Where the Grass (and the Money) Is Greener

Introduction:

Nearly 10 years ago, Simon Bedding, who owns a manufacturing company in England, picked up a copy of Boss Life, Paul Downs’ memoir about running (and almost losing) a manufacturing company in Pennsylvania. Simon liked the book enough to email Paul. Paul wrote back. And over the years, they’ve kind of stayed in touch. This year, as we mark the 250th anniversary of the United States spinning off from the United Kingdom, we thought it would be illuminating to get these two business owners together to compare notes. After all, their countries started with the same language and much of the same legal tradition, but two and a half centuries later, running a business on opposite sides of the Atlantic can feel very different.

In this conversation, Paul and Simon compare taxes, regulation, hiring, health care, government support, and what it’s like to build a manufacturing business in their respective countries. Along the way, there are plenty of moments when one of them can’t quite believe how the other has to operate. Wait—you can’t fire an employee without going before a tribunal? Wait—you have to spend a week every year figuring out health insurance? Wait—your employees don’t have employment contracts?

And yet, for all of their differences, Paul and Simon also discover something else: Whether your factory is in Pennsylvania or southeast England, some challenges are universal. It’s hard to find great people. It’s hard to fight city hall. In short, it’s hard to build a successful business. And, as Paul puts it, “You’re always going to learn something by talking to other business owners.”

— Loren Feldman

Guests:

Simon Bedding is director of Sylmasta.

Paul Downs is CEO of Paul Downs Cabinetmakers.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome Paul, and our special guest, Simon. As you both know, we’re doing something a little different here today. You’re both manufacturers, one of you here in the U.S., one of you in the U.K. And we’re going to kind of compare notes on your experiences, your journeys, to try to get a better understanding of what it’s like doing business in each of the two countries. Paul, our regular listeners know all about you, but for anyone tuning in for the first time, can you just give us a brief summary of where you are and what you do?

Paul Downs:
Sure, my company is Paul Downs Cabinetmakers. We are located just outside Philadelphia, Pennsylvania. We currently have 25 employees. We’re looking at revenues of somewhere around $5 million this year, and we make custom conference and boardroom tables, all one at a time, in my workshop.

Loren Feldman:
And who do you sell them to?

Paul Downs:
We sell them to pretty much everybody, from a small school board in Iowa right up to the White House and private businesses and town governments, state governments, you name it. Everybody who’s looking for a custom table will eventually find us, because we get most of our leads through our Google positions. We’ve scored high on organic search for 20-something years now, so we’ve dealt with pretty much everybody.

Loren Feldman:
Simon, how about you? Where in the U.K. are you, and what do you do?

Simon Bedding:
Hi, thank you so much for inviting me onto your podcast. My company is Sylmasta Limited. We are based in the southeast of England. We have 15 employees, and we manufacture pipe repair and epoxy maintenance products. And we make them for our own brand and also for other companies as well.

We’ve been going for about 25 years, and our main product is a product called SilWrap. And it’s for leak repair kits, so it’s for emergency leak repair. So if you have a sudden leak of water pipes, or maybe in a factory, it enables you to quickly repair and make a permanent repair on the pipe and apply composite wrapping over the top and get back going again.

Loren Feldman:
And who do you sell to primarily?

Simon Bedding:
We sell to users all over the world. We are very big in water utilities. We supply into mines. You get a lot of leaks in mines. Our epoxy repair products are also heavily used in mining, and it’s for general industry. Most of it is sold under our own Sylmasta brand, and some of our products are sold to other brands, and we do the private labeling and everything for them as well.

Loren Feldman:
Can you give us a sense of how big the business is: employees, revenues?

Simon Bedding:
Okay, we have 15 employees, and we turn over at the moment about the equivalent of $2 million U.S. dollars, but we’ve been growing quite significantly over the last few years, so we look to get much bigger than that.

Loren Feldman:
So I’d love to start with just what it takes to get into business in the two countries, Paul first. You started your business right out of college. I know a lot has changed since then, but how hard was it for you to start your business?

Paul Downs:
Well, I guess there’s two ways to answer the question. One would be, how hard was it for me to decide to start a business? Which was not very hard at all—because I was young and stupid, might be one way to put it. But I just didn’t really know what I was getting into. And so I found a way to start making furniture and have then been able to succeed ever since.

But I think that part of what you’re asking is: What was the bureaucratic load? And now, this is 1986. There’s no internet. There’s no easy way to get a basic answer to what I need to do to be a business. But I went down to City Hall and asked some questions, and they directed me to an office. And it took about 10 minutes to get signed up as a business in Philadelphia.

Now, seven years later, I incorporated, and that was a little more complicated, but when I was first signing up, and I was down in City Hall, there were two guys ahead of me in line from Thailand. And they were also told basically the same thing: Give us some money and you’re good. And they could not believe it, that this was all that needed to happen. They were expecting to go down there and have to pay bribes, and do this, and it would take forever. And the city of Philadelphia is like, “Nope, you’re in.” And then what neither of us realized was that, once you’re in, then they’ve got their hooks in you, and the subsequent taxing experience is pretty bad, but very easy to get started and registered.

Loren Feldman:
Simon, how about you? How did you come to run the business? Did you start it yourself?

