A crumble rather than a collapse

As mentioned in my first post-hiatus piece, I've been traveling constantly for months now. The European countries where I've spent the most time are Spain and Germany, who are surely the large-economy yin and yang of the Euro crisis. Strangely the mood was better in Spain (but that might just have been the weather) but in both cases the sense was of business-as-usual in a regrettably tough economy.

Then again, my clients are multinational pharmaceutical companies who will almost always reduce a sales target and taken a global P&L hit rather than sack an entire sales team. This same option just doesn't exist for a local business that lives or dies by whatever revenues can be extricated from the economy in question. The Spanish employees of my clients know themselves to be very, very lucky people.

But as Europe shrinks it will be harder and harder for multinationals to give economic shelter to their staff, even in Germany. The name of the game is prescription pharmaceuticals, which in Europe means that all revenues come from the taxpayer. Theoretically this means that there'll always be a customer because there'll always be a Ministry of Health looking out for the needs of its citizens.

But at the moment Europe feels as if it's being hollowed out. The outward forms of government remain but less of the stuff that actually matters. In Greece you'll most likely still get into an oncology ward but access to those smart, low-side effect, 'tumour activated' cancer drugs is now C.O.D. The German government has a new policy whereby they'll demand a refund if a new medication fails to meet the expectations set by the pharma company (this one is really smart).

My friends working for my clients are safe for the moment and perhaps forever. It's not as if Big Pharma is diverting supplies from some other richer part of the world as a favour to Europe. Back at Global HQ they're sweating over missed targets and year-on-year declines but the governing fact is still patent expiry. Short of mothballing a promising drug until this mess is all over, my clients have no choice but to launch well in order to maximise the returns regardless of any other factors.

And 'launching well' is where I come in.

Advice for the self-employed (January edition)

Sometimes your ambitions move faster than the world.  Sometimes the world moves faster than you.

I finished my last job of last year the week of Christmas.  I never have paid consulting work that late in the year.  The preceding months are a blurred pastiche of meetings, telecons, airports and familiar hotel rooms in cities I'd never visited before.  Back in August my business accelerated and by December I was tumbling down the chute that opens with exhilaration then descends through fatigue, helplessness and exhaustion before bottoming out in tangible, physical illness.  Be careful what you wish for.

 

Sixteen days later I'm in a more familiar state of mind: my ambitions moving faster than my world.  I'm back to wanting more than what's on offer.  I'm impatient and paranoid.  Am I being deliberately excluded?  Are potential clients buying my old book instead of hiring the new me? The glass between me and a shining future is smudged with my greasy noseprints.  I read the Euro crisis stories and fret that last year was my financial high water mark. Then I worry that a smarter, savvier me would look at the state of the world and see where there's a quid to be made from all this chaos.  A fortnight is a long time in self-employment.

 

I've been at this Headcount:1 game a long time now (viz. my previous post.) so here’s my advice to those underemployed self-employed folks out there who spent the Christmas-New Year interregnum drinking too much and ignoring the gnawing knowledge that you don't have guaranteed work lined up for January already.  Reinhold Niebuhr’s ‘Serenity Prayer’ is always a good place to start: -

God grant me the serenity to accept the things I cannot change,
Courage to change the things I can,
And wisdom to know the difference.

Self-employment means that is that there's no boss to impress, no underling to browbeat and no rivalrous colleague to outmanoeuvre.  The brutal truth is that only thing you get to change is you.

 

January 6 is just too soon to start badgering clients so you're tempted to run headlong at all those clichéd resolutions: diet & exercise,better sleep patterns and commendable reading habits.  This impulse is prophylactic at best; racking up cosmic credits for the next time the spiralling chute opens beneath you.  Except that there is no godly ledger balancing a January spent at the gym against a May-time diet of airport pizza and beer.  At worst these resolutions are symptomatic of the very mismatch between ambition and action that you're looking to escape.  Even as you sweat over The Economist some part of you knows that you're just waiting for the phone call that will fill your days.  Diet and exercise might be change but not the sort you can really believe in. 

 

Devoting all this excess time to your actual business can be more damaging still. Parkinson’s Law assumes at least some sort of deadline.

 

My advice to my time-rich client-poor comrades is as follows: -

Find some small, new, discrete thing and do it well.

Not some rambling yearlong project.  You have one of those already: building your business.  Rather that small thing that is affordable in terms of both your time and money but that doesn't require you waiting on anyone else.  A one-off class.  A lecture. A walk to a place you've never been before.  An afternoon taking photos.  A blog post. Don't reorganise your life but somehow extend it.  A measure might be this to complete some thing that allows you to greet your life partner at the door with, “Guess what I did today?” Achievement, no matter how minor, is not risible.

