The Billionaire Case for Small Bets

0:00I think that's the wrong discipline. My magic model was hiring people that were better than me. Entrepreneurship is a high risk activity.

0:08Ryan Hanley:I have always struggled with goal setting. Don't set any goals. Don't try and become too big. Keep it small, prove it out and then go big. Copy what others are doing because it's working. We need to be very protective of our mental energy, attention, focus. They can either spend more quality time with their kids or they can put in five or six hours of extra work a week and earn more money.

0:42Ryan Hanley:Sir Richard Harpin, you, I have so many things that I want to talk to you about. I'm so excited for this conversation and I just, I appreciate you making the time, my friend. And do, do just call me Richard, Ryan. I did think that my knighthood would help me get a better seat in a London restaurant. But then somebody told me that they make a surcharge. Like any true good deed, you know, it comes with a price, right? You get the sur, but now you got to pay more for your next cheeseburger and pint. Absolutely. Well, I want to get into something that I saw actually on your Instagram channel that fascinated me.

1:27And it was just a snippet, but the topic, I'm really interested in hearing the more expanded version of this idea,

1:36Ryan Hanley:which was the idea of big bets versus small bets. And if anyone listens to business podcasts, entrepreneurial stuff, you know, Peter Diamandis, who is phenomenal, has the Moonshots podcast. Everything's about big bets, burn the boats. And you had some really interesting takes on on small bets and the value that small bets make and how they play a role. And I'd love to start our conversation in big bets versus small bets from someone who's built a billion dollar company. Yeah, I'm a big believer that you need to prove things out small. And I learned that the hard way because a great example was my original plumbing emergency business called A1 Fast Fix.

2:25Started it with my life savings, my business partner's life savings,£50 ,000. And we grew it and the business model didn't work and we ran out of money. We then managed to get half a million pound investment from a UK water company. And I thought, right, I'm going to grow the business even bigger. It will get to economies of scale. And of course, it didn't because it was the wrong business model. The business got bigger and the losses went from 10 ,000 a month to 50 ,000 a month. So my learning was stay small, bootstrap your business, test, learn, copy, pivot, and make sure you get the right business model.

3:11When you have, then press the accelerate button. And that might mean going and getting investment to really scale the business. But don't do that until you've absolutely categorically proved your model.

3:26Ryan Hanley:So why then do you think there is so much moonshot, swing for the fences pornography out there? Is that just clickbait to sell stuff and behind the scenes, all these entrepreneurs are kind of thinking the way you are? Or is this just a philosophical difference that people have in business? I think it's a message from some people that says, oh, you've got to go big at all costs. venture capital in some some periods have said well we'll give you loads of money to test and prove your business but just go big and throw loads of money at it and eventually it will work and i think that's the that's the wrong discipline keep it small prove it out and then go big Jim Collins, in his book, Good to Great, would call it firing bullets.

4:18And then when you hit the target, then fire the cannonball. If you fire the cannonball at the beginning, you run the risk of busting your business.

4:28Ryan Hanley:Yeah, I was listening to a kind of startup-oriented podcast the other day, and a very successful investor was on. And I don't think he meant anything negative about this, but he said, I want to see two or three failures before I invest. I want to know they've run into a wall before. And in a broad stroke, I can kind of understand what he's saying. But at the same time, as the actual operator, that is devastating. And it is oftentimes you don't survive the first major miss, especially if you're doing it kind of counter to what you're suggesting, which is you fire a cannonball and you miss, that bounces back with almost just as much negative impact on you, your emotions, your relationship, your bank account, all this kind of stuff.

5:20Ryan Hanley:So I guess what I'm trying to get at is I'm trying to break this down because I'm in your camp. I'm more in your camp. This is what really fascinated me is you're one of the few people that I've heard who's at the level of success that you're at preaching this type of philosophy. And I'm trying to kind of wrap my head around why this is so pervasive, this constant, and maybe it's more of a, and I could be wrong, you're pushing me. Maybe it's more of just an American cowboy, you know, shoot the big gun first, always kind of philosophy. Or is this just like talking point fodder? And because the businesses that I've seen be successful and the entrepreneurs I've seen consistently be successful have more of the philosophy that you are preaching.

