Anyone who has read the autobiography of Richard Booth, founder and ‘King’ of Hay on Wye, the original and foremost Book Town in Britain (indeed, the world), will have their views on booksellers confirmed – they are a shady lot who will take you for a ride if you give them half a chance.
Richard is a very colourful character (the book is an entertaining read) and the success of Hay is indisputable – an annual footfall of over 2m people and enough business to support around forty bookshops. But with such wild success, how come he has gone bankrupt several times?
One of the reasons is there for all to see in his biography – his ethics were deplorable. Not only does he recount many ‘deals’ of questionable morality, but also he does so with pride – he actually believes he is being a smart businessman. In reality, what he is doing is making a short-term gain and a long-term loss.
Which is the subject of this article.
There are as many ways to run a successful business as there are to run an unsuccessful one.
And there are more pitfalls to screw up a successful business than you can count, not the least being hubris.
You can run a successful business being smart, ruthless, cynical, and hard. And you can throw in sharp practice and even criminality and it can still be successful. Often wildly successful. But, sooner or later, such businesses founder.
Or you can run a successful business going down a different route.
You still need smart, and even a little bit of ruthless, but the rest you replace with basic honesty, honourable practices, and genuine effort on behalf of your customers, clients, business associates, and staff.
Such businesses tend to endure and grow.
It is on this latter method I will be dwelling, but before I do, let me remind you of the famous three Paul Getty principles for a successful business:
Get up early. Work late. Strike oil!
Which means that whichever method you finally choose to run a business, high ethics or low, it will not succeed if the basic business is flawed.
Getting up early and working late is good, but if the basic business is unsound, it will still founder.
Likewise, striking oil is good, but rare is the business that succeeds if you do not work at it.
Never forget that.
These rules run throughout all business (Enron is a spectacular example of low business ethics – incandescent short-term gain – long-term disaster) but I will concentrate on the relevance to the business of selling books.
The bookshop (and its small branch) that my wife and I run is a very successful business that is now a major employer in the very small pond that is Alnwick. It has had twelve years of constant growth in a market that some say is declining, so we must be doing some things better or differently than others.
It has been our equivalent of striking oil and the strong ethics behind the business is, I believe, one of the reasons for its success.
We have never knowingly ripped off a customer.
That is not to say we have not made mistakes, but we have never knowingly offered less for a book that is offered to us than we believed it was worth, or charged more for a book than we believed was its market price. Yes, we only offer trade price and guard our profit margin with our life, but we never offer less than that.
To see how this affects your business let us examine this ethic in practice.
All the prices I am about to quote are in pounds sterling. If you have a problem with this, whenever I say pounds, think dollars – it will do for the purposes of this demonstration.
A little old lady comes into the shop with a valuable book to sell, say, for example, worth £200.
She clearly has no idea of the value – it has been in the family for years.
The low ethic business offers £20. The little old lady is perhaps disappointed, but she accepts because she knows no better – she might even be persuaded that it is a wonderful offer.
Whoopee, our smart businessman has made a huge profit – what a clever lad am I!
But stop – let us follow this through a little further.
He puts the book on display at a massive mark up.
The granddaughter comes into the shop and sees ‘Grannies book’ at £300. (or even more!).
She tells granny and the rot sets in. Granny vows never to bring another book to that bookshop, and more importantly, tells all her friends.
Sooner or later that short-term profit will become a long-term loss. She will grumble about that bookshop for years to come and do untold damage.
Now look at the other side.
The same little old lady offers the book to a high ethic business, and is absolutely thrilled with the £200 she is offered.
The granddaughter comes into the shop and sees ‘Grannies book’ at £300. (or even more!).
She tells granny and, and granny, who is older and wiser than the granddaughter, explains why, with overheads and staff to pay, the shop must charge more than she got for the book.
Granny is happy, tells all her friends, and the bookshop continues to be offered excellent books.
Now look at a third scenario, which is even more wonderful.
It is a high ethic business but it gets the initial valuation wrong – not intentional, but perhaps a signature or a plate was missed during the valuation.
Granny is offered only £100.
Later, the bookshop discovers its mistake, and gets back to granny and insists on paying her a further £100.
Granny is astonished.
But more importantly, ‘the story of the book’ becomes a standard anecdote with granny for the rest of her life.
I maintain that, in business terms, this ‘word of mouth’ recommendation is worth many more hundreds of pounds than the extra payment made to granny.
You can extend this principle to all aspects of your business – how you deal with your colleagues or how you offer at yard or boot sales. Keep doing it and your reputation will grow to the point where all the best books and all the best deals are offered to you before anyone else.
If you look through the histories of major corporations that have taken a fall, it can often be traced to the low business ethic of ruthlessly taking advantage of your customers when you feel you can get away with it or have the market cornered.
IBM and Enron are classic examples of this, but there are many others.
When customers have been abused they will stay with you only as long as they have to. The moment they have the opportunity to go elsewhere, they will leave you in droves. And conversely, if you treat them well, they will stay with you – the competition never gets a chance to break in.
If you make ‘doing the right thing’ your instinctive reaction to any business situation, it can be remarkable how well it can turn out in business terms in the end.
Another important area of business ethics is dealing with complaints when things go wrong.
A high ethic business will take extraordinary care with complaints and to hang with the expense. A low ethic business will avoid responsibility wherever possible. This does not mean caving in to unreasonable complaints on the principle that ‘the customer is always right’. I do not think this is so, and the maxim should be modified to: ‘the customer should always have the benefit of the doubt’.
The same sort of reward awaits the business that treats its staff well – we pay above the local norm, and, importantly, have a bonus system geared to the success of the business, so everyone who works for us has a direct financial interest in the shop doing well. The result is a happy and loyal staff – undoubtedly one of our major strengths. I forget the name of the man who said this, but it is true: ‘I pay my staff well, but this is not because I am rich. The reverse is true – I am rich because I pay my staff well.’
So there you have it – two ways to run a business, both of which can be successful: high ethics, low ethics.
I maintain that high ethics brings the biggest business gains – and has the added value that you get to sleep at night!
Stuart Manley, co-owner, Barter Books, Alnwick, Northumberland, England