 

Create small ambitions that are under your control and sit them alongside those larger ones that are not. But do this small thing for its own sake, not with one eye fastened on the far side of the smudgy glass.

And don't worry too much about 2012.  My reading of the news is that we all, those with bosses and offices and those without, are going to hell in a handbasket of soon-to-be resurrected European currencies anyway.

 

Happy New Year.

Chien noir. Perro negro. Cane nero...

At a dinner at a European pharma meeting last night the conversation couldn't escape the financial crisis. Budgets slashed. Health ministries paralysed by the turmoil. Every hospital, therapy area, patient group and drug company desperately seeking an ever-larger share of a shrinking pie just to keep up.

"My dog's blacker than yours" in twelve European languages

Big bites in Big Pharma

As this next, even scarier phase of the Global Financial Crisis takes hold it appears that Big Pharma is much of its implicit losing political patronage.

The Spanish government is looking to cut its drug bill by €1.3B by demanding price reductions in both the off-patent and soon-to-be-off-patent medications.  By hitting branded drugs as well as generics (i.e. those already off-patent) a signal is being sent by the Minister for Health & Social Policy: -

The pharmaceutical bill rises to nearly €15 million annually and the government becomes the largest customer in this sector...  We demanded a lot to the industry and we believe enough is enough

In the UK the National Institute for Clinical Excellence (NICE) has decided that none of three leading treatments for metastatic colorectal cancer are good value at their current pricing.  This will effect Roche (Avastin), Amgen (Vectibix) and Merck Serono (Erbitux).  The NICE statement said that it was: -

Disappointed not to be able to recommend cetuximab (Erbitux), bevacizumab (Avastin) and panitunmumab (Vectibix) for this stage, but we have to be confident that the benefits justify the cost of the drugs

This is especially bad news for Roche as Avastin, the world's largest selling cancer medication, is under ongoing FDA scrutiny as a treatment for metastatic breast cancer in the US.

Boehringer-Lilly have been scared off launching diabetes medication in Germany due to legal-administrative changes that place a greater onus of the company to ensure that a new drug is value for money: -

Reorganisation of the Pharmaceutical Market (AMNOG), (which) was established in January this year to regulate the pricing of newly approved drugs within their first year.  This means that Germany's NICE equivalent IQWiG and a new Federal Joint Committee (G-BA) now assess a drug's cost-effectiveness against a suitable comparator and if the drug fails to demonstrate its cost-effectiveness, then its manufacturer may be liable to refund the government's Statutory Health Fund, which originally paid for the treatment.

It looks as if the German government called Boehringer-Lilly's bluff.

And all of this in the (somewhat) solvent north of Europe.  As I've mentioned previously, further south the picture is different.  In Greece the government is issuing zero-coupon bonds to pay its pharma bills.  Roche said that the conversion of their debt to a bond amounted to a loss of 26% when the bonds was converted to cash.

Of course as Greece racks up more debt a 26% 'haircut' might look like good value.  Assuming that Greek bonds of any value are still deemed to be assets in the months ahead.

London. Dawn. An uneasy peace prevails

Got back to London yesterday after three weeks away. Mostly I was catching up with family in Australia in Far North Queensland and western New South Wales but I also managed the best part of a week seeing friends in Sydney and Wellington (NZ). With all the bad behaviour in England this week I found it harder and harder to 'sell' the UK as a sensible place to live when Oz is an option.

I like Great Britain and I love London but the ambient anger we've seen this week isn't going to dissipate until the city / country regains some sense of shared opportunity. I'm still trying to work out where I want to grow old but I'm not sure I'd stay in the UK if I were still young.

The wages of frustration

I am still in rural NSW at the farm where I grew up.  The weekend was a reunion of sorts for my three sisters, their manifold children and me.  It's taken me a while to adjust to sleeping in the deafening silence of the Australian bush after inner London but that absence of noise is one of the things that I am here to rediscover.

On Saturday my brother-in-law gave me the tour of his cattle-raising business.  He's made a number of quite radical changes to the farm since my father has stepped back.  He and my sister are enthusiastic adherents to a more holistic approach to agriculture that is quite close to hard-core environmentalism in terms of protecting  pastures and (especially) soil quality*.  To this layman's eyes it seems as if they're on the right track but they'll only know for sure after a few hard years of poor rainfall and depressed cattle prices.

It's easy to look good in the good times.

And this is something that I'm not sure that my brother-in-law, a smart, hard-working man, quite gets yet.  An understanding of the meaning of prosperity is hard to come by.  If you take the long view of a business in any established industry (and none are more established than food production) then a trendline will emerge; a sense of what a good operator can reasonably achieve with his particular assets can be established.  I say 'established' because it takes time for these trendlines to solidify; no one knows what the DNA sequencing industry will look like yet.

