Advice #9 - Never Over Indulge

This piece of advice can take many forms.? The key areas I will focus on will be:

1. Personal Expenditure

2. Personnel Expenditure

3. Personal Behaviour

Spoiler alert - as if you couldn't guess from the title - if you want to be successful in the long term then you need to avoid overindulging across these 3 areas.? It can be surprisingly easy to do and you will need to have a very strong moral and ethical compass to ensure you do not succumb to temptation here.? Trust me, I have seen plenty of examples of people getting one or all of these wrong and it never ends well!

Personal Expenditure

If you've ever read or listened to any motivational business books or biographies about successful business people there are several common themes in them.? One predominantly consistent one is their passion for their mission that exceeds any personal desire for wealth.? In the early days this almost always means figuring out how to survive by extracting the absolute minimum amount from the company in favour of using that cash to grow the business for the future.

Don't mistake this for me saying that one should always do this at all points.? The 'jam tomorrow' phrase comes to mind here.? What I am trying to say is that you need to consider how to proportionally extract the minimum out of the company while ensuring future growth and scale such that there is never a trade off between short-term gains and future viability of the business you're creating.? In the first few years this may mean cutting back on everything... no alcohol, no holidays, no dining out and so on.? In latter years it may mean only ever flying short haul once a year and using your Tesco Clubcard points to eat at Prezzo or Ask (yes - these are real examples from my life).

As a founder of a business - professional service or any kind for that matter - you are committing to create something much bigger than yourself and you need to be true to that commitment.? It is no good subscribing to this way of life and then using available cash for some ridiculously lavish holiday in favour of making an extra hire to ensure your team is not over-worked and end up getting burned out.? Not only is that a dick move but all you're doing is trading a very short-term benefit for an exponentially greater future position.??

What many of you possibly don't realise - as I didn't when I started this journey - is that if you can build a sustainable and growing business with revenues at or in excess of $5m annually then you're likely to achieve an 8-12x multiple of EBITDA (Google that) which may also then be delivered over a 3-5 year period.? If you're running at a 20% profit margin (a good target) and growing 20% YoY this could equate to a realistic total valuation of $10m.? That $30k holiday you might be tempted to take could end up costing you $300k!

Personnel Expenditure

If you're anything like me then you'll want to reward your time to the greatest possible level at all times.? Over time this will likely become harder and harder.? One clear observation we have within our business - and I know this to be common across other similar businesses - is that as your team grows the % profit margin you have will decline but then should level out somewhere.? The 'somewhere' is essentially defined by the industry you operate in, how efficient your team is at delivering the work and what your principles are regarding hiring and retaining staff.? You don't exactly get to decide it as such because there will be tolerable limits within the industry, country and time period you're operating in.? For example, right now in the UK when GDP is flat or even slightly declining, it's hard to get this margin above 20% while also maintaining your commitment to delivering client value and commitment to rewarding your team fairly for their efforts.

The way we have tried to crack this - and I am by no means suggesting I have actually cracked it perfectly - is by being completely transparent with everyone about the performance of the business, their contribution to that performance and therefore the value they can extract from that contribution.? There are 5 key levers to this:

1. ?Salary
2. ?Meritocratic pay rises
3. ?Benefits
4. ?Inflationary pay rises
5. ?Bonuses

For us, 1 & 2 are things that absolutely can't be affected by anything else going on.? Someone's market value is not just decided by me.? It's based on a range of factors and as such it is simply my responsibility to ensure that when someone is working for DMPG that they are pegged correctly against this.? I do have an interesting anecdotal story about this but you'll have to buy me a beer to get that out of me.? How fast someone moves along this index is (and should be) predominantly down to their motivations and therefore is linked to #2.? If someone deserves a pay rise because they are adding more value to the business then they should get it.? It really bugs me when I hear stories of people missing out on promotions and pay rises because of ridiculous bureaucratic reasons and then watching someone who clearly is trying to play the career ladder game swoop in above them.

Items 3, 4 and 5 are all variable.? They are all linked to competitive and economic forces that are often beyond our control as business owners.? This needs to be fully understood by each member of the team and how it potentially impacts them.? As much as I find it odd that people miss out on promotions and pay rises, I also find it odd when people assume that a X% bonus minimum is essential.? The whole point of a bonus is to reward people over and above the standard value expected of them and it comes down to a combination of personal performance and business performance.? If economic factors mean that a business shrinks (a pandemic for example) should people get a bonus by default???

The key points to take away here are that every business should be paying people fairly based on their actual value and not just because they've been there for X years, or are male, or are over 6ft tall (Google some stats on that!).? Owners of a business have a duty to be transparent about how they will reward people and why.? We also need to ensure everyone understands these rules in determining how to grow the team.? It's no good lavishing certain people with huge bonuses and then causing others to become overworked because all of sudden there is no more cash to justify new hires.

Personal Behaviour

How many times have you read a story about someone abusing their position of power?? The more you find yourself in a position of power the more responsibility you need to accept over that.? If you do not want or think you can handle this responsibility appropriately then demote yourself somehow.? Abuse of power is never acceptable, it should never happen and it's quite rare that there is a good route back from it if you do abuse it.? I'm aware of situations where this has happened and in many cases it's something that has actually developed over time without that person even really realising.? This is not a justification for their actions in any way at all.? It's merely me pointing out that in many cases even the person committing the abuse doesn't know they are doing it because they've normalised it over a period of time.? The key - if you're inclined to fall into this trap - is to catch yourself early and either demote yourself or figure out a route to owning and respecting the responsibility that comes with this power.? I do not believe I've ever even gotten close to abusing any power I have developed over time but for those that know me, I give you full permission and absolved liability to punch me in the face as hard as you can if you think I am falling into that trap!