The Myths, Fads and Fairytales of Business

Hi, I'm Jess Smith, core founder of Mind Your Business. Mind Your Business programmes were created after years of research into founders' wellbeing and how founders and their business co-exist together. What we found is where businesses and the business owners are treated differently that can be some disconnect and therefore we need a more holistic approach to business ownership and looking after founder wellbeing. Where we do try and treat the business and the business owner as separate entities, it does run risks to both. In this first episode, we're going to be having a look at national and regional policy around business support and how these might impact on the business owner. In this series of podcasts, we're going to be looking at the reality of business ownerships and what matters to founders and why founders matter. We're going to start this episode by looking at some of the national and regional policies around business ownerships and who better to join us and talk about that. We're going to start off with the government backing your business strategy for small businesses. It comes at a time when the northeast growth fund and growth over also releasing a lot of their information. And we look through it, it talks a lot about leadership skills, management skills, how to operate a business and the funding. But Pablo, based on your experience, where should the real focus be on so that founders get the most out of it? And do you think there's a bit of a mismatch between what national and regional policy makers are suggesting founders want and actually what founders really want? There's a renewal of policies ever so often in programs, but they're very rarely new and repeating the same formulas and mimicking what people think it works. But it doesn't reflect the reality of how small business ownership works and how entrepreneurship works. There's a big distance between policy making and what's being promoted and the reality of it. So, for example, I think it's operational skills and competences. It's always relevant knowing how to start a business, knowing how to run a business and act as a manager. I think there's too much emphasis on the how to and very little emphasis on the being. So there's a human side. There's a lot of the individual in that business. There's normally individual start businesses in their areas of competence, but not only is what they know, but is what they like, what they're passionate about. In a lot of cases, they turn passion into business or they turn hobbies into business. It's very rare that some of us start a business beyond their domains. So, the human side is largely missing. There's a lot in the head and we know from research that future making is a big part of it. So, envisioning visualizing futures and finding a way into that future. It's a big part of it. In that sense, intuition plays a massive role in emotions, play a big role in how decisions are made. Therefore, the emotional component is largely missing. There's another thing that I think is problematic. We tend to miss. Given that the relevance or the pressure we put on entrepreneurs, there's that tendency to self-optimise all the time. And since you're constantly moving the goalpost, so you can never get it done. You have a lot of internal demands, but there are things that you're supposed to achieve, things that you're supposed to do. It becomes an obligation, rather than a constant improvement. You should do more, you should do more, you can achieve more. And that creates a lot of problems. There's a lot of burnout, and there's a really interesting book called The Burnout Society. It shows how that relentless pursue of optimisation and growth takes a toll on people. It seems like there's no limit to it. So, I guess knowing how it went to stop, how to stop, knowing when to abandon, knowing how much is enough. And knowing when to push back. Because there's a lot of expectations, but you know what, this is enough. And these are the limits, and this is how I protect myself, this is how I protect my business. So, these are conversations that we haven't yet had, and that very much needed. So, lots of good stuff out there, lots of good stuff being promoted, lots of good stuff being offered. But maybe the human element is not quite there, and I think I'd like to come back to that later on. But, you know, the elephant in the room, money, you know, access to finances, always a pain point for start-ups, for new founders. In your experience, how well the publicly funded sort of business support programmes align with what the founders actually need. And do you think having easier access to funding helps at that early stage, or is there a risk that it promotes this over optimism when it can't? It's not my money, so I take more risks with it. In a lot of cases, there's too much available, and once you see the number, it doesn't really look like a good investment. When you play the numbers game, right, so the more you support, the more you're supposed to have at the very end, right? So, if I support thousands of companies, start-ups, I'll end up with X amount of companies. What we've seen in the data actually doesn't really work that way, because the amount of start-ups and companies actually transitioning to small businesses that can grow, that correlates with the size of the economy. So, you can throw a lot of money into it, but ultimately you end up with the same amount of companies. So, you create in bubbles of start-ups, but it doesn't really make a difference down the line. I think there's three problems. One of that, one is that one. The second one is more the merrier, I think it doesn't really work. A lot of the funding that is available is offered at a very early stages. A lot goes into training, support, skills and confidence, as I was mentioning before, with the aim of having more start-ups. And that becomes an end in itself, and in all these we're going to create 10,000 start-ups in, however, five years, right? But what different does it make, right? So, if the result is still the same, it looks good, right? Again, because you're just a start-up economy, but it makes no difference. So, there's a lot of structural issues that we haven't yet solved, that need to be solved to be able to get to the point where you have a lot of viable businesses, right, operating in the region. The numbers game, it doesn't really make too much sense to me. And if you go into later stages, when support is really needed, only growth oriented. So, if you're not a growth oriented