There is a point in the growth of a successful business when another €10 million of revenue may not create anything close to €10 million of additional value.

The customers increase.

The headcount increases.

Compliance increases.

Technology increases.

Management layers increase.

And the cost of serving every additional euro of revenue can quietly increase with them.

This is one of the major growth problems successful gentlemen founders routinely underestimate.

“The complexity of running the business” begins increasing because the founder is still trying to do too much himself and hasn’t installed the technology required to support the company he has created.

At Quantum Mogul, we believe this creates an important distinction.

Growth and scale are not the same thing.

Growth makes the company bigger.

Scale should make the economics of becoming bigger increasingly powerful.

And if your revenue is rising while your margins, service quality and operational control are deteriorating, you may be accumulating complexity rather than creating scale.

Your €100,000 customer may not be worth what he was ten years ago

This becomes particularly important when you calculate the economics of acquiring another customer.

“Taking on a customer today is not the same as taking on a customer even ten years ago.”

Donal points directly to the additional burden surrounding that customer:

Paperwork.

Technology.

GDPR.

Data protection.

Compliance.

“Everything has just literally quadrupled in some cases, definitely doubled and tripled.”

His point is not that those increases apply uniformly to every company or customer.

It is that the historical margin on a customer tells you remarkably little if the cost structure surrounding that customer has fundamentally changed.

Donal gives the example of taking on a client with €100,000 of value.

If ten years ago you expected to make 15%, what does that relationship produce today after its full contemporary cost of servicing, compliance, technology, administration and protection is included?

“You need to keep doing the audits all the time.”

That is margin compression hiding inside revenue growth.

Your top line can continue moving beautifully upwards while the economic value underneath each additional customer moves in the opposite direction.

Don’t acquire another company until you understand the one you already own

At Quantum Mogul we see another version of this play out across financial services.

Wealth managers are acquiring wealth managers.

Insurance companies are acquiring brokerages.

Companies are getting larger.

Yet we continuously hear the same thing from customers after these mergers:

“The service has gone down.”

People cannot find the same person on the phone.

Employees have left.

Paperwork gets lost.

Customers encounter confusion.

That should make an acquisitive gentleman founder stop.

Because what exactly have you acquired if you buy the customers and then destroy part of the service experience that made those customers valuable?

The problem, to our mind, is frequently that companies bring old systems and paperwork into the enlarged business without first asking:

What is repeatable here, and what can we streamline?

Do that before expansion and the economics can look very different.

We believe that in the right business, identifying repetitive work and installing the appropriate technology could expose something like a 20% improvement.

But Donal immediately makes a more important point.

“It’s not so much the 20%, but the quality of the business and your customer satisfaction that ensures and often guarantees referrals for you.”

That is genuine leverage.

Not merely doing more.

Doing more without allowing complexity to destroy the thing customers were paying you for in the first place.

Complexity becomes even more expensive when a company has enough money to finance it.

We see this particularly inside large corporations.

A company allocates €20 million to R&D.

Twenty, thirty or fifty people are assigned to a project for 12 to 24 months.

There is “no real accountability, no real head nor tail to it.”

Eventually somebody decides it isn’t working.

The project is shelved.

And €20 million has gone down the drain.

This is a different form of margin destruction.

The company can afford the inefficiency, so the inefficiency survives.

High margins can therefore become dangerous because there is enough cash “sloshing around” to tolerate complexity that a smaller company would be forced to eliminate.

At Quantum Mogul, this is why we care so much about understanding the real-time reality of the business.

Revenue alone cannot tell you whether expansion is creating value.

You need to understand what is happening underneath it.

Technology can solve enormous amounts of this.

But Donal has an equally strong warning for gentlemen founders now buying AI and software because everybody else is buying it.

“The mediocre golfer thinks that if he buys Tiger Woods’ golf clubs, he can be like Tiger Woods.”

Buying expensive technology on its own is not the answer.

“Fact finding is the answer.”

And Donal would begin that fact-find with one question:

What is the major thing causing you serious hassle at the moment?

Then solve that problem.

Look first for what is repetitive.

What are highly paid people doing again and again that can be streamlined?

Where has growth created administration rather than value?

Where are you adding employees because the underlying process never changed?

Where is compliance consuming increasing amounts of time that is taking away from serving your current customers, selling them additional products and services they need, and improving your service or product?

And where have you installed technology without understanding the problem it was supposed to solve?

There is another form of complexity that is considerably harder to admit.

You built the company.

But the company now operates in a world you did not build it in.

Donal sees this particularly with elite gentlemen founders who have been in business since their twenties and are now in their late forties, fifties and beyond.

“The changes that have happened in the last 20 to 50 years are enormous, and the last ten years have been phenomenal altogether.”

For a proud founder who has run his business successfully for decades, admitting that he no longer understands part of the operating environment can be extraordinarily difficult.

But Donal is unequivocal:

“If he doesn’t accept it, he’s in real trouble.”

At Quantum Mogul our answer is not to discard the founder’s experience.

It is harnessing the power of the young, the middle and the old.

If you are the old, find the middle and the young.

Listen to them.

Have the interactive conversation.