Many companies and most Headcount: 1 / freelancer types misinterpret prosperity.  If you treat the good things (it rained, my client got a big promotion, I got the part in the hot new movie) as luck or even as 'just rewards for all my hard work' then that prosperity is mispriced: -

The good years must compensate you for the emotional damage wrought by the bad ones

None of us gets to relive those bad years but with more money in our pockets.  We don't get that time back.  Our health and the wellbeing of our relationships with family will inevitably have been damaged by both the frustration of not having succeeded yet and the quiet terror of not knowing if you're actually going to succeed at all.  When you hear that someone's eventual success 'feels hollow' it means that the bad years were 'not worth it' (or mispriced).

Hopefully my brother-in-law has it right.  Like many smart farmers of his generation he is adamant about carving out time for his other passions: his family and campdrafting, a very difficult, peculiarly Australian rodeo event.  But the proof will be in whether or not he manages to keep up these other aspects of his life when beef prices tank and the rain refuses to fall.

The current good season will have to pay for some future time of heartbreak and frustration whether he knows it or not.

* This is not to say that my father didn't have a keen appreciation of the relationship between his agricultural practices and his land.  He did.  However, to an outsider it does seem that the thinking has moved even in the last ten years.  Even though he doesn't use that language, my father was a custodian of his land, which is more than you can say for most farmers in most parts of the world.

The stories we tell

For the last five years I've served on the board of trustees for a West London charity. We offer adult education in the form of Numeracy & Literacy and Information Communication Technology (ICT, aka 'computer skills') to unemployed and otherwise excluded people in North Kensington. The charity has been in operation for 28 years and the chief function of the board is to support our inspirational (and formidable) CEO.

As with all charities everywhere, attracting adequate funding is a constant battle. Our geography counts against us we are located in one of the most deprived wards in London (Golbourne) but that ward is in the richest borough in Britain (Kensington & Chelsea). This incongruence means that we attract less funding than similar organisations in the east of the city even though our students, many of whom are refugees and asylum seekers from places like Ethiopia, Somalia, the Sudan and Iraq, are equally deserving.

Lately I've been making a renewed effort to get friends and acquaintances to help us out financially; my strange, schizophrenic social circle includes quite a number of City Types who, at first glance, would be ideal benefactors to an organisation that is doing good work in their own back yard.

Not so much.

This is not to say that my friends aren't generous but rather that as you'd expect your typical City Type finds himself constantly targeted by a bewildering selection of charities representing good causes ranging from small theatres to the Guide Dogs to the local school to disabled kids to the alma mater. With wealth comes the right to pick and choose where you bestow your munificence.

In marketing terms this amounts to: -

Whose story moves me the most?

What I've learned is that even people with even moderately right wing views are not moved by the origin tales of foreigners. An entreaty that highlights a benighted past can result in a shrug of the shoulders or even something uglier. I've learned to save the stories of famine and refugee camps and even the obscene oppression of women for my lefty mates.

The narrative that motivates the right wingers is not where the beneficiary is from but where she's going. They are no less generous but words like 'motivation', 'integration' and 'aspiration' resonate where 'deserving', 'justified' and even 'humanity' fail.

As with any sales pitch it's all about the story; I've learned to distinguish what has already happened from what is yet to come.

Cold-calling a falling man

In these straitened times every client of mine is under pressure all the time.  The cultures of every pharma company pulse with implicit threat: -

Do more with less.  Do it sooner.  Do it right the first time or else...

Some days all of this makes self-employment feel a little better.  It feels as though I have more control over my destiny.  Arrant nonsense, of course, as there's nothing like a job scare to encourage a sales team to attempt a little DIY training.

This pressure on expenses is doubly felt by the pharmaceutical industry; not only is the sector going through the same GFC as everyone else but it faces a systemic threat in the number of hugely popular products that are coming off patent.  A branded medication can expect to lose as much as 80% of its sales within six months of patent expiry and by some calculations the big research companies (aka 'my clients') will lose a further $100 billion in sales to generic manufacturers in the next three years.

This is old news and the industry is responding.  Pfizer is closing research facilities in the UK and invest in sales teams in China.  Novartis has been positioning itself in the generics game with Sandoz since 2002.  Roche completed a takeover of Genentech in 2009 to try and dominate the biologics market.  This year Sanofi-Aventis has bought Genzyme and Takeda has bought Nycomed.  The M&A industry has plenty of reasons to love pharma.

This can make life a little tricky for a Headcount: 1 consultant trying a few cold calls but with one eye on his summer holidays.  Here's an ex-client's response to my friendly hi-how's-it-going email: -

Yes i do remember you.  It is probably not the right time to come in -- we have just been taken over by XXXX so things are a little unsettled at the moment.  Sorry can't help at this time

 Not my finest moment as a salesman.