business, there's no support for you. So, in that's problematic, because that's when support is actually needed, right? So, if you want to transition from a single individual business, you don't want to go into like a 500, but perhaps you want to go into a 5 and keep it contained as small and grow slowly, you're not going to get funding. If you write like a business plan, and you go for funding, saying, no, I'm not interested in growing, I'm not interested in, you're never going to get the funding, right? So, you have to make a lot of promises, and a lot of fiction in it, right, to be able to get the funding. So, there are a lot of viable businesses in this region, and across the UK, but they don't get the funding because they don't sell stories. So, in a lot of cases, it becomes a literacy game, right? And we're seeing that in the data, as long as you know how to write a business plan, you'll likely get the funding. It becomes a skill in itself. So, is it really a reflection of the quality of the business? And the other problem is, what we're seeing in the data, the excessive amount of funding and support, it creates the impression that this is easy, right? It reduces the value to the point where it triggers overconfidence, over optimism, because it's like, anyone can do it. Right, and that's the message, anyone can do it. Well, in reality, well, it's not, and it's not just about the individual as well. I mean, we need to pay attention to the individual, but success is not only explained by the industry or the individuals. There are support structures, and you need a lot of things happening at the same time to be able to create those sort of outcomes. If you have all over confidence, over optimism and overestimation of your chances of success, that probably, and it's very likely that decision-making would be as good if you're more grounded, right? And with reality checks. And then the other problem is, because we're supporting early stages, the effect of the intervention, it's very limited. So we only know what happens right after the intervention. They receive funding, or they weren't through any incubation programme, so we can only see what happens right after it. But down the line, we have no evidence that those programmes work. Interesting. So, yeah, the money's important, but maybe it needs to be looked at as to when that money's injected into the business. And I absolutely agree that there's an art to bid writing and funding applications, and if you go to it, you're more likely to see regardless of the venture. You mentioned there about growth, and we've got lots of national and regional growth programmes, but should growth really be the priority for businesses? Given that you've said, a lot of businesses are quite happy just to get to a certain size and continue as they are. And by itself, no, there's a really, really cool piece of research. I think it's like 15 years ago. Profit first, growth first, right? Currently, the emphasis is on growth first, right? So you just have to go and improve that you're able to grow by X, because that leads to high performance down the line. And this piece of research that I've always asked my students to read actually shows the opposite, and the data is very consistent in that sense, right? It always wins. And that means that as you're growing the business, you have to make more money than the money you spend. There's something called like cash bending rates, right? You have to bend a lot of cash to be able to grow and go into markets and acquire a lot of markets. And then by itself, it looks like that's a very successful business. But in a lot of the cases, these are very inefficient business models. The pictures don't work, right? And we're expecting that they'll grow to the point in terms of valuation. We'll grow to the point where you can sell. So you go for an equivalent with a solid ethics strategy, but there's no value being created. There's a lot of value being destroyed in the process. The problem is that profit's first is a very unattractive strategy if you look from the outside, right? Because these are just low-growing businesses, normally very variables, cost structures on the control, trying to sort of a secure market. But not in the, in a sense, that we're going to expand markets in a sense that we're going to look after our customers and make sure that they come back. These are solid revenue streams and that takes time and that's the issue. If you're going to grow fast, it's a riskier strategy and what the data again shows is that down the line, they achieve lift performance. So performance actually explained by profit first strategy. Grow in line with your profit. And interestingly, you touch on the fact that there's a lot of data missing, lots of short-term impact, but no real sort of data on the long-term impact informing some of the strategies and policies. How can we fact, data piece, what the plan does acknowledge is that there's a gap in the data around underrepresented founder groups. So again, based on your experience, what do you think needs to be done to support those underrepresented groups? So one of the things I like to say, and I have a fair amount of colleagues who support that idea that entrepreneurship is a study of diversity. And you see across the world how diverse the world of entrepreneurship is, in terms of individuals and how you do it and how you start up and how you go about things. So different interests, different ambitions, in different contexts. So even across this region, if you go in the fumble and so you see a very different reality, if you go into the center of Newcastle. Even within Newcastle, right? So if you go to the west end of Newcastle, very different reality. And we've created this image of what an entrepreneurship looked like. And we're also supposed to behave and speak and say the same amount of things. The one size fits all doesn't really work. It's very effective when it comes to the design and delivery of programs, but very ineffective when it comes to our performance. Because you're not paying attention to diversity and how contextualize that agency is. So it's largely shaped by context and life circumstances. And this is the other problem, right? So if there's an over emphasis on agency, so people think that if you support the entrepreneur, it's like a silver bullet. And that doesn't really happen that way because of what the data is showing is that if you don't, for example, in the case of underrepresented groups and like eight minorities or prisoners using entrepreneurship in many different ways. So the