He Sold for £4.1B— These 9 Lessons Changed How I’ll Do Business Forever - Richard Harpin

0:00I look back after I'd sold HomeServe for£4.1 billion two years ago, and instead of sort of congratulating myself, I'm sort of a person that would say, if I had, maybe we could have got there as a team in 15 years rather than 30. We're really good in the UK at startups and we're really bad at scale ups. And if you can take a basic idea that somebody else has proven, then I'm a big believer in second mover advantage. Copy from somebody else, but then add some additional value and then go big. My business partner and I had to give up 52 % of the business for our half a million pound investment. Those businesses that are still doing direct mail get a bigger share of the doormat.

0:41Just think at home, how many bits of direct mail are coming through? Hire your replacement. The bottom line is Americans buy from Americans. And you're not going to have credibility as a British business if you're sending a bunch of Brits over there, however good they are. I think one of the biggest issues with entrepreneurs is far too many ideas. We're all foxes. We need to be hedgehogs and we need to stay really focused. Hardest lesson for us entrepreneurs. and for anybody watching or listening is...

1:18Richard, thanks for being here. Pleasure to be here.

1:22Jack Frimston:It's Sam, I'm really excited about this one. So let's get straight into it. We always start our podcast off the same way. So who are you and what problem do you solve? I'm a entrepreneur through and through from about the age of five when I started my first business, which was breeding white rabbits and then running a rabbit kennels for the people that sold rabbits to when they went on holiday. And the problem that we need to solve as entrepreneurs is we're really good in the UK at startups and we're really bad at scale-ups. So how do we help medium-sized businesses to go from medium to large?

1:58And that's the problem that I really want to now focus on solving.

2:03Jack Frimston:Amazing. And for anyone who doesn't know who you are, what qualifies you to be? able to have those types of conversations with people? Yeah, I'm one of only 10 entrepreneurs that's built a business worth£4 billion or more. I achieved that sale two years ago with HomeServe that I've been running for 30 years. And I want to take the nine things that I know now that I truly wish I'd known at the start of my entrepreneurial career with HomeServe and get those messages out to every entrepreneur in the UK, but particularly those that are running a medium-sized business and they want to be large. Or hopefully some of those that will create the next billion pound plus value businesses.

2:50I'm excited for this one already, Richard.

2:53Zac Thompson:So I want to talk about obviously your characteristics that I'm sure you see in some of these entrepreneurs that can take these businesses from millions to billions. you strike me as somebody that is quite resilient gritty and I'd probably say curious as well so where do you think that comes from I think it's sort of you're born with some of those attributes a big believer that you can hone your characteristics but you can't sort of completely change yourself and I think if I was going to pick out one I'd say that curiosity sits at the top I want to learn new stuff every day. I think I've always been driven by market research and what customers think.

3:38I maybe could give a few examples of that. I wanted to run a mail order fishing tackle business, which was selling fly tying materials to fly fishermen that tied their own flies. And I thought, I really need to know whether there's a demand out there. so I placed a£8 advertisement in the classified section of Trout and Salmon magazine and it said send for my mail order catalogue so this was it well before the days of the internet I hadn't actually got the catalogue printed yet I hadn't bought any of the stock I got about 25 calls saying oh yes please send me your catalogue I had to say well it's actually we've had a run on them were out of prints and I got on and printed it quickly but that bit of basic market research proved the demand was there and then I set up the business.

4:33I guess give you one more example when I was running my ready tied fly business and selling fly tying materials at a national game fair the wives and sisters and girlfriends of all these fishermen said oh those colorful flies would make nice earrings so again that was my market research done off with the end of the hook on with kidney wires and I'd launched a high fashion business yeah so it feels like so many entrepreneurs

5:06Zac Thompson:are going out there creating a solution for sometimes there isn't even the problem out there so it sounds like you've always nailed that so say and I know that you sit in a lot of rooms with a What say we brought in 50 entrepreneurs today and you're sat around the room and you're talking to them all. What are the attributes do you think you need to see for them to succeed? But also, what are some of the attributes that, you know, are going to guarantee them failure? Yeah, I think one of the biggest ones is I think some of those inherent characteristics. And Jim Collins, who wrote Good to Great, would call them level five leadership characteristics.

