turning a good idea into a great business
the beermat entrepreneur
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Mr. West: That's
what winning is, when you get big enough to put stuff
Mr. Southon: Also, just to repeat something we said this afternoon, it’s being
able to sleep at night. It's a myth that you have to go out and
screw everybody to do well in business. The fact is, to use the
technical term, that’s bull crap. The vision that you've got to
get one over somebody else, that doesn't work.
I asked Sir
Campbell Fraser an honest question. “In all your years of
industry, have you ever screwed anybody in business?” He thought
and he said, “Do you know? I have not.” I believed him. That
man sleeps at night, and I'm sure he's going to go to Heaven. I
hope he puts in a good word for me when he gets there. He's a
I'll give you a
bit of personal experience. I was lucky enough to make money 10
years ago. We had a trade-sell. I was the right guy at the right
time. Unix happened and I was with the right guys. I was really,
really lucky. I had a check with seven figures. It did make my
misery a bit more comfortable, of course, but it enabled me to do
something that others wanted to do, which is, have you ever wanted
to be a really big pop star? You know, one of these guys all the
girls scream about? I do. Okay, I'm a bit strange. I do, so I
worked out how to do it. I'll show you. It's really simple. Take
this gentleman here. What has he got that I haven't got? A
mustache. What I need is a mustache. You start off with the mastic
glue here. For those of you who don't know about it, it's the glue
that I've been sniffing for the last 10 years and it hasn't
affected me at all. There's that. [He puts the glue above his
Now I need a
mustache. Here's a mustache here. These are the best mustaches you
can get. They are handcrafted by Bolivian virgins. They're
individually stitched. All these hairs were on somebody once. I
wonder where. [He puts on the fake mustache.] Anyway, you
stick it on and, oh, yeah, I'm looking rather cool. I think some
of the ladies are getting a bit overexcited now. My glasses were a
bit on the tentative side. These are business glasses. I mean, no
offense, but I need some groovy glasses. I stole these from
Graceland, from Elvis Presley's corpse. How about that? [He
replaces his eyeglasses with large, glittery show glasses.]
There you go,
but there's still something wrong with this picture, isn't there?
I'll show you what. What you all need is serious hair. [He puts
on an enormous afro wig.] Now, this is serious hair. Let me
put this on, put my glasses on, and I am now confused disco legend
and '70s fashion guru Mike Fab-Gere, and I am the grooviest guy in
So what's all
this about? It's very simple. We sold the company. I had some
money. I thought, “I'm going to play in a band.” I used to
play in a band with Chris, a swing band. I put together a pop '70s
band, but, of course, I had money, so I put together the best band
in the world. I just went to see my keyboard player. He's now in
Deep Purple. I've lost him for about another six months because
he's touring. I got my guitarist from Wishbone Ash, I got my bass
player from Toya, who you've probably never heard of, but I've got
all the best session players in London. I put this gear on and the
flares. I've got the afro and I've got all the clothes that I've
had made for me. I've got a 10-piece band. I've got a horn
section, I've got girl singers. I've done just about every
university in Europe by now, and I've done corporate events, bar
mitzvahs, weddings, coming out parties, putting it back in
parties. It's a laugh. I'm a silly man in a wig and we're doing
“I Will Survive” and “Blame It on the Boogie” and “Honky
Tonk Women.” I strut my funky stuff, I use it up, I wear it out,
I get the funk out of my face, and I boogie on down. How much fun
is this? If you saw me live with the band, you would think, he's a
mad guy in a wig.
You get the
point of this. This is fun and interesting because this is my
hobby. It's a rather serious hobby. I toured for about six years
solid. It was when I was getting a bit tired of touring that I
went back to do startups, but I still do it. I did a wedding last
Saturday, and, remarkably, we ran into the bride and groom at
Heathrow and they were so happy because we really helped make
their wedding a great day. How much good karma is that? I get to
be a pop star. The ladies can hardly restrain themselves at the
front here. I've had experiences with Mike Fab-Gere that you would
not believe. I hope to play over here one day, but I've done some
fantastic gigs. When I'm a pop star, it's great. When I don't want
to be a pop star anymore [he begins taking off the accessories],
I take off the glasses, the wig, the mustache, and I'm boring Mike
Southon again, the beermat entrepreneur.
serious point to this. We're going to talk now about the meaning
of life. Start writing. Get your pens ready. For this I'm going to
get Chris Fab-Gere to help me. Come on Chris, put your wig on.
Now, the meaning of life has two parts only, rather like the
elevator pitch. Part number one?