Simon Bedding:
No, my father actually had a business already running from home in the 90s. And I graduated from university in 2005 and realized I didn’t actually want to go work for anybody, and I really wanted to try my hand at running my own business. So I thought an easy way to get into it would be to join up with him and help him grow his company. At the time, he was running it from about a quarter of a double garage and a study. He was making decent products and supplying small tools into some very, very niche hobby markets. And his background had been in industrial adhesives.

So, after I joined, he happened to take on some larger accounts, and we began by repacking adhesives, which we were buying, in the garage, sometimes even in the living room, or the lounge—I don’t know what you guys call it. And packing people’s private label products using their own brands from home, that quickly became very difficult to cope with in a house. So we bought an industrial unit in 2006 and started manufacturing products there. And over time, we started making everything ourselves. I mean, we always wanted to make everything ourselves. We’ve never wanted to be the kind of company to just buy stuff and rebrand. So we slowly bought up all the industrial units around us and brought everything in-house.

And in 2012, we decided that we wanted to really focus on making more products in our own brands in the industrial maintenance market. We had some great pipe repair composite products, which we thought were really good for the market. So we started focusing on that. Sadly, my father passed away in 2019, and it gave me an opportunity to reflect on where we were going as a company. We had a lot of different products, a lot of niche things. It was quite a messy range. So we got rid of a lot of the sort of small stuff, which made a lot of noise, just took up a lot of time, and focused on our composite pipe repair bandages, our epoxy putties, and our epoxy repair paste. And since then, we’ve gone from strength to strength. Last year, we moved out of our existing premises into one big facility, which made manufacturing a lot easier.

Loren Feldman:
Simon, how did you guys connect?

Simon Bedding:
It’s very interesting, actually. I mentioned earlier that my father passed away in 2019. Well, prior to that, he’d been taken ill, and in 2018 we were going on a holiday to Thailand—you know, to make some memories—and I happened to have picked up this [book], which happened to be written by Paul, and it was called Boss Life. I always liked business biographies, and the like, and it really connected with me. I really enjoyed reading it. It was different to most other books I’d read, because it talked about numbers, it talked about the day-to-day struggles, and yeah, I really, really enjoyed it.

And, unusually, at the end, he put his email address right at the end of the book, so I emailed him. He replied very quickly, which was great of him. And then, I wasn’t quite so quick on my reply. Life just got a bit messy after that. And I happened to be listening to the 21 Hats Podcast earlier this year, and something struck me when I was listening to him on the podcast. I thought, “I really recognize this guy. I’m pretty sure it’s the same guy I emailed about—was it nine years ago?” [Laughter] I double-checked it. I thought, “Oh, right, yeah, it’s Paul Downs.” So I sent another email. I followed up. I replied to his email at last, and he actually apologized because it took him four days to reply after that. And then we just connected, got chatting. It’s been a nice little bit of email correspondence going on.

Loren Feldman:
So, let’s get into comparing notes a little bit. Paul, do you have any questions for Simon, and what it’s like running his business in the U.K.?

Paul Downs:
Well, of course, I do. That’s why we’re having this podcast [episode]. [Laughter] Yes, I think that one of the things that I wanted to know more about was, in general, when you were growing up or deciding to enter a business, was small business ownership looked upon as sort of a viable and cool thing to do in Britain at the time, as opposed to maybe people were more interested in taking the safer route? I think there’s a real culture of lionizing entrepreneurs here in the U.S., and I wonder if anything like that exists in Britain.

Simon Bedding:
Right, I think the U.S. has a much better culture with regard to lionizing entrepreneurs, business owners, and that kind of thing. My experience growing up in the 1990s, the general kind of attitude toward business, was generally okay. But it wasn’t something that you’d expect somebody to go into, or to start a business. And I think the only kind of businesses that were lionized were probably sort of like ones that were fairly glamorous. When I left university and decided to go into business, I think people thought I was a bit crazy to not follow a career in finance or engineering, which was my degree.

In recent years, I think it’s actually become worse. I think the attitude of the general public—this is only what I get from the media—is the fact that their perception of business people is that we just dodge taxes. We’re corrupt, in it for ourselves. Obviously, as business owners, we create employment, we generate income, and we help raise GDP. And you don’t feel loved. I think there’s other careers which people look up to a lot more, whereas I imagine in the U.S. it’s obviously quite different. I mean, maybe my perception is different, but I certainly feel that business owners in the U.S. are kind of looked upon as being very positive. Is that your experience?

Paul Downs:
I would say yes. Yeah, I mean, people, when you say you own your own business, and they say, “What is it?” And I tell them what we do, and like, “Woodworking? That’s cool.” But they’re always really taken aback when I show them that, instead of just me being a guy in a garage whittling or whatever, that I have a bunch of employees, and we work all over the place. That, to them, is extremely impressive.

And I mean, I think that one thing is, there’s just a lot of business owners in the United States. It’s not that hard to run into one, and people own all kinds of businesses. But I would say, on the whole, that until you get into the billionaire class, perceptions are pretty positive.

Loren Feldman:
It is interesting, though, Paul, I think it’s fair to say that small business owners, based on the polling I’ve seen, are held in extremely high regard—among the highest of any profession that you might name. But if the issue is capitalism, that seems to be on a very different track. Do you agree with that, Paul?

Paul Downs:
Well, it depends on who you talk to. Believe it or not, there’s still quite a few people who believe in capitalism, and then there’s quite a few who feel like they’ve been burned by it, but I don’t think that they’ve necessarily experienced any alternatives in a way that would give them perspective.