The unreasonable man

Whereas back in UK the 1.7million-person cost containment system known as the NHS continues to frustrate all who encounter it, both within and without.

I've long been of the view that the scarcest resource in the entire network is human energy required of a health care professional who will fight for the good of the patient.  This is not to say that there's malice or even negligence at work but rather an inertia that elevates older and cheaper therapies over newer, more expensive ones.  Doctors are soothingly told to be reasonable, to avoid cruelly raising a patient's expectations with talk of state-of-the-art treatments.  All of which brings to mind the great GBS: -

"The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself.  Therefore all progress depends on the unreasonable man."

George Bernard Shaw

Which is certainly true of the NHS; drug budget blow-outs are avoided due to the reasonableness (read: exhaustion) of the staff.  An entirely unspoken aspect of the British pharma representative's job is to locate that rare unreasonable man.

More thoughts on Greece

Thinking further about the situation in Greece, Simon Kuper wrote an especially poignant piece in the weekend FT that compares the ordeal about to be thrust upon middle class Greeks with that of Argentinians in 2002.

And there was my Argentine friend who lost her mother.  The mother, a nurse, had fallen ill, deteriorated, and then died without ever being diagnosed.  Afterwards, my friend deduced that she had had a brain trauma.  Being a nurse, the mother had apparently diagnosed it herself, decided that treatment would be too expensive, and quietly died.  All these people felt disbelief.  This couldn’t be happening to them.  It turned out that there was no safety net, no benevolent state.

This goes well beyond what the pharma industry can alleviate: if there's no money for basic health care there's certainly no money for biologic agents.

The callous disinterestedness of the NHS

In the last month I've been out ‘on the road’ for three days observing sales representatives selling into the NHS.  As with any sales job the days are long and usually frustrating.  Busy doctors are always cancelling appointments.  The rest of the time gets filled with the strange burden of minor expectations that health care professionals, from the most senior doctor to the student nurse, have of the pharmaceutical industry.  Branded pens and Post-It notes have been banned but the ‘drug rep’ is still the conduit for funding for educational meetings here and abroad and for sandwiches (“We prefer a selection of wraps from M&S”) at least once a week.

What struck me hardest was the visible level of stress being carried by every NHS employee.  It had been a couple of years since I’d been out in the UK system and I was surprised by the universal interest in the price of the drug being sold.  Once upon a time only pharmacists and payers bothered to discuss cost; doctors and nurses didn’t sully their minds with such mundane financial matters.  But last week I watched a junior nurse, who is years away from prescriber status, quiz the rep about the comparative cost of rival treatments.  The nurse didn’t seem to be aggressive or point-scoring nor was he being clever for the sake of it; he just saw it as part of his job to understand the treatment options from a financial as well as a scientific-clinical standpoint.

I can’t think of another government department anywhere in the world where cost-consciousness pervades so thoroughly through the hierarchy as in the NHS.  Of course everywhere there are low-ranking teachers, police and perhaps even soldiers who are aware of their departmental budgets but not so consistently across an entire system.  By some counts the NHS is the second largest employer on the planet and every one of those employees has been trained to count the pennies. 

The taxpayer in me supposes that this is a good thing but I'm also sure that this cost-consciousness contributes significantly to the stress levels I saw in English hospitals.  No one ever went into the caring professions because they enjoyed the budgeting process yet this is now a substantial part of the job.

The reps I shadowed were selling expensive drugs.  This is true by definition: the only cheap drugs are ‘off-patent’ and so with insufficient margins to justify the formidable expense of a sales team.  With the NHS set up the way it is, any conversation with a drug rep is going to end with him asking for something that is difficult financially.  The medicine in question may amount to a revolution in the fight against a given disease but the health care professional is still left with the same old zero-sum game: - 

I cannot treat any patient as well as I would like to treat every patient

This has seeped into the organisation’s DNA.  Last year when the new Coalition government announced its Cancer Drugs Fund (CDF) the idea was for doctors to stop acting as financial comptrollers and get back to practicing medicine.  Yet the initial budget of £50,000,000 for the first twelve months will be underspent by a considerable margin.  This is not because Britain doesn’t have enough cancer sufferers to justify the money but because doctors across the country are genuinely suspicious about the long-term consequences of adopting newer, more advanced treatments in case the funding is later withdrawn

I've sat in on those sales calls.  I've seen doctors agree that there are patients under their care who would benefit from the drug in question.  But when the CDF is mentioned I've watched them narrow their eyes and ask for assurance that they weren't being tricked into changing their practice in an ultimately unsustainable way.  The logic being that it would be better to deny all current patients a better treatment if future patients would be denied it also.