Mr. West: Have as much fun as you can.
Mr. Southon: Right. Have as much fun as you can. If you're not having fun, what on
earth are you doing? What's more fun than starting up a business
with cool people doing neat stuff? Hover boards, whatever. Being
an entrepreneur is the best possible fun you can have. It’s hard
work, but it's really, really good fun.
So, have as
much fun as you can. If you're not having fun, get a wig and have
And part two?
Mr. West: Spread some good karma.
Mr. Southon: Spread some good karma. What is that about? It's about happy employees
and happy customers. What better karma is there? Have as much fun
as you can and spread some good karma.
The final bit
of advice from Sir Campbell Fraser is: “Watch the cash, laddy.”
And that's it.
That's the meaning of life, have fun, be entrepreneurial.
We hope you've
enjoyed our talk. We are the beermat entrepreneurs. I'm Mike
Mr. West: I'm Chris West.
Mr. Southon: Thank you very much.
the audience: q&a
Ms. MacPherson: Thank you very
much, guys — Don't put that wig on me!— We have time
for a few questions which we can take from the microphones in the
Audience Member: When you start
out with the entrepreneur and the cornerstones, you say everybody
is equal and they have a 20% share. Is somebody in charge?
Mr. Southon: Yes, Peter Griffiths was in charge of The Instruction Set because he
was the intellectual champion. He wasn't right about everything,
but he was right about most things. People are in charge in
different areas. If there was a sales issue, I was in charge.
Audience Member: But is there a chief to the company?
Mr. Southon: It will happen naturally.
Mr. West: It tends to be that the entrepreneur remains the chief because he or
she is the person who has the vision, who guides things.
Audience Member: How do you handle the cornerstones when I'm the chief? We're all equal
partners, but what I say goes.
Mr. West: No, that's not what leadership is in small business. Once the
entrepreneur starts saying, “What I say goes,” they're in
trouble, because entrepreneurs aren't always right. The point
about the cornerstones—finance, sales, delivery, and technical
cornerstones—is that they're there to argue against that and
say, “No, that's wrong.” The point about having five people is
that you will reach a consensus. If people get out of line and
start having odd ideas that aren't right, the others can heave
them back into line. That is the point. The entrepreneur isn't
always right, and the whole point about having the cornerstones
there is to prevent the entrepreneur from hijacking the
organization and sending it in the wrong direction, which can
Audience Member: But without a company leader, you're spending a lot of time discussing
and going over decisions and things like that—who's in charge,
who's right and who's wrong, whatever. Without someone providing
leadership for the vision, you're really kind of spinning your
Mr. Southon: Let me tell you what happened at The Instruction Set. Someone would
say, “Why don't we do courses in OS2?” The technical guys
would have a discussion about the merits, then they would say to
me, “Mike, can we sell this?” I said, “I don't know. Let me
have a look.” I sort of pulled rank on sales, somebody else
pulled rank on what should the course look like, Pete had the
vision, and we formed a consensus. We didn't have to discuss every
decision, it had to be voted on. Most run of the mill decisions
that were made were done by somebody else. I wasn't even there. I
was out of the building. I would only be called up to ask what
color photocopier we were going to get. If it was something like
whether we should we take on some more staff, it would be a matter
of, “Mike, can we sell any more? What's the revenue looking
like? What are the customers saying? What sort of people? Do we
know anybody?” A consensus was formed on the sensible decisions,
but it will really focus your mind giving away 20% of your company
to a cornerstone. That's why they're good people.
Audience Member: You said focus
on revenue and profitability from day one. If your intent is to
build a product, how can you sell it if you haven't built it yet?
Mr. Southon: Yes, of course. The question we always get asked is, “The beermat is
all very well, but we're about to invent a cancer drug and it's
going to cost half a billion to do.” Obviously, that's a tough
one, but any product, in my view, also has a service element.
Let's say that you're going to make a widget and it's going to
take a bit of money to make it. You're telling me, the sales
cornerstone, that you're going to do a revolutionary widget. That
sounds cool. Let me ask this gentleman, he's head of purchasing at
Widgets Unlimited, “If we have this widget, would you be
interested?” He says, “Yes, but we're very skeptical.”
do a little consultancy for you. We'll write a report about how
this widget is going to be better than anything else and we'll
bring you an example.” Just knock one out, a quick, easy one. If
this guy will pay for the consultancy even before we have the
product, it is looking good. But maybe he says, “Well, you do
what you like, but we'll never buy it.” See, a lot of product
companies make the mistake of building the product, putting too
many features in it, then going to him and discovering at the end
of the day he didn't want to buy it.