belief is that as long as you support the individual, it's like problem solved. But what the data is showing is that if you don't change or don't work with the structural conditions that support that individual. And this is not just in the business support industry, it's not business coaches, right? So I think it's a broader issue that we need to address the chances of success of our limited. There's a cool piece of research that came out, say, ten years ago, looking into 40 years of enterprise policies in the UK, address issues like poverty through entrepreneurship and the answer is still the same. No, it's not a silver bullet. Is that like a panacea myth, right? So by itself, we think that can do a lot, but in reality, it can do very little. For the point of view on the individual, these are the expectations that the individual see and feel and experience. So you're supposed to achieve a lot and by itself, you can achieve very little. It's that easy to just become a founder and be very, very successful very quickly. We'd all be founders, wouldn't we? That's of course. Interesting. And if the government had asked you for your opinion or your thoughts, what would be the one thing that you would encourage them to have in their strategy that would make it more founder friendly and more reflective of what founders really need to help them succeed? Which is one thing, it cannot be one thing. Is that the problem that we think there is just one thing? It's very difficult to think about systems and appreciate the complexity of systems and keep systems in your mind all the time. But if I can offer a piece of advice, I think it would look at the evidence. People think we do evidence-based policy-making with reality that do policy-based evidence-making. So evidence being produced as they're trying to sort of sort out things. It's not that they wing it, right? I'm not saying that. But there's a reason why there's a misalignment between reality evidence and what's being created at the policy level and the thing that they pay attention to, the evidence decisions might change. The problem is that the evidence is not so attractive. So you wouldn't be able to sell probably anything on the back of the evidence because it's a very normal thing, right? It's very unattractive. So there's only a handful of companies that deliver most of the outcome, probably three, right? In the entire region, but the reality is just boring reality, right? And that's normal, that's absolutely fine. Second one, I think there's a difference between an overemphasis and agency and a focus on the individual holistically. So as a human being with emotions, with worries, with skills and competences, instead of overemphasizing the agencies or what the individual can do, perhaps in, it's about focusing on who is the individual, right? And what are the life circumstances? I think that's missing because we rely too much on agency, so perhaps it's less and we have to take a look at the individual more realistically. And then strengthen the support structures. The problem is that we've created this layer of support that is now called like a business support industry. So it's an industry in itself, right? It's fairly large. And these are the ones that normally, they act as a conduit, right, from policy into the individuals, right? So they channel all the support. What I'm meaning by support infrastructure is all the systems of support that the individual requires to be able to do whatever they want to do, right? So if you have a fix for the infrastructure industry that they all do in exactly the same is very unlikely that outcomes will change. And we need to change the outcomes. If you look into wellbeing, we know if we have healthier individuals, they'll run healthier businesses, right? So it's no magic in that. And what's happening is that since we're doing all the same, the chances of having a different outcomes in terms of, like for example mental health outcomes, where reductions in the level of stress, reduction in the level of anxiety, even suicide rates, right? As a result of business ownership, we need to do something different. And that means a very different support structure. Again, that leading on very nicely, obviously both the national and regional policies do have quite a wide ranging set of ambitions and goals. And as you mentioned previously, very rarely mentioned the human factor, the human being, that is the founder. We know that burnout and mental strain are pervasive amongst founders in general. And in particular in the north of England, it's got some of the poorest levels of mental health under 25s or recording some really poor levels of wellbeing. Do you think enough has been done nationally and regionally to address the risks that are involved to the person when they're being encouraged to maybe start a business? Or is that getting lost in the desire to build the business? We lose sight of the fact there's a human being in the middle of it who might be finding things tough. Might have been finding things tough in the first place. And maybe thought that the silver bullet of working for yourself might help and not fully understanding or comprehending how difficult it can be. In the context of mental health and wellbeing, most of the support that it's currently available from the top down is in understanding their organizations and could be companies or public sector organizations. And the way we offer support is in that context. I work in university, I have any issues, I can fill in a form and then I have a meeting with occupational health and then there's a wellbeing plan and a stress management plan and there's an entire system that gets triggered. Imagine you're running your business. Where's that form? Who do I speak to? And also in consideration that this is a very lonely journey. If you go back to COVID, so it will happen with the fellow system. So how do we through? We have to figure out what to do with the founders. So how do we support them? That's a very good example that the systems of support are designed with conventional workplace environment in mind. And then there's the assumption that a startup or as you create a new business is a small version of a large corporation where the reality is very, very different. We don't understand the unique challenges that business owners and entrepreneurs face and so far we've been unable to create and deliver adequate support in consideration of those unique challenges. So we have all the sort of a range of mechanisms available with, again, we didn't understand that they operate