 At the heart of the global financial crisis is the dawning realisation that for the first time in centuries we have to accept that future generations may lead less happy lives than us.  We are faced with the fact that the constant improvement in general wellbeing that the West has enjoyed since the mid-18^th Century is not inexorable.  If you work in the NHS then every day you're learning this unpalatable truth first hand: Britain cannot afford to keep offering every citizen continually improving health care.

By God that’s a stressful way to work.

Non-financial overinvestment

If you've ever bought a residential property you're familiar with the principle of overinvestment.  It's the moment during the inspection when you start wondering about the state of mind of the people who are selling.  You look at your partner and whisper,

"Really?  They must've spent another thousand pounds on that?  I mean we like the place well enough but they're kidding themselves if they think they're getting their money back on whatever they spent on that skylight / fireplace / waterfall / bedroom spa unit..."

I'm not thinking about the feature that was obviously installed because the vendors thought that they'd enjoy the use of it but rather that addition they made because of a transparent thought that it would increase the resale value*.  By definition this incremental spend as an investment: something that will return them more money than they laid out.  If they don't get that additional return then they've overinvested.

There's a parallel with my sort of knowledge work.  When I have too much time on my hands I'm in danger of devoting more attention to a project than it warrants.  Sometimes I'm guilty of devoting more attention to a project than it can bear.  In either case I'm guilty of overinvestment,

"Really?  He must've spent another couple of extra days on that?  I mean we like the concept well enough but he's kidding himself if he thinks we're going to pay extra for however long he spent on those new graphics / additional background research..."

If my time is worth something when I'm busy then it's worth something when I'm not.  Allowing that figure to shift is crazy.  If I have spare time on my hands then it shouldn't be devoted to my client's goals but rather my own.

* A good rule to remember when selling a house or flat is that you're never going to guess the shade of blue the buyer wants so either paint the wall white or leave it as is

A price-maker but a date-taker

I've found myself musing on the nature of success.  When you're in the middle of a life how do you know if it's going well?

This is especially acute if you're self-employed and thus denied the external loci of the annual performance review, the promotion achieved or denied and the size of your bonus.  What indicators can you look to to vindicate the choice you made to go out on your own?  I don't think it's enough to get to the end of the tax year and check the bank account, especially as money is rarely the chief reason why people start their own businesses.  Making money is necessary for survival but not sufficient for success.

I need an array of projects at different stages of the development cycle.  These projects should be with a range of clients and preferably spread around the world.

My development cycle runs something like this: -

• Initial inquiry ➙ credentials presentation
• Identified need ➙ costed proposal
• Project sign-off & timeline agreed
• Design ➙ delivery ➙ invoice
• Feedback
• Initial discussion on follow-up

My business model relies on me delivering twenty or so projects a year.  Obviously life is so much easier when they spread out over the calendar rather than the stress of 'feast or famine' but of course that's preferable to no projects at all.

Because my work requires largish numbers of people to be herded into a single room I have very little influence over the delivery date of the project.  I'm a price-maker but a date-taker.

Summer is always quiet in Europe because of holidays.  January is busy because everyone wants kick-off meetings which means that December is a high-stress month of preparation interrupted by the 'silly season'.

So can I achieve this even spread of projects over the year?  Geography helps as America takes shorter summer holidays than Europe and my Asian clients operate with less seasonality still (Chinese New Year notwithstanding).  More important is upping the variety of my offering: if my business is built solely on 'energiser' sessions for sales teams then I'm going to be busy at New Year and a la rentrée and no other time.  That's not going to make me feel successful.

A good starting point is actually documenting the development cycle.  Understanding where each active project is sitting on the continuum helps me to spot upcoming periods of stress.  It also forces me to keep prospecting for new work through the busy patches and it forces me to develop offerings that aren't so seasonal; for example working with smaller, more easily assembled groups of marketing as well as larger sales teams.

If in the course of a week I'm pitching, writing proposals, meeting new clients for the first time and actually delivering a project then I'm pleased.  Whenever I can see months that look like this I sometimes go crazy and start wishing for a vacation.

The self-employed: often pleased, rarely happy.

How IP goes AWOL

Twice in the last seven years my intellectual property has been appropriated without my permission.   I'm not sure if two incidents of blatant theft since 2004 is a lot but it's certainly more than I want to deal with.

Both times the culprit was an overambitious yet cost-conscious training manager who had invited me in to make a credentials presentation.  In both the rip-off was based on introductory slides from that first meeting and despite the intrinsic simplicity of my ideas each end product of it all was rudimentary to the point of being completely useless, yet still vaguely linked to my brand.  The worst of all worlds.

I'm told that in each cases like this the plagiarists' thinking would have followed a progression such as this: -

1. That's such a simple idea!  I wish I'd thought of it.
2. That's such a simple idea!  I've often thought something similar myself.
3. Ideas like that are pretty commonplace.  It's really all about delivery
4. That idea has been around forever.  Much of the delivery techniques are probably already in the public domain
5. Why would I pay this guy to deliver ideas that are no better than my own and which he probably lifted from someone else anyway?