Adopt a service
element. “Why don't we train this guy in how to do better
widgets?” Offer the service element, which is hard for a product
company to do, to test the market first. You're forming a
relationship with the customer and you're beginning to understand
what his needs are, what the business is about, where widgets
would fit in, and what he might pay for them as consultancy work.
Try services first if you can.
Audience Member: You talked
about the entrepreneur’s decision to stay on or not at the
25-person point, but mostly about their leaving. Can you offer any
strategies if you want to stay with the company? How do you need
to adapt? Is there any point at which you can say that you've
safely gotten over the hump?
Mr. Southon: The first thing we advise for the entrepreneur is that if you still
want to be involved, great, but you have to let a lot of stuff go.
Let managers do stuff and do not meddle. I left the company once
when the entrepreneur kept meddling in sales, retargeted all my
salespeople without telling me. I said, “Why buy a dog and bark
yourself?” I left.
entrepreneur has to let all this stuff go. Maybe they start a
Skunk Works for that fantastic new product, put it in the building
next door, put a skull and cross bones on it, and keep your key
team. Let's say you're the entrepreneur. Take them with you, your
little tiger team who invented the Macintosh and grow it that way.
Still be the charismatic founder who wanders around charming
everybody: “I was there at the beginning, It's great for all you
new people. I don't know your names, but I don't care, I love you
anyway. I'm in the Skunk Works.” Still produce that leadership
stuff but don't get meddling in things, like why are we spending
this on that and why have we got this paper and not the other one.
Let stuff go.
I guess you'll
get humps all the way up. People who grow companies past 50, 100,
200, there's definite stages in there.
Mr. West: One hundred and fifty.
Mr. Southon: One hundred and fifty is a bit of a magic number as well. There's a lot
of organizational theory on this. We're not experts on larger
companies, we're startup people. I think you'll find people who
have more expertise than us in growing that, but we loved The
Instruction Set at 150 people. That went really well. I wasn't
head of sales anymore. I had a sales manager and he was excellent.
I was head of technology development and I was the guy who went
off and brought in new sales from who knows where. I was really
happy. I had no responsibilities other than bringing in revenue.
When I stopped bringing in revenue, if they had quietly stopped
paying me and said, “Just sit in the corner and don't get in the
way,” I would have been happy, probably.
But it's a
tough one for the entrepreneur, realizing from day one that one
day you're going to have to move aside or maybe out. If you pull
some of the tricks that Chris was saying, being difficult and
calling up customers randomly, then you have to go. They have to
be fired. It's a tough one.
Audience Member: Can an
entrepreneur be a cornerstone functionally as well?
Mr. Southon: It's possible, yes.
Audience Member: I think they have to be.
Mr. West: Yes, I think so. Yes, I'm sure.
Mr. Southon: Entrepreneurs tend to be one of two things, technical people who have a
great idea for a widget, or a salesperson who has been to yet
another sales visit and says, “If only we had green widgets. We
don't make green widgets.” Use their sales or technical
background, and, yes, I think they can be cornerstones.
Mr. West: I think they can be, but, even if you are a sales-driven entrepreneur,
it still might be a good idea to have a sales cornerstone there to
do the basic work because entrepreneurs are always going all over
the place. The point about cornerstones is that they stick to
their job. Even if you are a salesperson who is good at sales and
has the idea and is driving the company, you're not always
available to do sales. You're still going to need somebody who is
charismatic, who is good, who loves the company, and who's really
involved to spearhead the sales on a day-to-day basis. I think
it's usually better to have somebody doubling you who is doing
that stuff every day, all the time.
course, you may well have to double up and do things because small
businesses are like that. Everybody has to do a bit of everything,
but it's something to aim for, having that setup where there is
the entrepreneur and the cornerstones around him or her.
Audience Member: Once you've
written your elevator pitch, what's more important, a business
plan, a slide presentation explaining your business in more depth,
or something else ?
Mr. Southon: Something else. A customer.
Mr. West: No, the answer is a person telling it to another person. The old story
of sales is that people buy from people. They don't buy from slide
shows or business plans; they buy from you because you're a
person. That's what you need. You need somebody selling for you
who says, “That is a great idea and I know who's going to buy
it. I'm going and doing that.”