Our country has problems like every country, and I think it’s easy to find a scapegoat. And so the overall idea of big business versus small business, I think, the perceptions are quite different. And something that just occurred to me: In America, small businesses, I think they employ something like 25 or 30 percent of the people in the workforce.

Loren Feldman:
I think it’s higher than that.

Paul Downs:
It might even be higher than that, so most of the people you know will know somebody who works for a small business. And I don’t know whether that’s true in Britain at all, whether there’s a solid class of companies that, say, run from 20 to 100 employees, and how likely you are to know somebody who works for a company like that. I don’t know, Simon, do you have any thoughts on that?

Simon Bedding:
Yeah, that’s a really good question. I can only speak from my own personal experience, and you know, what I’m saying may be completely disagreed with by someone else from the U.K. But I don’t tend to know many people who work for especially small businesses, to be honest. I think most people I know work for large companies, or they might work for a charity or something like that. You don’t seem to come across it as much, and actually, it’s almost perceived as being a little bit unusual.

You were saying, when you meet someone, you tell them, “Well, I run a business.” On a personal basis, people actually can be quite interested, but I think they also consider it quite unusual. Normally, you speak to people, and they’re accountants, or solicitors, or lawyers, or something else of that ilk. Or it might be in sales or marketing, or whatever. They don’t tend to meet small businesses, particularly small businesses that manufacture things.

You do get a lot of people who go off and set up their sort of boutique agencies for, say, service-based things. Not many people seem to want to go out and start making things, and, as you said, grow a company to be beyond whittling something in the garage and employing 10, 20, 30, 40 people. It just doesn’t seem to be, in my experience, as common. However, I would point out that I’m in the Southeast, which is heavily influenced by London. And it’s quite a wealthy part of the country. A lot of people are in professional jobs. In other parts of the country, where we have traditionally more manufacturing, that might be a completely different perception.

Loren Feldman:
Simon, you said that you don’t actually know that many small business owners. Paul has—actually, he wrote in his book about this and he’s spoken on the podcast about it a good bit—he’s been in a peer group of business owners called Vistage that he says has been tremendously helpful to him in figuring out how to build his business. Have you had anything like that? Are you part of a group?

Simon Bedding:
No, maybe I should be. I’ve spent so many years just focusing on growing the business, it hasn’t really been something I’ve really looked at. We have something called the Federation of Small Businesses, which is a private organization, which helps companies with sorting out things like getting broadband or maybe finance and discounted insurance and things, and they try and lobby for small businesses.

And again, a small business in the U.K. is probably considered a micro business in the U.S., I think by probably a magnitude of 10. But there are organizations around, but not ones that I’ve really been involved with. They’re not really many manufacturers organizations that I’ve been particularly involved with. I’d like to know more about yours, Paul, actually, because I haven’t really heard you speak much about this.

Paul Downs:
Well, the group I was in is fairly well-known in the United States, and it’s a peer-to-peer recruitment process, so that may be part of why it’s bigger, more prominent. It’s just because the people who run the organization are constantly looking for new members. I’ve also been in a trade organization from a trade association that’s associated with woodworking and met a bunch of business owners there. But in general, there’s a lot of different ways for people in the United States to connect with each other. There’s chambers of commerce. There’s industry peer groups, private peer groups like Vistage or Young Entrepreneurs, or Young Presidents Organization, Entrepreneurs Organization.

These companies are out looking for business owners to join because they have a revenue model, and they like to sign up new people. So maybe that’s just part of why America is more entrepreneur-friendly. It’s because we not only have the companies, but we have ways to connect with each other. And I think that that connection is a great way to put yourself on the path to success. And the years when I wasn’t in any business groups, I did not do so well. That was how I sort of ended up with the book I wrote about how hard it was to keep the doors open. And once I learned better techniques and better ways to think about what I was doing, the business became much more viable.

Simon Bedding:
Did you join business organizations after you wrote the book then?

Paul Downs:
No, I joined before I wrote the book, but part of it was that I was writing for The New York Times at that time, and somebody saw my name and put me on a list, and I got invited to a meeting, and then I signed up. But that happened in the year that I was writing about in 2012, and prior to that, I’d never really done much networking at all. I don’t know why, I just hadn’t. And so I would say that one takeaway is that you’re always going to learn something by talking to other business owners, whether it’s something to do or something to not do.

But it’s tremendously valuable to start talking to more of them. So I think if you look for maybe an industry group—I think in a lot of places in the United States you might meet other business owners through your church, or through—if you’ve got kids in school—Little League. Anything that brings people together is a way to start to try to find peers. So, that’s my recommendation.

Simon Bedding:
Thank you very much. You also, well, funnily enough, you mentioned the church being a good way. In the U.K., we don’t have the similar kind of culture, in that respect. I don’t think churchgoing has gone up over the last few decades. From a school perspective, yeah, that’s quite interesting. You meet the other parents and everything. Often, they’re in very different industries. But I think joining an industry association, we do have an adhesives one that might be quite interesting. Previously, when we’ve spoken, you’ve mentioned you’ve got the SBA as well in the U.S. How do you find that helps?

