How Hiring The Right People Can Collapse Your Business

Introduction to a Serial Entrepreneur’s Journey

I spoke to a business acquaintance (Let’s call him Mike) last week. He’s what could be called a serial entrepreneur, going from one business to the next—and in most cases, managing to sell the last enterprise for a good return.

The Importance of People in Business Growth

We discussed, as I often do with business contacts, that people are always largely to thank for our respective businesses’ growth. This is a favourite subject of mine since MNE Accounting is staffed by some of the best people I’ve ever been lucky enough to employ. We agreed that the best people produce the best results—and this seems pretty obvious.

An Unexpected Turn in Business Ventures

The conversation took an unexpected turn when he told me about one of his ventures, which started with some incredible prospects but then came to a less-than-brilliant end.

The Initial Promise of a New Acquisition

Mike had bought an established lettings agency franchise as the existing franchisors were about to retire. He’d been through all the due diligence, and everything stood to scrutiny; the finances and the business itself were exactly as he’d expected. The price was good, and the business had lots of room for development.

Challenges with Staff Dynamics

Mike’s venture started off a little like the first part of The Italian Job (the 2003 version), where the perfect business idea was executed by exactly the people who could carry it out in the most efficient and successful way. In his planning of the purchase, Mike spent some time with the staff in the business. It was a mixed bag, with a handful of star performers and also some really very average performers. These worked strictly to rule, would never go the extra mile and were not shining beacons of joy in the office.

Team Building and Internal Conflicts

Mike lost three of the four average team members through the purchase – they didn’t like change and weren’t encouraged to stay by Mike, given what he’d heard from the old employers. Mike brought in some of the people he’d met through the years who had performed excellently under his employ: a marketing guy, two negotiators, and a general manager. The mistake Mike says he made was to ignore the fact that having a perfect group of people is not the same as having a perfect team.

The Downfall of the Business

The problem for Mike was that the workers were so excellent at their jobs yet so completely incompetent at working together that the business soon started to fall apart. The general manager turned out to be feathering his own nest from day one, as he convinced a few large landlords to jump ship to his new, secretly formed agency.

Reflections and Lessons Learned

During our conversation, Mike discussed how the apparently very average original team had departed and became a high-flying, low-performing group. His theory is that a good culture was simply too hard to create, where everyone had brought their own. By the time his general manager had moved on, the business had dropped its management income by just over 20% and had gone from a business that made a modest but reliable profit to one that couldn’t even break even.

Staffing and Business Strategy at MNE Accounting

At MNE Accounting, we’ve always been very proud that some of our most senior team members started with us as trainees—and they’ve become some of the most excellent accountants we’ve employed. Conversely, on two occasions, newly fully trained employees came up with completely the wrong ideas, and unfortunately, their employment lasted days and not months or years. It’s not about people’s skills; it’s their attitude and a hint of how that attitude is managed.

Business Accountants and Future Client Discussions

So when I speak to clients in future about their potentially incredible new venture, staffing will rise even further up the list of priorities – and in this case, it’d have been beneficial to focus on these more than the profitability of the business!