In other words, a pernicious internal monologue that begins with admiration and ends in defiance.  Left uninterrupted it costs me stupid amounts of time and emotional energy to arrive at a financial settlement that will 'make things right'.  Even worse, it also sets back my relationship with that company by years.  The sort of people who pass off others' work as their own usually have a highly attuned political sense and are going to do everything in their power to stop me ever getting back in the building.

This phenomenon, albeit rare, is why I have to out so much stock in my personal brand: my ability to convey my own ideas better than anyone else can is the reason why I make credentials presentations instead of watching them.

The business world's often cavalier attitude to plagiarism ('getting caught is the real crime') is also one of the differences between B2B and B2C.  When you're selling direct to the public at large the progression is likely to be: -

1. I wish I'd thought of that
2. I wish that I could do that
3. I wish I was doing that
4. I don't have time / energy / talent to be doing that but I'm so happy that someone out there is doing it and I get to enjoy it

Commerce isn't anywhere near as squeamish as Art on matters of originality.  You have to call the foul because it's unlikely that anyone else is going to do it for you.

We’re not into high science R&D; we’re into making money

My recent thinking on Pfizer may be a slight case of jumping the gun.  Pfizer isn't shedding 100% of its R&D, although it is reducing its spend from around $9.4 billion last year to perhaps as little as $6.0 billion in 2012.  A massive decrease but still a huge investment (second only to Roche).

My argument is better made by Valeant, a Toronto-based company run by a J Michael Pearson,  ex-McKinsey consultant.  Instead of the usual combination of medics, pharmacists and scientists, Valeant has assembled a group of very smart venture capitalists as its board of directors.  Everyone's favourite Pearson quotes come from a recent Bloomberg profile: -

We’re not into high science R&D; we’re into making money.

We’re looking for companies that have products in them that we could grow and maybe do a slightly better job than current owners.

The thinking is that there's room for one or two of these in the market but no more than that.  An entire industry that thinks in this way will become increasingly risk averse, giving less leeway to researchers to follow that 100-to-1 hunch that leads to the Next Big Thing.

And let's not forget that because this is pharma, that Next Big Thing is almost by definition a further alleviation of human suffering.

A bird in the hand is worth...

This post may be a bit dry for some.  I'm going to try and set out the new way of forecasting that I'm applying to my consulting business.  The more I think about it the more I'm sure that these principles apply to most freelancers including stand-up comics, graphic designers and the like.

Every successful freelancer struggles with the 'feast or famine' phenomenon whereby you're either too busy to scratch yourself or else you're sitting around waiting for the phone to ring.  The problem stems from failing to generate future work whilst you're preoccupied with the challenges of the present.  Most of us fall into the dreadful habit of not worrying about the blank page in the diary until that actual day.  The oh-so-astute Kate Smurfwaite nailed this with an observation that you often go through periods of always gigging with the same few comics because they emailed with the same promoters s you on the same day three months previously.

I can't remove the need to constantly be prospecting for new business but there are ways to be smart about it.  Firstly, focus on the money, not the diary.  For fear of an empty diary it's easy to fall into the trap of selling your at a discount.  The logic is that it's better to be busy but underpaid than, I dunno, going to the gym and then reading a book.

This diary / money nexus has to be inverted.  The question you need to ask is: how much do I want to earn in a year?  Work out how much do you need to pay the bills, to add to your savings and still have a little left over to splash around to prove to yourself and the world that this self-employment malarkey is working out.

Let's call that 'annual earnings' figure A

Have a good hard look at it.  If it doesn't look a little daunting then you probably haven't got the maths right.  Once you're happy, divide it by four as we're going to work in quarters.

Let's call that 'quarterly earnings' figure Q

Now rather than one big problem (A) you've got four smaller problems but they won't seem to be problems of equal size.  If we say we're going to start this new regimen on April Fools Day then the challenge of earning Q for April-May-June probably seems much more daunting than for January-February-March.  Or maybe your diary's looking good up until summer and you've got less of a handle on July-August-September.  Either way, the psychological challenges represented by Q fluctuate over time.

From here in on you'll need pen and paper or (better still) a spreadsheet.  Create four columns, one for each quarter with three rows.  Write Q at the bottom of the first row as per below

Now get your diary and enter every definite job in the appropriate quarter.  Only include those where you are 100% sure that your services will be needed and that you will be paid.

Let's call these 'definite earnings' D

List the details of D in the top row of appropriate quarter and subtract that from Q.  Call that new figure Qa

This example roughly follows the pattern that my business follows: few clients book me a long way in advance so I have to be comfortable with a 3-6 month horizon.  I know I should be worried that the end of the year and early 2012 are looking thin but I also need to know what to do with that worry.

