Ask Richard: Advisory boards, accidental managers and being a public company

Richard Harpin has had a hugely successful career in business. Having founded Homeserve in 1993, he helped build it into one of the UK’s largest home emergency businesses. He served as CEO until its acquisition in 2022 by Brookfield Asset Management, in a deal that valued the business at £4.1bn.

He has since founded the investment fund Growth Partner and Business Leader. Here, he discusses how to structure an advisory board, whether he preferred being CEO of a public or private company and how he thinks about where to invest.

What is your take on an advisory board and how would you recommend structuring one?

Steve Johnson, co-founder and CEO, HOLM

I would recommend that a business has an advisory board and board meetings. But those board meetings are only as good as two things. First is the quality of the information that people get in advance. There should be a board pack with lots of numbers and KPIs because board meetings should be talking about performance. And there should also be short papers on strategies and plans. I’ve seen board packs that run to more than 150 pages; they should be more like 30 pages.

Second is who sits on the board. In my Growth Partner business, when I’m investing in an entrepreneur and taking a minority investment in their business, I make sure that business has board meetings and that we jointly appoint a great non-exec chair who has some relevant experience and is going to help the founder grow the business.

The best chairs have been a chief executive previously and maybe even an entrepreneur.

Ideally, they have some relevant experience. In terms of frequency of those board meetings, they should be bi-monthly because they’re not designed to run the business. The business should be run by the management team, which meets weekly and discusses how the previous week has been. The board is more about strategy and plans and reviewing performance.

Beyond a chairman, you can have a board of non-execs, but you don’t want too big a board. You need people around the table who are going to make a real contribution, can confront the brutal facts and do that in real time.

Did you prefer being the CEO of a business with private investors or a public company?

Anonymous

HomeServe became a public company in 2004. Unusually for an entrepreneurial chief executive, I ran that public company for 18 years until we were bought by Brookfield. I did enjoy being a public company chief executive. But now, being private-equity

owned, it’s clear that you can focus on longer-term value creation and not worry so much about short-term profitability. I’m a big believer in private equity because most of the sector is about investing in a business and helping that management team to grow it.

I do worry about UK plc and the UK stock market. In my later years running a public company, I got frustrated by the level of governance, red tape and box ticking on everything from corporate governance, remuneration, audit and risk, to ESG and diversity.

Some of those topics are important, but it should be up to the business and its leadership to say which ones they’re going to focus on and really make happen.

Did you seek investment from the start with HomeServe? Why?

Rick Smith, managing director, Forbes Burton

Not initially. The HomeServe idea came out of the difficulty in getting a plumber on a Friday evening in Newcastle. I thought, that’s a great opportunity, so set up Fastfix, which was the precursor to HomeServe. Jeremy Middleton (my co-founder) and I put our life savings into it, which was £50,000.

Then the money ran out and we had to desperately seek third-party investment. We went round all the UK water companies because we thought there was a good link between a plumbing service and offering it to water companies’ customers, but they all said no, with one exception: South Staffordshire.

Ultimately, it was about not just getting some money to keep the business afloat but getting some of their expertise. I think, in seeking investment, it shouldn’t be just about the money. We luckily managed to find a water company that would invest £500,000 and that was the way that we kept the business running.

It gave us 12 months to find the right model. And we found a water company in Surrey that offered a plumbing insurance model that we copied and improved. That was the breakthrough that, after 12 months, meant the business went from losing £500,000 in its first full year to making £750,000 the next year.

As an investor yourself, what other investors do you like to work alongside in the businesses you back?

Anonymous

I decided that I wanted to back other entrepreneurs and help them avoid the mistakes I made at HomeServe, and to share my secrets to building a billion-pound business. I’ve earmarked £175m of my own money; £75m of that is now invested in 12 great entrepreneurs running 12 amazing businesses.

I like to invest alongside the founders, so my model is not to buy 100 per cent of a business but 20-30 per cent, enabling that entrepreneur to take a bit of money out of the business to derisk themselves and to have some capital they can use to grow the business faster.

On other investors, I like to find experienced non-exec chairs who will also invest. Steve Hewitt was CEO at Gymshark and he came in as non-executive chairman of Passenger Clothing, a business I invested £15m in for a 30 per cent shareholding. Steve invested £1m.

Given that ‘accidental managers’ are reputed to cost the economy £84bn per annum, how do you believe businesses should support them to ensure that their contribution is beneficial to a company’s success?

Suzy Cooper, EQ Management

I think the best example of accidental managers is entrepreneurs. They’re not typically born with the ambition to employ a large team of people and very few will be highly trained managers who have been chief executives of a business before, so they’re learning on the job.

Out of my eight secrets to building a billion-pound business, the most important one is that every entrepreneur should hire their replacement. Ben Francis, the Gymshark founder, hired his chief executive after three years. It took me eight years before I hired Jonathan King as my first chief executive to run Homeserve UK.

The biggest thing I aim to do is persuade my Growth Partner businesses and every medium-sized business out there run by an entrepreneur that the time has come to go out and hire a great chief executive, so they can then work on the business, not in the business. This is not about leaving the business, it’s about stepping up or focusing on what they’re really good at.