Audience Member: The sales
cornerstone would also be someone who, once you have them on
board, would go out and find your angel funding if that's
Mr. West: Well, they would be good at that because they're good negotiators. The
entrepreneur and the finance cornerstone should be doing that as
well. It's a team effort, I think, finding the funding. The
entrepreneur will have the overview and will be the person wheeled
into the angel, but, ultimately, the debate with the angel should
be with the finance cornerstone. Although we say that there is a
fun aspect, there's also a financial aspect, and you need somebody
with whom you can talk spreadsheets. But before you start thinking
about the funding, you need to have customers expressing interest.
What you need once you've got the elevator pitch is a man or a
woman who goes out and tells people, “This is brilliant.”
That's the next thing you need.
Mr. Southon: How many people here have an MBA? Right. We were a bit rude about MBAs
as well, so hopefully we won't be torn to shreds. It's a natural
thing for MBAs to write business plans. Later on, you'll need
somebody to do that, write it down and make sense out of it. We
advocate the beermat business plan early on, which is a simple:
Does this make sense or not?
I'll tell the
story of a real entrepreneur that we're working with in the UK.
This is a classic story. He's a guy that comes out of South Point
University. He's an inventor, an ex-truck driver and mechanic.
He's invented a mirror for trucks which removes the blind spot,
thus reducing accidents at low levels. He already had a large
supermarket chain interested in the product. He asked to see us
and, because he had a first customer, we said, “I'm sure we can
help you.” We actually met him in the pub, bizarrely, because we
were busy launching the book. So, there he is buying beer and he's
talking about this idea. We said, “We don't know anything about
mirrors, but it sounds like a good idea to us. You're speaking to
this large supermarket group. Are you speaking—and this was my
stroke of genius after two pints—are you speaking to the people
in insurance in this company?”
“That's brilliant!” and he bought more drinks. I thought,
“Great, I'm clearly a genius.”
He set up a
meeting with the head of insurance for the supermarket group. I
just asked the guy, “How much of a problem is it, these low
level accidents with these truck mirrors?” He said, “We factor
in about $600 per vehicle per year for this kind of accident.”
I said to
Jason, the entrepreneur, “How much to knock these up in your
“Three hundred bucks.”
That was the
beermat business plan. We haven't gotten into what is the market
for mirrors and how much can we manufacture them for in Korea,
nothing like that, just a simple deal to be done written on a
I said to this
chief buyer at the supermarket chain, “So, do you like the
mirrors? Do you want to do this deal?” There's a depot manager
who said, “Yes, how much money do you want?”
I thought of a
ridiculous amount, “$300,000.”
He said, “Are
“Yeah, I'm Mike Fab-Gere. How much money could you spend
realistically and not get fired?”
“Done. We'll have $15,000.”
We called it 10
mirrors at so much and so much consultancy, and let's see if they
work. He's testing them next week. If these 10 mirrors work, this
company will buy 100, then 1,000, then who knows. Then, obviously,
every other trucking company will buy them. If they don't work,
it’s back to the pub, get another beermat out.
This guy has
not got premises. He's got a bit of government grant money and
we're applying the beermat test, but it passed the beermat sales
test. I spent an hour with this chap from the supermarket chain.
It was clearly a win/win. I didn't need to write a business plan
or produce any slides to get a customer.
Audience Member: You haven't
mentioned marketing at all. Has the dotcom era convinced you of
Mr. Southon: Marketing. Well, let me talk about marketing. I'm a big expert in
sales. Often, when I'm working in the US, people say I work in
marketing when they mean sales. I'm a salesperson so I hate people
from marketing. All you do is write brochures all day; you don't
go out there selling. Blah, blah, blah. Of course, there's a great
place for marketing. It's a hugely important and valuable skill a
little bit later. You probably don't need marketing in a startup
company under 50 people, I'd say.
Mr. West: No, no. There are two basic functions of marketing, as far as I can
see. One is strategic marketing. The entrepreneur should have a
feel for that. If he or she hasn't got that feel, you've got a
serious problem and no amount of market reports will solve that.
The other function is communication with clients, and that is on a
person-to-person basis. People buy from people, and coming in with
a brochure is no substitute for a person coming in and saying,
“I believe in this.” The ideal pitch to any company, of
course, is that this is going to save you a million dollars.
You've got people's attention when you say that, and you don't
need a brochure to say it. So, marketing is great. I've worked in
marketing, I like it and I like marketing people, but it is big
companies who really need marketing. I think small companies don't
need it. They need a vision of the product and its role in solving
a problem for a selection of people, which is a strategic aspect.
It needs people talking about the product who are enthusiastic and
really know what they're doing.