Go back to your diary.  Now list every probable job by quarter.  Define 'probable' as anything where there's a better than 2 in 3 chance of your services will be needed and that you will be paid.

Let's call these 'probable earnings' P

List the details of P in the top row of appropriate quarter.  Now divide P by 1.5 and subtract that from Qa to get Qb

Why 1.5?  Because we think there's about a 2 in 3 chance of the job coming off.  And look what I've learned; I'm probably going to miss my budget (Q) for April-May-June by 17 but I'm more than fine for July-August-September.  More importantly for the period between October and March I still have a lot of work to do.  Even though I might bill another 360 in October-December, which would get me to 510, the jobs aren't booked yet so I'd be a fool to bank on them.  And I still have plenty of work to do for the start of 2012.

We have to make up the difference in the bottom row.  This is where the diary is of less use than the old the contact list, that stack of business cards and the guy who said to give him a call some time.  We're deep in maybeland.

So let's call these 'maybe earnings' M

There are only two places that these earnings can conceivably come from:-

1. Finding new clients (Mnc), or
2. Selling new products (Mnp) to old clients

I've had my UK business for almost six years, so I have enough data to know that my average time from first meeting with a client to actually delivering a project is 8.67 months.  I've never been able to reduce this.  I now accept it as a fact of my working life.  So even if I met a potential client today I can't realistically bank on anything (Mnc) before January.

Another problem is I'm not especially good at putting time aside for new product development (Mnp).  Almost all of my innovations have emerged as solutions to problems articulated by clients and I'm actually quite crap at building the thing that meets the unrecognised need.  But I do have a few ideas that have worked in one market but have yet to be taken up in others so there's hope for me yet.

I guess we'd better input M into our spreadsheet

This bottom row always has a fantasy element about it, however, the rule is you must keep the Qc fantasy to the right hand side of the page.  If I could realistically anticipate any new business in the next six months then it should appear in the middle row (Qb).  If I need it to happen later in the year it's a task, needing it tomorrow makes it a prayer.

In keeping with my 8.67 month average I've assumed I'll get no new clients (Mnc) before next January.  This means that all of my October-December earnings have to come from existing clients (Mnp).

To temper the fantasy just a little you'll notice that I reckon there's only about a 1 in 3 chance of any Qc earnings actually coming off; remember that we're selling either something that doesn't yet exist or to someone we haven't met.  So we have to be able to identify three times as many Qc opportunities.

Summary
My imaginary business might just survive the next twelve months.  Well done me.  But for that to happen I've got to find new things to sell to my existing clients as well as speaking to new ones.  I knew that already.  The nasty truth I've was avoiding was that both these tasks have to happen now.

Variations
There are a few obvious variations to this basic model that will make it more applicable.  For example, I've assumed that the demand for my stuff is constant throughout the year (500 / quarter).  If your business dries up in the summer then you the initial Q figure for that quarter and compensate with higher targets over the rest of the year.  Anyone contemplating the Edinburgh Fringe may well have a negative figure for July-August-September. 

I've also gone for conversion rates (1.5 and 3) that are a realistic reflection of the way my industry operates but may be questionable elsewhere. 

In Conclusion
As I said at the beginning this is a new technique for me and I apologise if in my excitement I've overcomplicated it.  Like many good ideas it seems to clarify something that I've long known but never articulated.  I like knowing where I need to focus my attention.  I like that it shines a harsh light on the naive expectation that 'somewhere, someone unknown to me is about to come to my rescue'.

I like that if I can see a feast on the horizon then I can decide that next week isn't a famine but a chance to finish that book.

A gathering storm

This week saw a nasty escalation of the mid-project blues that often hits me during an extended and complicated job. I fully accept that a client has a right to feel nervous, especially if we haven't worked together before. No small part of my job is to ease those concerns.

Alas, the escalation came from another, albeit not entirely unexpected, quarter. As part of the task of integrating my ideas with existing elements of the client's culture I was emailed a 'background' PowerPoint presentation, which I opened at 5am last Thursday. There, in all its barely adulterated glory was a sequence of my slides.

My ideas are a big part of my livelihood and they'd been lifted without a hint of acknowledgement or attribution. Seemingly this has been going on for about three years.  The prospect of the coming fight exhausts me. Try as I might I cannot figure a way to resolve this mess without the plagiarist losing face.

The sad irony is that the client is a pharmaceutical company; one industry that exists only on account of vigorous intellectual property law.

Who has your back?