6:05Yeah, and I think that entrepreneurship is a high-risk activity. I don't know the numbers in the US where quite often Americans would say that failure is a stepping stone on the way to success. It's frowned on here in the UK. Therefore, I think you get more caution. and there's two bits of advice that I would give to people that want to be entrepreneurs and that is don't be afraid to copy somebody else's idea. If a business is already working, then that means it does work. Copy their model and improve it. I did exactly that with HomeServe in the UK, copied somebody else's model and improved it.

6:56And that was the magic model, triple A for the home. And then secondly, don't be afraid to go and buy a business. There are lots of retirement sales out there. And those are existing businesses that are making profitability. And the big objection might be, well, I haven't got a lot of money to go and buy a business. Where would I raise the money? and the answer is vendor finance. Somebody that's selling the business, particularly if it's a retirement sale, if they really like the person that's buying the business and think they're capable, will say, put down a small amount of your own money, maybe a bit of bank debt because a bank will lend against a profitable business and then the seller of the business will agree to repayment over maybe a three-year period.

7:52So that's another smart way for people to get into businesses to want to do it by acquiring somebody else's already profitable existing operation.

8:03Ryan Hanley:Yeah, I love the recommendation of buying an already operating business. I don't know if you're familiar with Cody Sanchez's work, but she's been popularizing this idea as well. She calls it buying boring businesses. So she advocates for buying plumbing shops and HVACs and, you know, pressure washing businesses and stuff like that. And what I like about it is I think for too long, there was almost like an ego trip around. It had to be like this and nothing against Peter Thiel because I'm a fan of him and the way he thinks. But he kind of has this, you know, be a category of one type mentality.

8:42Ryan Hanley:If you can't, you know, which I think I get what he's going for. But I also think it shuts a lot of people down who are sitting at home going, I really would like to run my own business. I feel like I had the chops to do it, but I don't have some idea that's a category of one. And I think it shuts them down where what you've just presented are ideas of, hey, maybe you see something working in, like you said, AAA cars. But now we can move that and say, OK, we can take this idea and maybe apply it to home service or we can apply it to, you know, insert other business. But if I'm but I want to go into the buying a business.

9:18Ryan Hanley:So, and I know you also have a venture fund. So you're very familiar with this entire game, bought businesses, et cetera. So if I'm, if I'm listening to this and I'm saying, you know what, I've always wanted to go off on my own and, but I've never had that idea. That's been maybe a big blockers. I just didn't feel like I had that original idea to start, but geez, I, man, I, I, I'd love to own a plumbing business. My dad was a plumber. I used to help him. And it's, and I get that like in this AI world, these types of physical human businesses are going to have real traction. How do you start to go about that process?

9:52Ryan Hanley:How do you evaluate your opportunities? How do you think about purchasing an already existing business if you've never done it before? Yeah, I would take a listing. So maybe go to Entrepreneur Magazine and look at the listings of every franchise business. I'm a big believer of van-based service businesses, particularly those are businesses that are going out and doing something in a home or in a business environment. And those are most likely the businesses that can be made more efficient through the use of AI, better scheduling, better routing of the vehicles, but unlikely that a skilled technician going out to the home or the office is going to be taken away through AI.

10:47And certainly in the UK, we've got a real shortage of skilled tradespeople, what you would call pros. and so I see AI shutting down call centres and releasing a lot of people's lives that have been doing boring, tedious answering of customer calls that a voice bot can very easily do more efficiently and cheaper and releasing those great human lives to go and work in people's homes and offices and do worthwhile things that are offering great customer service.

11:28Ryan Hanley:I actually just signed my very first traditional book publishing deal two weeks ago. And it's around this concept that I call easy mode, which is essentially that thing that you do that looks like cheating to everyone else. What is that thing for you? And then how do we build your life around that idea? How do we use AI, outsourcing, or automation, etc., or just simply removing something from your life to get you more into the thing that is your easy mode and out of these transactional zero value tasks that were part of the job and took us away from that thing, which could be twisting a wrench, right?

12:07Ryan Hanley:You might just love being under a sink, under, you know, in the basement, fixing pipes, you know, just what you enjoy doing. But if half your time is scheduling and, you know, follow-ups and, you know, AR and, or, you know, accounts receivable, et cetera, like those things are taking you out of what's your easy mode so again where are some of the the easy wins in that place you know having built you know home service and being a big part of this service-based thing like when you're looking at this and examining you know and there's a lot of i'll tell you there's a lot of um smb owners a lot of service owners that listen to the show like where are some of the places that you're seeing some easy wins for these guys and gals that that they can start to implement in their business and get some of their time back?