5:44So courage, determination, resilience. The values that I live by are persistence and courage and then integrity, which is not about honesty, because hopefully we take that for granted, but more about being able to confront the brutal facts of a situation, have those honest and open discussions and take some action. I think the characteristics of somebody that would get in the way of success would be ego and just focusing on the numbers. So it would be about low ego and not always right sort of characteristics, being able to roll up your sleeves, listen to other people, learn from that. those are the things that I'd be looking for where I'm making a personal investment in somebody else's business.

6:38Jack Frimston:Amazing. So I think we're well on our way. We're going through the nine secrets almost organically here. So number one there, we were talking about character, right? And then the next one we talk about is copy and pivot, I believe. So how would you define copy and pivot for people who don't know what that framework is? Yeah, and so we're taught at school, aren't we, that copying homework is bad, but in business I think it's good. And if you can take a basic idea that somebody else has proven, then I'm a big believer in second mover advantage. Copy from somebody else but then add some additional value and then go big.

7:18And I guess if I was to take an example of that, then use Synergym, which is a business that I've personally invested in. It's actually a guy, one of the two co-founders was an ex-home surf person who was a regretted loss. And they had copied the Pure Gym model. Pure Gym was a copy of a low-cost German gym chain. And the difference was that Cinegym hadn't been done in Spain. Secondly, the low-cost gym model hadn't been done in Spain. Secondly, what they did was they developed their unique characteristics for how you run a low cost gym chain. So nobody at reception, fingerprint entry. Secondly, having some personal trainers that are in the gym, but others are beamed in from our TV studio.

8:16So it's live classes, but it's on a screen in one of our studio rooms. the the clever bit is um before they sign a lease to open a new location in spain they they put up a website saying we're opening in your community um sign up special discount if we don't get 300 members signed up in a six-week period then we don't sign the lease on the gym so we avoid opening in the wrong area where we haven't got enough demand and then the other part of the model is local influencers and ambassadors that get a free membership and then we have a big gym opening it's well publicized and we're able to sign up individual gym members at a cost of acquisition of less than five euros wow so then how much do you think people need to

9:16Jack Frimston:be doing let's say someone's got a business idea and they're listening to this something they've always wanted to do how much research do you think they need to do into the competitive market where those areas are that do need to be copied and where those areas are that do need to be yeah i think the answer is do lots of market research i think people sometimes would be put off by saying oh somebody's already done it yeah but actually that's good just find a way that your idea can be done even better than somebody else's. But I'd always be looking for an idea that's been done that can be improved upon.

9:51Zac Thompson:Nice. So we're moving nicely. So just we'll do a little interlude. Tell us about these nine steps. Why have you created these nine steps to bake a billion? I look back after I'd sold HomeServe for£4.1 billion two years ago. And instead of sort of congratulating myself I'm sort of person that would say I want to look back at all the mistakes I've made the nine things I know now that I wish I'd known at the start of my entrepreneurial career if I had maybe we could have got there as a team in 15 years rather than 30 so I was determined to write those down road test them for 18 months and then turn them into originally it was the eight secrets.

10:37But there were two things wrong with that. Number one is we've missed one of the secrets, which is the one about the personal characteristics of an entrepreneur, which we now call step number nine, hone your character. And then secondly, let's not call them secrets because my objective is to get them out to every entrepreneur in this country. And there are about 1.6 million of those that are running a business that is more than just somebody that's self-employed. So they're employing two or more people. Really, I also want to focus on those mid-sized businesses that are employing 15 or more people and use those steps to help them.

11:19Zac Thompson:So I want this to be a real business masterclass for anybody that's watching. Let's run through the rest of them. What's next on the list? So the next one would be get some coachment. If somebody's watching this, and I'm guessing their first port of call would be, how do I get in Richard's DMs and get him to coach me? But where should people be starting when they're looking for a coach or a mentor? Yeah, I think if you'd asked me a couple of years ago, then I didn't know the difference between a coach and a mentor. I decided that as part of my transition from going from a hands-on founder chief exec to being a chairman and an investor and helping other entrepreneurs, I should go to INSEAD.

12:02And I trained as a business coach over 12 days over nine months. And a coach is somebody that I describe it sort of as the X-ray machine if you're going to A &E. It will sort of tell you what's wrong with your arm, whether you sprained it or broken it or neither of those. And then the mentor would be the doctor or consultant that's got that medical experience, that's looking at the x-rays and deciding what the advice or prognosis is. So what we need in this country is more experienced business people towards the end of their career that will then say, I'd like to do some mentoring. Ideally I'd like to encourage them to go and train as a business coach so that you can then say what are the big questions that you need to ask your coachee about what the problem or opportunity is?