Paul Downs:
Well, I think, in a way, Loren might be better suited to answer this. But just in case you’re not familiar, the SBA, Small Business Administration, is a branch of the federal government that’s interested in helping small businesses succeed. And so they are tremendously helpful if you need to finance something. They will guarantee a loan that a bank would make, and that’s a good avenue for getting funds for expansion. But Loren, you talk to a lot of people all around the SBA question. What are your thoughts on it?

Loren Feldman:
Well, one thing that’s interesting about it is that a lot of business owners don’t make use of the SBA. I think there’s kind of a cultural issue there. They want to make it on their own, and they’re not looking for government help, and you know, the government doesn’t necessarily have the best reputation among entrepreneurs for being helpful. So some people make tremendous use of the SBA. You mentioned the lending programs. There are also just general programs that offer all sorts of advice and tips for business owners from other people who’ve run businesses. They also provide help in government contracting work. Paul, you’ve done some government contracting. Have they been helpful to you in that area?

Paul Downs:
No, I never reached out to the SBA in order to get my government contracts. We kind of taught ourselves and hired some consultants, specialized consultants, at a certain point, but a lot of dealing with government in the United States is just trying to figure out the bureaucratic system for each branch you’re dealing with. Because we have to deal with a tremendous number of different jurisdictions, and each one has its own way of doing paperwork and invoicing and qualifying and licensing and all that.

I mean, 50 states and how many municipalities, then the federal government. I mean, I’m probably registered in 40 or 50 different systems at the moment, but if SBA offers assistance for that, you know, great. That’s good. I think that what’s remarkable to Simon—and Simon, you could agree or disagree—is that there is a branch of the federal government that’s all about this. And my understanding is you don’t have that in Britain.

Simon Bedding:
Yeah, you’re absolutely right. I even Googled this and Google came back and said, “No, there’s no equivalent in the U.K.” We also have the problem of the fact that it seems that with every new government, they sort of tear up any previous scheme and start a new one, so we don’t have any consistency. So we had previous schemes which were going to help you export. There was one called Passport to Export, which just as it was getting going, was starting to have some benefit to us. It was giving you courses on how to export and things like that, which would have been helpful to a lot of companies. And they even had sort of mentors you could come and talk to, and it was actually quite helpful at the time. And then they just changed everything and got rid of it all, so it was only going for a few years.

So maybe I’ve developed a bit of cynicism. Because every time there’s a new scheme, you say: Why waste all your time trying to learn about it and getting involved when they very quickly decide, “Oh, we’re going to change everything,” and start all over again? That was the experience we’ve got. I mean, on the other hand, bureaucracy-wise, I think we’re not too bad for companies. Obviously, we’ve just got a much simpler market. We don’t have loads of different state governments, etc., who all have different rules and things.

Our government has also—I can’t believe I’m actually complimenting them—in my opinion, they’ve been quite good at actually digitizing a lot of the things that you have to submit to the government, so things like tax returns and what we call value added tax, which is what you would call a sales tax, I guess. It all ties in with your accountancy software. It’s very, very nice. It’s very, very slick. They’ve been very good at doing everything on a very digital basis. They can get most of the information and things, and most of the stuff you want to do can be done online, which is great. That means you don’t have to call the government up every time you want to find something out, because that’s painful.

Loren Feldman:
Simon, do you have an impression of what the regulatory environment is like in the U.S. for business owners?

Simon Bedding:
I don’t actually. I’d be very interested to know, really. I don’t know if it’s more bureaucratic or if you have to deal with more regulations or what.

Loren Feldman:
Paul, what would you say?

Paul Downs:
I think it depends a lot on where you are, because there’s different states, and different states have different attitudes toward regulation. So personally, I’ve brushed up against the business environment in California and New York, and I would never want to be there—just way too much regulation on everything. The state I’m in, Pennsylvania, is, I would say, probably on the less regulated side, particularly for my industry.

So there are states that pride themselves on being low regulation, like Texas, and some of the southern states, and then there’s states where they feel like, “We’re so prosperous, nobody’s going to want to move away. We’re going to regulate you to death.” And that’s California, Illinois, New York, New Jersey. And so there’s a pretty wide range.

It’s also driven much by what your business is. If you run a restaurant, you’ve got to deal with a health inspector. I don’t have to deal with that. And so I think it’s hard to characterize, but in general, if you want lower regulation, you move somewhere where there is that. And if you don’t care, then you stay someplace where it’s more regulated.

Simon Bedding:
What about taxes? What are they like in the U.S.? And I imagine it’s in my mind itself, like it’s probably, you know, much lower tax, higher thresholds, etc. And I might be completely wrong. You might have a million sort of stealth taxes that sort of nibble away at your profit.

Loren Feldman:
Well, Simon, why don’t you go first on this one? You mentioned earlier, I think, that the general impression of the population in the U.K. is that business owners don’t pay enough in taxes. Is that your impression as well?

Simon Bedding:
No.

Loren Feldman:
I didn’t think so.

Simon Bedding:
Obviously, I don’t think we should pay tax at all. We’re doing a great service to the economy by having businesses, but I guess you have to pay tax. Some of the things that are notable in the U.K., which I think really inhibit growth—it always sounds very negative, but I guess every time we talk to business owners, we think about the problems.