12:50Yeah, I would say it's all around AI applications that would do the quotations, that would do the invoicing and chasing those invoices and the payments, would be doing the routing and the scheduling of work. I think that's going to make a tremendous effect on the efficiency of a business so that the major cost will be the cost of the technician going out to the customer home and we all want to be able to get somebody out to do all of these repairs to assemble our flat pack furniture rather than trying to do it ourselves. So releasing more people to get them into doing services to the home is going to really help.

13:51Ryan Hanley:Where do you fall on AI with, I get this question quite a bit, is should I be learning Cloud Code or Codex or Cursor and building these applications myself? or should I be looking at some of these off the rack AI tools? Like in today's terms, right? I think in the future, I don't know where the future is going to go, but I think in today's terms, I'm kind of caught. I tend to be a little nerdier. So I love, like I tore my entire site apart and rebuilt it from scratch using Claude Code, right? So replaced WordPress, replaced all this stuff and built it myself. But I'm nerdy, like that's a Friday night for me.

14:31Ryan Hanley:I don't know that many people are going to want to do that. So when you're looking at return on time, where do you think a service professional, you know, in particular, where should they be spending their time? Should they be looking for off-the-rack stuff or should they be really digging in and trying to understand what a Claude code could do for them or build for them from scratch? Yeah, I would recommend second mover advantage. So look for AI applications that other business owners are using, where it's a proven case, and it's working, it's efficient, it's low cost. Don't be bleeding edge and take AI applications or try and develop your own versions.

15:13Copy what others are doing, because it's working, and it's having a big effect. jump on the bandwagon, but only where you can see that a similar business is getting a big efficiency gain.

15:27Ryan Hanley:Yeah, I like that. So like if you're a super AI nerd, or maybe even a white collar, more knowledge worker base, maybe it makes sense to get your hands into clawed code and figure out how you can move some data around. But if you're out there, like I said, twisting pipes, or pressure washing stuff, or whatever you're doing, there's just that return on time is not worth digging in and trying to build it yourself? No, I'm invested in a business called Checker Trade in the UK. We have over 50 ,000 pros on the marketplace. And we've developed software that is called Trade More. And it's available for all of our pros.

16:10And it is literally AI as an app that helps a pro to run the business. So they can free up some of their administration time and they can either spend more quality time with their kids or they can put in five or six hours of extra work a week and earn more money.

16:32Ryan Hanley:Yeah. I love that. I love that. I think it's very smart advice, guys, for those of you listening at home, that I think we're all going to be pushed and it's going to be kind of shiny object syndrome for a while with AI, certainly. It may even be in like the first inning of shiny object syndrome. But I think more than ever, and correct me if I'm wrong here, we need to be very protective of our mental energy, attention, focus, because AI in particular seems to, I mean, you can go down some rabbit holes and not come up for days. And that's a lot of lost time if you're not kind of protecting your work hours and protecting your focus.

17:16Absolutely. Yeah. Yeah.

17:18Ryan Hanley:So, okay. You wrote the book, Nine Steps to a Billion. My first question was, is a billion, like, should we be shooting for a billion? Is like, what's, like, I guess, take this question however you want. When I sit down and I'm looking to grow, let's say I have a business, but I want to grow. I'm ambitious. Maybe I'm early 30s and I want to, you know, I know I got 30, 40 years of good business in front of me and I want to grow something substantial, build a legacy. How do I pick the target? Like, do I go a billion dollars in revenue? Do I go 10 million? Do I go just, hey, let's just not have a goal, focus on systems?

18:00Ryan Hanley:Like, like, how do we pick that initial target? And I'm asking this almost very selfishly. I have always struggled with goal setting because, and I'll do the last piece of context and then I'll let you answer. I've always just in my head had, I'm going to work as hard as I can no matter what. Whether my goal is a billion or 10 billion or 10 bucks, I'm going to work as hard as I possibly can. So I struggle with where to set that goal. So where do you start with goal setting? And if goal setting isn't even relevant to getting there, then I'd love to have that discussion too. Yeah, I didn't start out saying, I want to build a business worth a billion dollars or a billion pounds.

