skills that can only be gained from the successful delivery of large projects and these skills are most often found in large organisations. Gallagher’s experienced project manager was again given the specific brief of saving her own salary and more.

She installed the project management software they used at IBM, which turned out not to be as monolithic or inflexible as Gallagher had feared.This enabled Bluhalo to raise itself from the hundreds of thousands of companies that offer web design into one of the most successful in the country. Bluhalo specialises in large sports sites, with high numbers of visitors looking at increasing amounts of ever-changing content. This requires advanced software development skills as well as expert customer management.

Hiring grown-ups also enables the entrepreneur to spend more time turning the next good idea into a great business and not bother with ever having to grow up themselves. Perhaps the best role model for the aspiring entrepreneur is not Richard Branson or Bill Gates, but Peter Pan."