In terms of on the local level, we have something called business rates. So for example, they are normally taxed at a percentage of the rentable value of your property, thereabouts. And it’s taken by your local government or the local council, as we call it. So if you had, for example, a business property. And it was rented out for, say, $100,000, the tax for that, the physical business rates, will be about $45,000. And that’s before you’ve made any profit or anything. So, the day you start with that nice big factory, before you make any money, you’ve got to be paying those rates every single month, whether you like it or not. We don’t get much in the way of any kind of reliefs, unless you’re very, very small.

So that’s the starting point. Then, after that, we have, obviously, corporation tax. And it used to be quite good a few years ago. It was about 18 or 19 percent. Recently, corporation tax for anything above 250,000 pounds, it’s 25 percent for corporation tax on your profit. And if you want to take the money out of your business, obviously after that you have to pay your tax on the dividends after that. If you want to pay yourself a salary, you pay more money. We have a tax-free threshold of about 12,500 pounds. It’s about $15,000, I expect. And then by the time we get to between 50,000 and 125,000, your tax rate is 40 percent. Then, over 125,000 is 45 percent.

But we have this wonderful thing where, when you earn over 100,000 pounds, they take away the 12,500 pounds tax-free allowance. So for the first sort of 20,000 or 30,000 over 100,000, you actually end up taking home less money. So we’ve got a sort of ceiling where there’s a huge jump between the salaries, between 99,000 pounds, and then, I don’t know, 130,000 or 140,000 pounds, before you’re starting to make the same amount of income again.

Companies also have to pay a percentage of people’s salary for something called national insurance, and then you always have to make your own national insurance contributions on top of all your taxes as well, which I can’t remember what it is now. But yeah, so we get taxed at quite a high rate at quite a low level. And there aren’t a huge amount of tax reliefs.

We used to have a research and development, R&D, tax relief, which was pretty good a few years ago. We still have it, but because some people decided to abuse the system and claim R&D tax credits for making a new menu for their restaurant and claiming the salary of the person who makes the menu, or whatever, they’ve made it so stringent. And they made it so difficult to even claim against it now. It’s almost not worth doing. I do it now. I have to do it with a consultant, whereas before I used to do my own claims, and now it’s just very hard to do that. So that’s generally it for the U.K. So I think it’s quite punitive, quite low down, whereas, as far as I understand, in the U.S., you start to pay higher rates at a much, much higher kind of level of income.

Paul Downs:
I would say that, yeah, we pay a lot less tax in general. A couple years ago, I did my personal taxes, and I had made about 450,000 bucks, and the tax I paid was about 20 percent of that, federal and state together. Now, one thing, though, is that I have to go buy health insurance after that, and so that is the equivalent of about 5 percent of my income every year. At this point at my age to cover myself and my wife costs about $25,000 a year. And so that’s something that, if you’re paying higher taxes, but you’re getting that, then I think that it makes the burden a little higher for Americans than you might otherwise think.

Loren Feldman:
Paul, you were referring, I think, just to what you pay to cover you and your family. But you also are paying a percentage to cover your employees.

Paul Downs:
Well, I am, but that’s a little bit different, in that it’s hard to come up with a formula for what it costs, other than that the younger you are, the cheaper it is to buy insurance. So, a lot of my workforce is in their 20s, and their insurance costs a couple of hundred bucks a month. It’s just not nearly as expensive as my wife and I, who are near retirement age, because that’s just how the rates work.

As an expense to our business, the insurance coverage for my employees and their family is going to be about $140,000 bucks this year, and that includes me and my wife, so that’s going to be something like two and a half, 2 percent of our revenues. It’s not crippling. Now, it’s an expense that I would much rather be able to put that money in my pocket or use it for the good of the business, but it is what it is. But I just think of it as being part of what employees cost. You pay them some in cash, you pay them some in insurance. They don’t love getting part of their salary as insurance, but too bad, that’s how it goes.

Loren Feldman:
There’s also a bit of a tax on your time, Paul, in that you periodically reassess whether you have the right health care insurance to offer your employees.

Paul Downs:
Yeah, that’s like a bad week of work in the fall, figuring out the renewals and all that. But just like being familiar with the different ways that government systems work, I’m now quite familiar with how my health insurers systems work. So, I can get through that fairly quickly.

Loren Feldman:
Simon, that’s something that you, I assume, don’t have to deal with: figuring out who to cover your employees every year.

Simon Bedding:
Yeah, I would say that’s one huge benefit of being in the U.K., and the fact that we have the NHS, National Health Service. It’s reasonably good. I wouldn’t say it’s world-class, but it certainly keeps people alive. And if you want to go to a doctor or go to the emergency room—or A&D, as we call it here—you can go there quite easily. You’re not going to walk out with a bill.

It’s a big weight off anyone’s mind, and obviously, say you become unemployed, you’re not going to suddenly not have any access to health care. So that’s quite good in the U.K., and also we do have private health insurance, which you can use to get the best standard of care for most things, so long as they’re acute and not chronic, although that is post-tax money. You don’t get a tax deduction on health insurance over here, unfortunately.

Loren Feldman:
Simon, can you fire people when you want to?

Simon Bedding:
Only if we want to go to the employment tribunal. No, we have to follow process and make sure that they haven’t been treated unfairly. For example, okay, if they sort of did a whistleblowing event or something, and say they claimed that you were doing something wrong with the company, and you got rid of them, they have a really good case for suing you for wrongful dismissal. So, wrongful dismissal is something you have to be really, really careful of. We use an HR company to help us take us through the process. So you have to go through procedure, give people a warning, a written warning, and you’ve just got to be very, very careful, because you don’t want to get rid of someone, and then they sue you for whatever reason.