18:43It was really just, I want to run a successful business. I'm not quite sure what it will be. Stumbled into the AAA idea, and that works. Once I was running the business, then we did start having five-year plans. So we did set some goals. And if you shoot for the stars and you only get to the moon, then that's great. So I am a believer that at some point in the evolution of the business that you should set some big, hairy, audacious goals. If you don't, then you won't get there. So, my recommendation would be that entrepreneurs should set some objectives. But when they've set the objectives, then it's about also saying, what's our purpose?

19:45How are we going to be different from our competitors? What's our economic engine and how are we going to make money? And if we focus on running the business and making our customers really happy and growing the business, then the dollars will be the byproduct of that. So I do believe in objectives, but it shouldn't just be about saying I'm focused on these big goals and getting rich quick.

20:16Ryan Hanley:If you could go back to your younger self before that first iteration of the business that didn't work, was there a moment in there that in hindsight, obviously you did the best you could in that moment. But in hindsight, maybe there was something that you could go back and tell your younger self, hey, there was a moment here that you missed or there was a stat or an inflection or something that had to do in the economy that you could have avoided the first business model not working. Or is that just part of the process that you had to go through to get there? I think it's going through a process to find a model that works.

20:54And what I would tell my younger self today would be don't set any goals. Don't try and become too big. Just focus on finding the right model. Don't worry about scaling and size. You're in the founder phase and you just need to get a model that works. Only when you've got the model that works do you press the accelerate button. And it's in that professionalizing phase that you then say, right, we should set some goals. We should develop a three-year plan. We should know where we're heading. We need to know whether we need to go out and get an investor in order to fund that growth or not. We need to start bringing in an experienced team to help run the business.

21:46Ryan Hanley:How do you know when to make the transition from founder phase to professionalizing phase? When you've proved your model that you're then getting some growth and you're then saying, so where are we going to take this business now? And at some point within that professionalizing stage, it would be saying, I wonder whether there's an opportunity to take this business into a foreign country. Many American businesses, it's such a big country that Americans never need to expand outside of America. Whereas in a small country like the UK, being able to globalize a business model is really, really important.

22:38Ryan Hanley:Yeah, I was working with a company a couple of weeks ago that was thinking about entering the U.S. market. and they're a UK company. And what was interesting to me, and, you know, I don't have as much international experience. Most of my business career has been inside the States for the most part, a little bit, Canada as well. But what was really interesting was listening to them to describe the process of, you know, in their words, kind of conquering the EU, you know what I mean? So like they had expanded out of the UK and, you know, hit Spain, I think first and then France. And then now they they're kind of top three leader in their category in most of of of the EU.

23:23Ryan Hanley:And then listening to that and then the expansion into the United States and, you know, kind of the, and I'm interested in your take on this because their take was that dealing with the 50 states, the fact that it's 50 regulated bodies inside a federally regulated body was fairly unique and a challenge. not maybe necessarily harder or work, just barely unique to their expansion into some of the other countries within Western Europe. Is that true? Is that a fair assessment? And how, I'm very interested, coming from the United States looking out, what it looks like trying to come and bring a business in.

24:12Yeah, my dream as a aspiring entrepreneur in my teens was to go to that big country called America and copy a business idea and bring it back to little UK. And so when I went out to the US for the first time, and that was on a business trip in 2002, and utility-branded home assistance cover, AAA for the home, didn't exist. And I thought, wow, fantastic opportunity. It's the, we speak the same language. It's going to be really straightforward to take the business model and put it across every state in America. And of course it wasn't. Many British entrepreneurs fail in America. And I was there for six years.

25:11I sent a really good guy that worked for me and ran the UK. sent him to America in 2003. Six years later, and the business was still really small. We were making less than$10 million annual profit. And I'm a great believer in the power of mentors. There was a guy that I came across that was Americanized, but he was a Brit who founded Capital One in the US. a guy called Nigel Morris. He was a co-founder. And I thought, he can help me to crack America. So I emailed him, no response. I sent a direct mail letter, then a DHL, urgent, important, still no response. And one evening, 11 o 'clock UK time, 6 p.m., East Coast, Washington, D.C., which is where he lived, I didn't have his cell number, But I did have his landline office number.