Mr. Southon: Are you a marketing person?
Audience Member: No.
Mr. Southon: Oh, thank God for that. Does that answer your question, ma'am?
Actually, there's a very good example of marketing, which is the
Morgan Lewis brochure. Where are you, Dean or David? Have you got
a Morgan Lewis brochure? Bring a brochure over. We'll show you a
good brochure. It's the same color as the Beermat book.
Mr. West: Talking about marketing, the role of advisors in the company is
interesting. A lot of people get consultants in too early and
things like that. With a law firm—Morgan Lewis sponsored us
today, so we're going to say nice things about them—there are
very important things that law firms can do for small businesses.
If you do have to get funding, for Heaven's sake, get a proper law
firm, a big law firm on your side. They'll do deals so that you
don't have to charge the same sort of money that they charge
Exxon. Get a big law firm on your side if you're going to go near
one of these venture capitalists. We say don't, but you may find
yourself doing so. Don't go there on your own, Get a big firm
behind you, somebody who can outstare the venture capitalists.
One of the
problems entrepreneurs have with VCs is that there's an imbalance
in negotiating skills and needs. The entrepreneur is normally
desperate for money and is not as good a negotiator as he or she
thinks. The VC has got money coming out of his or her ears and is
a mean bastard at negotiating. Get a lawyer, a hard-nosed lawyer
in there on your side, and the deal will be very, very different.
There are very nasty things VCs can put in contracts, and suddenly
you've got none of your company left because you were 1% short of
your sales target for October and they've taken the whole company
over. A good lawyer will prevent that.
Mr. Southon: I'll save you some money. Everybody thinks they should have a brochure.
A law firm has to have one to be credible and they can afford to
buy one of these things. None of you startups need anything like
this now. Any salespeople who say they need a brochure before they
can go out and sell, they need a smack, in my view. Maybe one page
you can just do off a laser printer if you want to leave them with
something. And don't spend a fortune on your website early on.
Just something that explains what you do, no Flash or any of that
nonsense. A simple website that explains what you do, contact
numbers, details, an email address. You don't even need a
document you will write will be what we call a white paper, which
is a description of what happened in the first sale. It has two
functions. One is to work out whether you ever want to do it
again. It's the story of what happened when you did your first
sale and was it profitable? Was it a good idea? Second, it's
something you can leave with the customer, which is a technical
description of what you did. It's paper, just a bunch of text and
a couple of diagrams. You don't need to spend money unless you're
a large law firm.
Audience Member: I've invented
a safety product that has generated a lot of interest from many
organizations. How do you approach an OEM to sell your product to
Mr. Southon: That's a very good point. Strategic partnerships, or an Original
Equipment Manufacturer (OEM) in this case, can be a great sales
channel for you early on when you've got the infrastructure. For
that mirror, it could be an OEM to sell to other truck people. Go
into an OEM with a great customer story. A lot of interest from
potential customers is okay, I would prefer a lot of
interest from a customer, singular, who coughed up some money for
it and is a good reference for the OEM. The OEM is thinking,
“You sold a mirror to the accountants; we can sell it to all the
accountants because that's what we do.” Go in there with good
Mr. West: Especially when that interest takes the form of a little piece of paper
with a signature and some numbers written on it. That's the sort
of interest you want. Then you can go to the OEM and say, “Look,
we've got something you people want.” The problem with a lot of
marketing and all that sort of stuff is people will always say it
sounds great, but will they cough up money for it? That is the
Mr. Southon: A quick question. How many of you have actually got revenue? Hands up.
Keep your hands up. How many of you framed your first check and
put it on the wall?
Mr. West: Well done, sir. Very good. Somebody did. Excellent.
Mr. Southon: It's such a great day having that first check up there, whatever it
was. That's celebrating success, which is something else we talk
about in the book. It's like sports teams when they score a goal,
they all go around kissing each other, don't they? They're
celebrating. They're taught that they have to do it. Part of that
is, and this is one of the tips in the book, framing your first
check. Have you got photos of all your early employees with their
employee numbers on them? I love doing that. In every company I've
joined, I've done
that. That's been my main job apart from selling. Take a photo of
everybody and put their names up. Employee number one, employee
number two, employee number three. This is great team-building
stuff. It's the lifeblood of an entrepreneur.
Ms. MacPherson: Let’s all
thank Mike and Chris for being with us this afternoon. I think
there's a lot of practical advice in what we heard, and also a lot
of controversy. I might take exception to a few things, but I
think we will continue that conversation. Thanks to all of you for