in a corporate organizational environment, nothing for more business owners. And again, imagine yourself, right? So I'm struggling. What do I do? I mean, obviously there's the GP and mental health support system that we know they're not working particularly well in a work setting. What do I do if I'm running a business by myself? You're really unlikely that somebody's going to have an employee assistance program if they're a window cleaner. Agree. Most of it is designed and developed for a more traditional workplace. And until your business has grown to a certain size, it maybe doesn't quite suit what you need. And I think the psychological relationship that the business owner has with the business is very different to the relationship and manager has with the business. So it is very different, I think. Do you think that ignoring the well-being bits or trying to patch up the well-being piece with traditional workplace methods actually runs a risk of undermining all of the other aims and ambitions of the national and regional strategies? I remember reading that the new, at least the one that's under consultation, the new, the northeast growth strategy, I think that was called, right? No mention of the new this. And we know that well-being is correlated with performance. So, like we're missing a very important piece of the possible rise of pay attention to the individual, the individual will likely do well. You could advise the policy makers, you could have one piece of change to the policies at the national or regional level in terms of well-being this time, not just in the broader sense. What would you like to see included in the strategies in the policies and in what's being delivered to business owners? There's a reason why in this region a lot of people don't want to call themselves entrepreneurs because that comes with a big bag. But the reality is the entrepreneurship is just a process. It's not a persona, it's not a personality. And then what you do in terms of action is largely depending on, as I mentioned before, on what you like, what you're passionate about. So, what we're currently not encouraging is self-determination, because we're creating one image, you're letting people to serve the term. The meritocratic and neoliberal societies were supposed to encourage that, self-determination, a lot of human agency, but we've created one image. And once you limit the funding mirror in that image, actually you're running against, running counter to self-determination, right? So you see how the two clash. And then once you do that, because again, self-determination puts you in sometimes a very vulnerable position, so you have to experiment and follow things that might not seem rational sometimes. A bit of self-care, knowing how went to abandon, went to stop, when is enough, when to push back. So, self-care, self-respect, that if you don't do well, or if you don't grow tenfolds in a year, that's absolutely fine, right? There's nothing wrong with that. Respecting people's journeys, I think that's good, because it's currently, as I mentioned before, right? So, if you don't promise that tenfold growth, or if you don't promise a highly-innovated disruptive IP, you're not going to get the funding, and in a lot of cases that de-legitimizes your efforts. So, the message is, you're not good enough, but you have to do more, you have to achieve more. There's something about respecting people's lives, right? But sometimes we just carry on repeating things that simply don't work. The menacing people's self-worth, right? The sense of being values of human being, when everyone's telling you all your businesses, right, not good enough. So, respect personal aspirations, ambitions, that's a really interesting term, for example, because ambition is just your own internal drive and what you want to achieve in life. But if it's not big enough, people will come and tell you you're not ambitious enough, right? Well, we're all ambitious, but in different degrees, and that's something that we, again, don't pay attention to. It's a fixed idea of what ambition is, when reality is, there's just variance. And again, this is a very diverse world, and we need to pay attention to that. And so, again, there's a handful of outliers that live amongst the outcome, but then the reality is just a very, very long tail of different, normal, capitalist, Chinese endeavors, like human endeavors, and that will continue regardless of what you promote. Especially in this region, right? So, I don't know, space economy, and then so on, when you have issues, when you have, for example, go to A-level or GCSE results, right? When there's no support, and the region is lagging behind in certain indicators in comparison to the South, I mean, you can create that, but you don't have the structures to support that. I think there's structural issues that need to change. I think it's valuable, it's important to dream and inspire, and for this to be the AI region, or the space region, or whatever, but it doesn't really reflect the reality of this region. So, that happens across the board, right? So, if you go around the UK, they all want to be the AI region, right? So, it goes through hypes. It doesn't make so much sense, because it doesn't really reflect the reality of that region. So, there's no respect for traditions and culture, and it's not really embedded in what that society, and that creates a detachment, and we end up doing things that don't make any sense in the context of who they are. Pablo, thank you for sharing your insights today, and you know, volunteering to sit in the hot seat. We've had a good chat there about, you know, national and regional policies and strategies. The key thing I'm to know from that, really, is the human element, is often missing and forgot about, and without a healthy founder, it's going to be very hard to have a healthy business, and we really need to look at them. So, that's it, the end of episode one for the founders matter, where hopefully we've started to explain what matters to founders, and why founders matter, and why they're so important to the unique business journey, and the fact that, you know, one size fits all approach isn't necessarily going to work. If you're interested, you can download a summary of the episode, all the stuff that we've discussed, all the research and theories that Pablo's touched on, will be available, and again, you can sign up to our checking emails. We'll get weekly questions, newsletters, and other information, and we'll hope you join you next time on the founders matter podcast.