By Mike Southon, FT Columnist

The jewel in ITV's autumn schedule is X Factor, a skilful blend of talent show, soap opera and pantomime. But viewing figures are declining, and commentators have speculated that this is due to fierce competition from the BBC's Strictly Come Dancing, boredom with the format or the absence of the éminence grise himself, Simon Cowell.

My theory for the programme's decline is that the viewers have realised that they are being deliberately misled. X Factor judge and mentor Gary Barlow admitted on air that he had lied about the performance of his mentee Frankie Cocozza and shortly afterwards the singer quit the programme or was fired, depending on who you believed.

Viewers could now be forgiven for suspecting that the whole premise of X Factor is built on a lie. Perhaps the thousands who queued to enter probably never stood a chance of being selected as the final contestants had actually been chosen in advance. Maybe the judges' public fallings-out were not genuine, but merely a ploy to boost ratings.

Most importantly, perhaps the premise of the show is not to discover and nurture the UK's next pop superstar, but to generate short-term revenue for Cowell's various companies.

But at least if we disapprove of X Factor we can switch to another channel. The UK's entrepreneurs are incandescent with rage that they have been lied to by the banks and successive governments, but feel they can do nothing about it.

Despite their public platitudes, it is clear that banks are more interested in rebuilding their balance sheets than lending to small businesses. Governments have consistently followed the policy that you can borrow indefinitely, a scheme that is not open to entrepreneurs. The only real government policy at the moment is to print more money, which even non-economists know will inevitably increase inflation.

Most importantly, it is clear that both bankers and politicians see nothing wrong in lying if it helps them achieve their short-term objectives, which are, respectively, boosting this quarter's figures and achieving re-election.

Every small business that wants to prosper over any substantial time realises that honesty is the best policy; if you tell lies, you will eventually be found out, making repeat business very difficult.

I was offered a common moral dilemma in a recent sales workshop. The delegate had an essentially sound business that they had been forced to downsize in the recession. Their question to me was how to appear bigger than they actually were to the next generation of clients.

My advice was that while hiring actors to sit in their office during a customer visit might create the illusion of a more substantial company, sooner or later they would be found out, probably with negative consequences.

Rather, they should promote their modest size with some genuine benefits, such as their flexibility, the value for money they represent due to their modest overheads and the enhanced care and attention they give to their small number of selected customers.

As the famous saying goes, nobody got fired for buying from IBM, so there will always be those who prefer to deal with a larger and lower-risk supplier, despite their inevitably being more expensive. But most people like to buy from smaller customers, whom they see as much as friends as suppliers.

This is why I advise most entrepreneurs to keep their companies below thirty people for as long as possible. Employees, customers and suppliers should also be your friends, the kind of people with whom you would share your social as well as work time; the kind of people who would never lie to you.

Originally published in The Financial Times: Copyright ©Mike Southon 2011. All Rights Reserved. Not to be reproduced without permission in writing. Mike Southon- Co-author of The Beermat Entrepreneur & Business Speaker-

Mike is one of the world’s top business speakers, a Fellow of The Professional Speakers Association. Mike is a Visiting Fellow in Innovation and Entrepreneurship at London South Bank University. He has made frequent appearances on television and radio, has a monthly sales column in Real Business magazine and is a regular commentator in the Financial Times.

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