And it’s hard. You can’t just sort of get rid of someone because you don’t like them anymore, you don’t think they’re any good, or whatever. You’ve got to be very careful. We do have a two-year window after people join, in which it’s much easier to let them go, but even then, if they think there’s been any kind of wrongful dismissal, or they can claim any kind of discrimination, or whatever, they could still take an employment tribunal against you. So we just have to be very careful. It doesn’t seem to be quite the case where, say you’ve done something really bad, gross conduct or whatever, you’re fired. I don’t think we can do that. I mean, that’s the impression I get of the U.S., but I’m sure it’s not quite as brutal as I make it sound.

Paul Downs:
Oh, it’s pretty brutal. I mean, I could fire anybody any day for whatever, any reason I feel like, and I may or may not have consequences. It’s not automatic that someone’s going to sue me for that. And I’m curious, when you say you go through the tribunal and they fine for the employee, like what’s the magnitude of the fine? Or do they make this person come back to your company? What happens after that?

Simon Bedding:
No, I haven’t had a huge amount of experience. Funnily enough, my sister’s company, they did have go through a tribunal, and it was a very stressful event for them. I don’t know what it’s like to be in the U.S., but if you want to take your former employer to a tribunal, it’s either no cost at all or it’s a very marginal cost. I can’t remember where the law currently stands, because they changed it a couple of years ago, but it’s quite easy to do.

And I think at the end of it, he managed to get something like the equivalent of $25,000 out of it at the end. And I think he just did it because he wanted to get the money, because he wanted to go traveling. That was the reason, and he claimed some spurious reasons—you know, he said he was a whistleblower or something. So, I mean, that might seem fairly reasonably small to you in the U.S. I know you’re quite well-known for when people sue, they sue for large amounts. But obviously, for a small company, it’s still a lot of money to have to deal with. Also, you’ve got the stress of going through the whole thing and having to go to courts and all the rest of it.

Paul Downs:
Wait, I have a question. Would you have the option when this person sues you of just taking them aside and say, “Listen, I’m going to give you five grand to just go away and shut up and not have to go through the tribunal”? Because that’s certainly an option here.

Simon Bedding:
Yeah, I think so. I think we could just do that. I mean, I’m sure they had that option. It was a while ago. I don’t know exactly, but I’m pretty sure that we are able to do that. And I think a lot of the time it probably would make sense to do, although sometimes you might just feel on principle you don’t want to do it because you’re feeling so sore about it. It depends on how pragmatic you are, I guess.

Loren Feldman:
Simon, do you generally have people working for you who, if it were a little bit easier to do, you would part ways with?

Simon Bedding:
Yes, yeah, we’ve had it in the past. We’ve had to just very slowly manage them out and deal with them. And we had to go through a lot of sort of effort, whereas I’m feeling like you could say, “Look, this guy, or girl, is really not doing the job. I’m afraid, look, let’s just part ways.” That’s quite hard. Well, we haven’t had to go through too much of it, to be honest, and at the moment, I can’t think of anyone in my company I’d really want to do that with. And to be perfectly honest, if I felt justified in wanting to let them go, then there’s probably enough justification to go through the proper due process.

Loren Feldman:
What if your company isn’t doing well? Can you lay people off for financial reasons?

Simon Bedding:
Yes, yeah. So you can make them redundant. So yeah, if the job is no longer available to them, yeah, we can make people redundant, and then normally you’d pay them whatever it says in their contracts. There’ll be a statutory amount that you have to pay them, which accumulates the longer they’ve been there. But yeah, that’s fine to do. I mean, so long as they don’t then find out that you’ve just made them redundant and then employed someone in their position, that then gets you sued again.

Loren Feldman:
Does every employee have a contract?

Simon Bedding:
Yes, yes. Is that the same in the U.S.? Is that absolutely mandatory? For us, everyone has a contract.

Paul Downs:
No, I don’t have a contract with any of my employees.

Simon Bedding:
Do you not? Do you? How? Why is that?

Paul Downs:
I don’t need to. I make a written offer when I hire someone, but it’s just: I’m offering you a job. You’re getting paid this much an hour. Here’s the benefits you’re eligible for. But that’s pretty much it. We don’t have a non-compete. I try to not put in much in the way of description of duties, other than to say: You’re being hired to do this, but we may ask you to do anything we feel like. And you know, if you come to work here, you’re accepting that.

I think a lot of it is that a contract is just more paperwork than people want to do. And there’s no particular advantage to it, as a company owner, that I can see. Because it would be unusual for small companies like mine to have a contract for all the shop floor workers, for instance.

Simon Bedding:
That’s really interesting. I hadn’t really even thought you wouldn’t have it, to be honest. I think the advice in the U.K. is, it’s best practice to make sure you have got a contract, because then, in the eventuality that there’s ever a dispute, you can say, “Well, these are the terms laid out in the contract.” Otherwise, you just have to rely on their statutory rights and things. So, at least it’s all written down.