13:10What could be the range of options that could help them to think about what's the right course of action? A coach is definitely not providing advice, they are facilitating. So when I am doing a coachment session, I will start in coach mode, really get an understanding of the issue or opportunity from those intelligent questions. And then we'll say, okay, what I've just found out is the following. I'm now going to revert into mentor mode and use all of those mistakes I've made over the last 35 years. and some of the big achievements and the learning and see what two or three things from what I've heard could I give advice on that you could then apply to your business.

14:01So that's the magic model of coachment. That is step number three.

14:06Zac Thompson:Do you think if people were, I'm excited to hear your answer on this, do you think if people were using AI, podcasts, and books or any other material rather than sitting down with a coach or a mentor, a human being, would they be wrong? What would they be missing from that? I think the answer is you need to do both. Taking a great believer in case studies. So looking at other role models of entrepreneurs that have really done it, ideally have built a billion pound business or more. Looking at the how. how did they do it and then going out and finding a coach or mentor

14:50Jack Frimston:so where does that take us next then so we're on coaching what's the next step yeah there is find an investor and that's really important to do but the key things here are when do I do it and the answer is not like I did in finding Sass Staff's water to put in half a million pounds into my loss-making emergency plumbing business that wasn't working. Ideally, find friends and family money, prove out the model small scale, keep the losses small. Once you prove the model and then you want to go big and get into growth mode, that's probably the time to get investment, fund the growth and do it properly, enabling you to start recruiting your team and getting that expansion.

15:44I would say ideally a minority investor. So you're retaining the majority shareholding. My business partner and I had to give up 52 % of the business for our half million pound investment. It was worth it in the end, but ideally we would have given up less of the shareholding. And then most importantly, find the right sort of investor who's going to be a good cultural fit, ask the right questions that will show rather than tell and could help you along every step of the way.

16:23Jack Frimston:Nice. So you hear a lot of, I mean, we've had lots of guests on the podcast. We've had some horror stories around investment, things that happen post-investment. What do you think are those early warning signs or maybe questions people can ask themselves to keep that process honest and make sure they're making the right decisions? I think making sure that the investor is backing their plan rather than arriving with their own plan that they try and impose upon the business, that they have a mindset of saying the objective here is to make that entrepreneur even more successful.

16:59Zac Thompson:Where does that leave us now? So you've got an investor. What's the next step? So then it's about thinking about the model. And what's great today that wasn't there in my time, in my early years, was the internet. And there are millions of online businesses. But I think the magic model I would call is bricks and clicks and paper. And what does that mean? Well, you would think in this digital age that paper is why do we need mail shots and catalogs anymore? The answer is that they still work. And actually, they work better today than they did five or 10 years ago because many businesses have said, oh, we're going to put all our money online, paying Google for AdWords for SCM.

17:57and actually those businesses that are still doing direct mail get a bigger share of the doormat. Just think at home how many bits of direct mail are coming through. It's a lot less today than it was 10 years ago. Hopefully you remember the mail shot that comes through from one of the businesses that I'm invested in personally that was one of the original home-served businesses that we acquired at CheckerTrade. Hopefully everybody knows the jingle, an online platform to find local trades people for home improvement or repair. We put out an A4 folded leaflet through 16 million doors six times a year with 150 trades people that are in the leaflet.

18:47And you can ring that track telephone number and speak directly to a great local vetted trade. but equally it prompts people to go online to the online marketplace and look for a wider range of trades. So a great example of paper driving clicks. Another couple of examples would be the White Company. Great business and they use paper and catalogs as well as having stores to supplement their online business. Charles Tirrett, the menswear, I buy my shirts from there and they have many catalogues that prompt me to go and buy. So paper is really important and then maybe give you another example of an American business, an optician called Warby Parker and a few weeks ago I was in New York, I went to visit the very original store.

19:55They were an online optician business. And one of the team said, why don't we open a store in New York? Everybody else around the table said, absolutely not. Have you not read our strategy? It says we're online only. And if we open a store, it's going to increase our overheads and it will cannibalize our online business in the New York zip codes. What happened? It did the reverse. Their online business went up in New York and the business got more credibility because they put a picture of the New York store in Soho on the website and the conversion rate from clicks to sales doubled because suddenly now they'd got the credibility of a store in New York as well as the online business.

20:43So big believer in omni-channel works.

