I have been building businesses from the wrong end

I put everything into the business and take nothing out.

I have said that about myself twice now, in two different decades, about two different companies, without noticing the first time that I was describing a pattern rather than a season.

I build businesses for the purpose of building businesses. Not for the purpose of making money. And for a long time I thought that was the admirable version of being an entrepreneur.

Two skills, not one

It is not one skill with a moral dimension. It is two skills, and they are genuinely different.

The first is making something exist and be good — finding the gap, convincing people to come and work on it, building the machinery, getting customers to care.

The second is making sure that the thing which now exists also makes you secure. Pricing properly. Taking money out. Knowing what the business can actually carry before you commit it.

I am good at the first and I have been consistently poor at the second, and the reason I did not fix it for twenty years is that the first one feels like virtue and the second feels like greed. It is not. A business that creates enormous value and leaves its owner with nothing has not been generous. It has been badly run, by me, in a way that eventually limits how much good it can do for anybody.

What it looked like in practice

The clearest symptom was that I solved problems by spending.

Every difficulty got a hire. A director for one thing, a consultant for another, tens of thousands of pounds committed to fixing a specific irritation — and at no point did I stop to check whether the business could carry that cost, or only whether I believed it would grow into it.

Each individual decision was defensible. Collectively they were a cost base built on a forecast, which is another way of saying built on nothing.

When conditions turned, they turned fast. A balance sheet I had been proud of went the other way inside a year, and at one point the thing looked beyond saving.

The part I would be judged on

What happened next is the only reason I am willing to write any of this down.

I did not walk. I went to the people we owed and asked them to keep backing the team rather than call in what they were due — which is, I should say, an outrageous thing to ask, and several of them had every reason to refuse. They did not. The business kept trading. The creditors were paid.

And when it came out the other side, I handed it to the people running it and took almost nothing for myself.

It is still trading today. That is the sentence that matters.

The uncomfortable symmetry

Here is what I did not see for years: the trait that nearly killed that company is the same trait that saved it.

Building from the wrong end is why I had a cost base I could not carry. It is also why, when there was a choice between extracting something for myself and getting everyone else whole, there was no real deliberation. I was never building it for the extraction. That had been the flaw for ten years, and for about four months it was the only thing holding the whole structure together.

I am not going to pretend that makes it a strength. It cost me a great deal of money and a great deal of sleep. But it did teach me something more precise than be better with money: I now know which of the two skills I am short of, and that it is a skill rather than a character trait.

Skills can be bought in. You can hire the second one, or marry it to a process, or simply decide the commercial model before you build the machinery rather than after.

What changed

The order.

I used to build the thing and then work out how it would pay. Now the commercial model is settled first, in uncomfortable detail, before anybody is hired and before anything impressive gets built.

It is less fun. It is the correct way round.

And if you are the kind of person who finds the building more interesting than the money — who has quietly been a bit proud of that — I would gently suggest that you are not being generous. You are postponing a conversation, and it gets more expensive the longer you leave it.