I actually put in for certain staff who are very cheap, particularly sort of people who may be up to the management level. I actually give them a longer goodbye term, so I sort of make sure that they can’t give us two weeks and then be off. I make sure they’ve got like two months. And it works both ways, because then when I want to ask them to leave, it gives them two months as well. But it gives us the benefit of the fact that then we’ve got two months for them to at least hand over the work and for us to recruit a replacement, which is great. Because I have had it in the past when someone just gives you two weeks notice and they go, and then you’re in a whole world of trouble.

Loren Feldman:
Do those contracts bind an employee to you for a period of time, or is it just the two-month quitting period?

Simon Bedding:
It’s just the two-month quitting period, really. So, yeah, and I’ve set that into the contracts, even, in fact, for shop floor stuff, just because it takes a lot of time to train them on our particular machinery. And then for them to go before training someone, it makes it very difficult for us because, yeah, we have to start from scratch. It’s nice to have an overlapping period.

Loren Feldman:
So every company can set its own policies in its own contracts?

Simon Bedding:
Yes, as long as it doesn’t put them at a disadvantage against the statutory limitations that are already there. And I guess it could be argued in a tribunal, making someone give you a six-month notice period might be deemed unreasonable. So I’m sure they could argue themselves out of the contract.

And quite honestly, if someone works for me, and then they were so desperate to leave, and they were really unhappy, and they just wanted to go, I would not hold them to two months generally. Because it’s just not worth having someone there who’s sort of unhappy, because you’re not going to get much out of them. So, we have had that in the past. I’ve let them go much earlier.

Paul Downs:
What if one of your employees is misbehaving in a way that’s intolerable? Can you fire them on the spot?

Simon Bedding:
I don’t know, actually. It depends. I guess if someone’s being incredibly offensive, like a racist or something to that extent, I’m pretty sure we’re allowed to, for gross misconduct. You can get rid of someone immediately for gross misconduct. You know, if they’re acting dangerously, if they’re being incredibly sexist or racist, or something like that. Yeah, then I believe that provision is there.

We’ve never had that problem, to be honest. We’ve been pretty lucky with the staff. So I haven’t had to go down that road. And you know, you have to be careful when you employ people to begin with to make sure you’re not going to get an idiot. But I guess, yeah, in the U.S., you just get to pick and choose when you want to let someone go.

Paul Downs:
Well, I’ve fired people for various reasons, mostly having to do with either dishonesty or refusing to follow safety protocols. And I have to document, like, why did I do it? But I have, on occasion, fired someone within an hour of being informed of a problem, and it’s never come back to bite me in any way because I’m careful about why I’m doing it.

But as a business owner in the United States, you actually have quite a bit of freedom with your employees, and there’s not always some easy to hand mechanism for that employee to come after you. I think part of that is also because there’s such a number of immigrants in the United States that it’s fairly easy for a boss to kind of hire people who don’t know what their rights are and abuse them.

And I’m not sure why that’s never been addressed by the legislature, other than that a lot of prosperous businesses rely on immigrant labor to an extent that the bosses will make sure that the current system doesn’t change much. And the current system is you can hire people and pay them under the table. You can do all kinds of things to abuse your employees if you feel like it, and the likelihood that you’ll pay the price, I would say, is way too low. Because I hear quite a bit about people who’ve been abused by bosses, and I’ve hired a bunch of people whose previous boss was doing something that was just straight out illegal or unethical, and that’s why they were looking for jobs. So I guess that’s just a big difference between the United States and Britain.

Simon Bedding:
Do you wish it was more stringent in the United States?

Paul Downs:
No, because if you run your company in a proper manner and treat people with basic decency, I don’t really need more people breathing down my neck. And then the other thing is that having a bunch of bad bosses around in your industry is good for hiring, because when the workers realize they’re being abused, they’ll come work for you. And you get good workers who are quite happy to be someplace which is not terrible. And so I’ve hired a lot of people who were in a job situation that was just intolerable because the boss was an idiot. And I’m delighted to have those workers come work for me. So I’m not looking for much change in the system as it pertains to my company.

Simon Bedding:
Do you have statutory minimum wage? And is that federal, is that state level?

Paul Downs:
There’s both, and there can be municipal level, too. At the moment, we’re subject to both the Pennsylvania and the United States. It happens to be the same thing, $7.25 an hour. Now, $7.25 an hour gets you nothing, in terms of a quality worker, so it’s not even really germane to me, because I could not possibly find a skilled person for that money. So we’re offering double to triple that to start with.

But whatever government, wherever you’re located, you may well be subject to three sets of laws, and whichever one is the most punitive is the one you’ve got to obey. So I know that a lot of the bigger cities are putting in $15 to $18 minimum wages, which is not unrealistic, in terms of what it actually takes to survive, but it’s different from how it used to be.

Loren Feldman:
How is that in the U.K., Simon?

Simon Bedding:
The minimum wage has been going up and up and up. They’ve introduced something called the living wage and the minimum wage, and I think the minimum wage has to match the living wage. I’m not entirely sure why they’ve got two measures, but I’m sure there’s a reason. Recently, the minimum wage has gone up to about 13 pounds per hour, which is about $17 an hour, and that’s across the U.K. for everyone.

It used to be, if you were younger, like below a certain age, you could be paid a lower wage. I can’t remember what it is now, because you don’t employ anyone young enough. And actually, we don’t discriminate on very new workers. We try to be quite fair, but they’re trying to make it so anyone doing the same job—or whether they’re 20 or 40 or whatever—all have to start on the same minimum wage.