20:46Zac Thompson:So the credibility piece there, when we think about like the human psychology, why do you think that people are more likely to say, oh, I'm more invested in this company now because they've got a flagship store? Because some of those customers will want to go there and touch and feel the product or the service. Doesn't necessarily need to be your whole own store. Pop-ups work. I'm investing in a business called Stubble & Co which is fantastic backpacks. They set up pop-up stands on part runs and sell the backpacks. That model really works well. It could be opening getting your product into somebody else's store.

21:34Another business I'm invested in is passenger clothing. a copy of Patagonia. And when they got into John Lewis for the first time, we tracked our online business in the postcodes around that John Lewis store. And what we found was that some people went into John Lewis, thought, wow, passenger clothing, this is great, really colorful fleeces. But they haven't got the right product for me or the right size. So they went online to Passenger Clothing and bought Direct, but it was a successful offer for John Lewis. But it also built our brand awareness and generated some direct sales ourselves. Nice.

22:21Zac Thompson:It sounds like there are different ways to use that as part of the marketing strategy. We have a lot of people that listen to this in the B2B world and talking about mail. I saw a brilliant example the other day and it was for a guttering company and it looked like it was a handwritten message. It was printed. It looked like it had been written in felt tip and everybody was going mad because it felt like personalized. I thought that was brilliant. If people are listening and they're B2B companies and they're wanting to break into other businesses, have you got any examples of where you can kind of use that step to make billions?

22:55Yeah, absolutely. I think that omni-channel bricks and clicks and paper equally applies B2B. so I think every B2B business should have a catalog that is bringing to life the product or service that's being sold think also about having the credibility of an office potentially even if it's a shared office that could be a London address which says that gives more credibility to the business that we're running Nice.

23:30Jack Frimston:So the cogs are going here. I'm really enjoying this. What's next? What's the next step? Next one is the hardest lesson for us entrepreneurs and for anybody watching or listening is hire your replacement. And I was about eight years into HomeServe when I realized that I was a rubbish chief exec. too many ideas and I'm sure somebody could run the day-to-day business much better than me and there was a guy that had come into HomeServe about a year earlier called Jonathan King he'd helped sign up some of the the water companies where we use their brand to put on our home assistance model and doing a great job called him into my office and said congratulations I'm giving you my job.

24:22You're going to become MD of HomeServe UK when we were only a UK business. That then enabled me to work on the business rather than in the business. And I started thinking about, I wonder whether HomeServe would work in a foreign country or not, knowing that he was focusing on continuing to grow the UK and that there wouldn't be that opportunity cost of the UK slowing down because my focus was now on will home serve work in France or even America

24:56Jack Frimston:okay so before we move on to the international piece then in terms of incentivizing a replacement so obviously it's Richard's business Richard's going to work hard for that business but then getting a replacement in for you how do you make sure the replacement is incentivized to kind of carry the button forward and not make any mistakes or drop it yeah i think the the key bit is um business is all about having the leader at the top so uh if we're talking about home serve uk finding that great leader and then saying we've got to pay them really well and we've got to give them not just a good salary and an annual bonus with a set of objectives that the pair of us agree but then there's got to be a long-term incentive some sort of equity that will drive long-term rather than just the short-term delivery of results thinking interesting is that equity that that then grows based on objects i'm thinking how do you you could get someone incentivized for three years but then maybe you've got a 10-year strategy or is it something that's constantly evolving and changing yeah i think the long term should really be about sort of i think five years rather than three and if it's a public company then it will be a long-term incentive plan which would be sort of shares in a company it could be a share save scheme so that that could be offered to every employee.

26:28If it's a private company, most entrepreneurs will be running a private company and then it will be probably an EMI scheme. There are tax benefits of doing that, but there's a range of different options. But I think don't be afraid to offer some equity because that will really incentivize the team at the top.

26:52Zac Thompson:So entrepreneurs are listening, they've hired their replacement, and they're thinking it's still not a billion pound turnover. What's the next step? What are they missing? The next bit would be, I wonder whether my business would work in a foreign country. And the key things to consider here are, I would say that timing is really important. Many businesses could jeopardize their model if they go too early. they might get some sort of opportunity internationally but if they haven't proven the model and it's growing really really well in the home country normally the uk and then they found somebody to focus on running the uk that is then the time to think internationally equally don't leave it too late because you don't want to wait until uk growth has slowed down or ground to a halt.