PPM Article: Should Alan Sugar be Fired?

business tips article

PPM Article: Should Lord Sugar be hired or fired? by Guy Blaskey originally published in the trade magazine Pet Product Marketing.

When you watch a cookery programme on TV you can copy what the chef does and will end up with a pretty similar, although usually not quite as pretty, result. Can you say the same think about business programmes? Shows like The Apprentice offer good entertainment, but do they offer good business advice? Can you follow the advice of the celebrity-entrepreneurs like Lord Sugar and have a successful business?

Costs

In The Boardroom Sir Alan continually goes on at Britain’s Brightest Business Brains about making sure they know all of their costs.

In a recent task the 2 teams were asked to create street food stalls. The teams went back to The Boardroom after 2-3 days hard work in Edinburgh and said that they spent (approximately) £200 and had revenues of (approximately) £500. They won the task with a profit of £300 and got sent for a day at a health farm (or some similar prize), which would cost far more than the £300 profit that they made.

No one in The Boardroom took the time to point out that they used a professional kitchen, with a Michelin-starred chef for a day (minimum cost £750+), branded and rented food selling vans (approximate cost £1,500+), had 2 nights accommodation (min £150 for 6 people), travelled by first class train (approximately £600 for 6 people) and the fact that they had 6 people working solidly for 2 days. I work out that their approximate costs, not including their time, totals a minimum of £3,200, giving them a loss of £2,700 over 2 days.

Even if you do not include any of these costs, six of Britain’s Brightest Business Brains only managed to make about £300 between 6 people in 2 days. Assuming that they were working more than 8 hours a day this means that they were working for less than minimum wage.

The key lesson to learn here is that when you are evaluating a business opportunity, whether it is to extend opening times or attend a show, you should consider all the costs involved, not just the obvious ones… and remember to include your own time. Your own time should be considered an ‘opportunity cost’, meaning that even though it might not cost you anything it does cost you what you could do and the money that you could earn in that time if you weren’t doing it, for example selling in your shop or even working a second job.

Good business is not about making a quick buck

Making a loss on a 2 day project or during a 2 day show is not always a bad thing. Especially at trade shows you might not even expect to make a profit within the time of the show, but will do afterwards when deals are done. This could take weeks, if not months. Even when there aren’t deals to be done in the future there are always future sales to consider either to the same customer or to someone that they recommend you to.

Lord Sugar in The Apprentice seems obsessed with how much profit you make in 2 days, but more often than not it is better to make less profit in the short run and have happy customers that come back in the long run. Especially in a food selling task, like the one mentioned above. Selling a cheap, low-quality product at a very high mark-up may make you more money in the short run, but customers will feel angry and ripped off. They will not come back again and they will not recommend your food (or product, or shop, or service) to anyone else.

If you offer a good quality product that does what it says and is at a fair price then people will come back again and again and recommend the product to others. We focus highly on this at Pooch & Mutt; 94% of our customers would recommend our products to others, 93% go on to repeat purchase and we have thousands of testimonials from happy customers.

In your shop it is essential to offer not only a high standard of products but also a high standard of customer service and if you are offering additional services, such as grooming or nutrition advice make sure that these are done to the best possible standard, not a rushed way to make a quick extra buck.

This is especially important in an internet enabled world where people are far more likely to comment online about a product or service (especially when they have a bad experience). A happy customer is far more important than making a quick buck, in the long term a happy customer is a profitable customer.

Strategy

Business TV shows are often credited with making people more entrepreneurial, especially important in tougher economic times. In The Apprentice the contestants get set a task, then decide what they are going to do, then do research, then launch a business the next day, setting the prices when they start.
Admittedly this makes entertaining TV and Henry Ford did say “If I asked people what they wanted they would have said a faster horse”, but if the TV shows are trying to teach us how to do business they should do it right. Otherwise it’s like putting flour, eggs, butter etc in an over for an hour, THEN pulling them out, mixing them together and expecting to have a cake.

Unless you are working with a truly pioneering product like Henry Ford you should research your market, competition, pricing etc before you start. Based on your research you create a strategy and that strategy runs everything from the name of your business to where you sell to your pricing.

This thinking can apply to almost any of your business decisions, whether changing opening hours or opening another shop. The first thing to do is check the market, asking your customers which days they would prefer late openings is better than guessing. If you are thinking of opening a new shop do an on-street survey near to where you are thinking of opening and see if they think there is a need for a new shop and what kind of shop it should be. Once you know this information build your business around it. If people overwhelmingly say that they think a “Pet Boutique” would be better than a discount pet store, then make sure that the new store has a boutique-y name and products, décor etc to match.

So…. Should Lord Sugar be hired or fired? Should he have been made a gouvernment Enterprise Champion? In my opinion – Fired. There are plenty of great British business people, like Richard Branson, James Dyson, Jonathan Ive and Richard Reed that we should be looking to instead.