And I would say it’s made a difficulty for us, because we always try to pay well above what minimum wage used to be. And they can bring a minimum wage up to what were previously fairly generous wages. So it makes it very hard to discriminate and be a good employer, because it means we have to keep pushing our wages up. And that can get something quite tough, but yeah, it is very high-level for all kinds of jobs. And it stops also, meaning it stops a little discrimination between a fairly skilled job and a completely sort of brand new low-skill job. It’s hard to create the sort of differential with the different salary levels when the minimum wage stops at that rate.

Loren Feldman:
Simon, when you have an opening, do you generally feel as though you have the opportunity to hire good people to fill the opening?

Simon Bedding:
No. Well, I’m sure it’s the same over there too. It’s very hard to find good people. Where we are in the U.K., factory work is not easy. It’s not really a big thing compared to say the Midlands or whatever. So, we’re already in a bad place to employ factory staff, or even people having the mindset of saying, “Oh, I’m going to go and work in a factory.”

But then, for advertising for jobs, you get a lot of people who don’t really want the job. People have to apply for a certain amount of jobs if they want to get employment benefits, so if they’re out of work, they have to kind of be shown to be applying for jobs. So we get a lot of people who are just going through the motions. So it wastes a lot of our time. We get a lot of inquiries coming from all over the world as well. So, if someone in India says, “Oh, can you pay to relocate me to your company in the U.K.?” It’s like, there’s no chance we can do that.

And then you get people where it’s hard to get good quality, to be honest. And we do advertise at a much higher rate than other factories and things. It’s hard to get the quality, but we do get it. Eventually, you get one or two people, but if we were looking to recruit another sort of 10-20 people in the next couple of months, I think it would be hard. But I presume it’s probably the same thing for Paul as well.

Paul Downs:
Well, yes and no. The people are attracted to the idea of being a woodworker, so we often get a lot of applicants, but very few of them will be qualified. We don’t have the problem of people needing to apply for jobs to stay on the dole, so I don’t see too many applications like that.

But the other thing is, my company itself has a pretty good reputation in the industry. It’s a good place to work. So it’s easier for me to hire than for people I know who run businesses, but that doesn’t mean it’s easy. Everybody’s chasing the top of the talent pool, and usually when a person like that finds a job, if the owner is at all intelligent, they’re going to do everything they can to keep them. So there are good workers out there. Most of them already have jobs. That’s the problem. We take younger people. We have to train them. We have to do a lot of training. There’s no way around it.

Simon Bedding:
That’s been the problem in the U.K. with the whole high minimum wage for school leavers. It’s the fact that it’s created a real unemployment problem over here, because companies are now saying, “Well, why should I pay the same wage to someone just out of school to someone who’s going to be joining in their 30s or something, who’ve got 10 years of experience just in the workplace?”

And that has genuinely made things really, really difficult. And I think we’d have a lot more opportunities for young people to be trained in production work if the minimum wage was just lower for them, so they could benefit from all the training they would get and all the hand holding they would get when they join.

Loren Feldman:
Unfortunately, we’re going to have to wrap this up, but I’d be curious to hear both of you answer one more question, which is: How do you define success? And I’d love to have you address that, both financially and more holistically. Do you enjoy what you do as a business owner, and what kind of non-financial rewards do you derive from that? Simon?

Simon Bedding:
You’ve put me on the spot there, haven’t you? Yeah, I think success is probably being able to show that you’ve moved from one point in life to another. And then financially, I think it’s the ability to have enough of an income to be able to enjoy life and not have to worry about money. So I’m not saying billions, but thinking about enough income so you can live a happy, comfortable life, go to a restaurant when you want.

Loren Feldman:
What does that take, Simon? What’s a good income for a business owner?

Simon Bedding:
I don’t know. Some people would probably say a few hundred thousand. I would say anything over a hundred thousand does start giving you a quite comfortable life. That’s why I would say, holistically, I would say, success is really about having your health, having a happy family life, having work you enjoy, and feeling like you’ve progressed in life.

Loren Feldman:
Paul?

Paul Downs:
Well, I think that that last statement of Simon’s is on target. You want to feel comfortable, and that you’ve succeeded. I think that, money-wise, probably the threshold for that same, “I’m settled, I’m doing well,” is going to vary, again, tremendously based on where you are. But let’s just say, for chuckles, a quarter of a million a year is the beginning of me feeling comfortable, and that puts me in something like the upper 10 percent of all income in United States—and a long way from very successful.

But I think the main thing being that success for me has been watching my company grow, seeing others join the company, and have a good place to work and good colleagues and able to make some money themselves. And I have a lot of personal freedom and autonomy with what I do with my time, and I’ve been blessed with a happy marriage and a lovely family. So I’m pretty successful. Thank you, whoever delivered all that to me. [Laughter] It wasn’t on me. There was some luck in there.

Simon Bedding:
Paul, I totally agree. Being able to have freedom, I think, is the most important thing. And actually, you’re right. I take great pride when I look at the people who work for me. We’re only a small company still, but the fact that people with mortgages are being paid, people are being able to live, people able to do things, that gives you a great sense of achievement to think that all these people are employed because of the company that they’re growing.

Loren Feldman:
That’s a great note to end on. My thanks to Paul Downs and Simon Betting, and to our sponsor. This episode was brought to you by Grasshopper Bank. Thanks for listening, everybody.