Your experience remains enormously valuable.

But you need people around you who understand what has changed.

Because once you “get comfortable again with the uncomfortable,” we believe something fascinating happens.

Complexity becomes normal again.

The gentleman founder who once learned how to build something extraordinarily difficult learns how to operate at the next level of difficulty.

And perhaps that is the real test of whether your next €10 million of revenue represents wealth creation.

Not:

Can we sell another €10 million?

But:

Can the underlying business absorb another €10 million without allowing complexity, compliance, deteriorating service, margin compression and the founder himself to consume the value it was supposed to create?

So for the Elite Gentleman Founder whose revenue has grown substantially over the past five years, we at Quantum Mogul would ask the following questions:

Have I installed the proper technology in line with my growth?

Have I surrounded myself with enough young geniuses and entrepreneurs to match the older and the middle-aged talent that I have?

Am I stepping out of my own way, or am I still standing in the way of true growth? Am I still trying to do it all myself?

An Elite Gentleman Founder can spend enormous amounts of time and money establishing trusts, holding companies and succession structures to protect his family wealth.

But Donal makes an important distinction.

The structure itself is not the problem.

“The structures are there for thousands of years.”

As he often says, methods are many, principles are few. Methods often change, but principles never do.

The principle behind the structure does not need to change simply because the world around it does.

What has changed enormously is what the structure now has to protect the wealth against.

“The robber barons of old just robbed a bank. Now they’re robbing identities and names and people’s data.”

That changes wealth preservation.

You could have the correct structures in place and still lose the fortune because you did not have the technology required to protect it.

Governments face it. Countries face it. Major payment structures face it. Geopolitical instability is disrupting trade and waterways. Even parties that previously trusted each other can face new problems transferring substantial sums for oil or raw materials.

So, for Donal, having the structure is no longer enough.

“You must have the technology to, at minimum, protect what you have and really to pre-empt what’s coming.”

There is another threat to a fortune that has nothing to do with somebody stealing it.

The family itself can gradually use the wealth in ways the founder never intended.

At Quantum Mogul we see this all the time and Donal’s explanation is straightforward.

“The instructions on the trust were not clear enough.”

There was too much grey area concerning where the money was supposed to be spent.

Who was accountable for it?

What research had to be completed before an investment was made?

What effort had been made to establish whether a deal was actually any good?

Or was it simply somebody who knew the family had money persuading them to invest?

At Quantum Mogul, we have seen that this is extremely common.

Donal’s answer is not less detail.

It is considerably more.

“You could not be too detailed.”

No loose ends.

There should be a defined set of rules.

Clearly articulated milestones before funds can be released.

Targets.

Return requirements.

ROI.

And a cutoff point if something is not working.

“It just can’t be allowed to linger on.”

The same applies to succession.

The person who comes next should be the person in the line of succession who has proved themselves, not simply somebody who happens to occupy the next position.

And if nobody in the family has proved themselves?

Someone may need to be hired to manage the trust.

Donal points out that successful trusts have been governed this way for centuries.

But if the instructions are extremely detailed, how can they possibly survive 50 or 100 years of change?

Donal’s distinction is between the structure and the intent.

“What remains the same is the structure. It’s the intent that has to be nailed down much better and recorded much better.”

Technology now gives families a different opportunity to do just this.

And this becomes particularly important when the gentleman founder’s wishes meet something that must change.

Tax.

Regulation.

Fiduciary responsibilities.

“Founder intent, as always, has to go along with the laws of the day.”

There is no way for a founder to predict what the tax system will be generations into the future.

So Donal asks:

What would the founder have done?

What did 60 years of building and running his empire tell us about how he responded when circumstances changed?

“He would have definitely come across some similar situation, and you just work with that.”

That, for Donal, is founder intent.

This is also why we believe at Quantum Mogul that recording the decision itself is not enough.

A future generation needs to know where the founder drew his conclusions from.

Why did he do it?

What did he see?

What was happening at the time?

What information did he have?

And what did decades of experience teach him to recognize?

Donal talks about being able to preserve this almost as a “hologram” of the founder.

Alongside the trust documents and structures that have existed for centuries sits the ability to recall the exact state in which a decision was made.

And we believe this is what wealth preservation will increasingly look like in the 21st century and beyond.

Because our argument is that history moves, but certain principles repeat.

“Each century has kind of the same fingerprint.”

Wealth moves.

“The principles stay the same, the trends move around.”

Donal describes those trends as being “a little bit like mercury.”

They move from place to place.

So if an Elite Gentleman Founder has spent 60 or 70 years building and protecting wealth, Donal believes there is extraordinary value in preserving how that man observed those movements and made decisions through them.

“The only things that will change are figures and locations.”

The future generation can then look at what worked, where it worked and under what circumstances, and ask where similar trends are appearing in their world.

For us at Quantum Mogul, that is the extraordinary possibility our technology can introduce into an ancient wealth-preservation structure.

The next generation does not have to hear:

Your grandfather would have wanted this.

They can see what he actually recorded.

Why he came to his conclusions.

How he made decisions.

What he drew upon.

And what ethos sat underneath them.

As Donal puts it:

“The founder never died.”

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