Performance improv is an innately social art form.  Improvisers from the Loose Moose in Calgary have a pre-show ritual they insist on following wherever they perform.  Immediately before taking the stage each improviser approaches every other improviser, pats them on the back and simply says: -

I've got your back

On a good night improv feels effortless and the audience will know it's in the presence of genius but these aren't the nights you have to worry about.  It's the bad nights (we all have them) when you feel inadequate and exposed.  It's as if the audience can see what you're thinking in real time as you fruitlessly try different approaches to turn your performance around over the course of a show.  Instead of starting the next scene you hang back hoping that someone else will shoulder the load.  You start blundering onto the stage when you're not needed and staying off when you are.  Paranoia creeps in as you sit in the wings wondering if you were ever any good at this nonsense.

The truth is that you can't think your way out of a hole like this.  You have to switch off that calculating brain and feel your way forward.  In the mean time you must trust that your fellow performers will give you time and space for this to happen.  You need to hear: -

I've got your back

About ten days ago I had that bad night in London.  Happily the format of the show and the quality of the rest of the cast meant that the overall night was unaffected.  My horrible sense of exposed inadequacy was mine alone.  On the night someone had my back.

The reason that stand-up terrifies most improvisers is that no one has your back.  The main reason that sole trading terrifies most people, even those self-employed in partnerships, is that no one has your back.  When you're self-employed you accept this and develop techniques to create the time and space to feel your way out of that hole.

I work early in the morning and late at night to give my underperforming brain the additional time to complete tasks that would be simple in better times.  I keep a private journal that gives me a historical record of what I'm feeling as much as what I'm thinking.  Most importantly I stay close to smart people who I trust despite most of them living in Australia.

It's counterintuitive but I think that misanthropes are the people least equipped for a Headcount: 1 life.

Image-making vs. Rent-paying

Sir Paul Smith is unarguably the most successful post-war British men's fashion designer.  He started out as a one-man-operation in the 70's in the back streets of Nottingham before being discovered by the likes of Led Zeppelin.  Last year his global sales were around £350M and he seems to be surviving the financial downturn better than most.

Last Monday The Independent ran a profile piece that gave me much food for thought.  His thoughts on the right attitude for starting your own business struck a chord: -

"I meet a lot of young designers now and they're so talented but they lack the life skills you need to make money.  When I started my clothes were quite particular and I knew I wouldn't sell a lot, so I only opened on Fridays and Saturdays. For the rest of the week I rolled up my sleeves and did shitty jobs – styling, or just borrowing a mate's Transit van to go selling suits – so I could keep the shop pure. So many people today only want the purity and wonder why they go bankrupt. You've got to have a balance between image-making and rent-paying."

I love his dichotomy between image-making and rent-paying and his blueprint for surviving tough times is wonderfully simple: -

Graft, honesty, humility – and good manners.

This applies as much to management consultants, bankers and corporate lawyers as it does to fashion designers and stand-up comics.

Some of my best friends are...

I've just read John Lanchester's Whoops! Why Everyone Owes Everyone and No On Can Pay; his diagnosis of the global financial crisis.  Lucid, funny and intelligently constructed for the interested non-expert, it is further evidence in favour of the argument that a good writer should be read regardless of his choice of topic.

He makes a distinction between 'industry' and 'business' at a cultural level: -

An industry is an entity which as its primary purpose makes or does something, and makes money as a byproduct.  The car industry makes cars, the television makes TV programmes, the publishing industry makes books, and with a bit of luck they all make money too, but for the most part the people engaged in them don't regard money as the ultimate purpose and justification of what they do...  Most human enterprises, especially the most meaningful and worthwhile ones, are in that sense industries, focused primarily on doing what they do: healthcare and education are both, from this anthropological perspective, industries.

Or at least that's what they are from the point of view of the people who work in them.  But many of these enterprises are increasingly owned by people who view them not as industries but as businesses: and the purpose of a business is, purely and simply, to make money.

p169-170

The sense of personal definition is hard to overstate as anyone who has watched a merchant banker try and explain what he does for a living to a six year old can attest.

The expensive boarding school where I studied was founded in the early years of the last century by Sydney's merchant class.  Corporate law, banking, stockbroking and commodities trading were promoted as desirable, laudable careers and some of my oldest friends have achieved immense success in these fields. My first degree was a Bachelor of Business and my high school essentially programmed me for some sort of financial career yet for some hitherto inarticulated reason I've always shied away.  Lanchester nails a social phenomenon under which I have long suffered that acts as an explanation of sorts: -

I have people I count as friends who work in the City.  We get on in all the ways in which people get on, but there is sometimes a moment in talking to them when you hit a kind of wall.  It's usually to do with fundamental assumptions based on the primacy of money, and the non-reality of other schemes of value.

p174

I work in two 'industries' (entertainment and pharmaceuticals) that I believe make the world a better place, albeit in vastly different ways.  I have always considered myself to be an unashamed capitalist so I expect to be paid well for my efforts.

But I am wary of a life where achievements are best expressed in dollar terms.