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A well-run business can be the key to wealth and happiness and in the post-Retail Distribution Review era, it’s truer than ever. It’s time for our profession to move beyond qualifications, proposition and compliance and step up to great business management.
Financial Advisory firms have never had it so good and the opportunity for businesses that are getting it right has never been greater. You help clients and make a real difference in their lives. You’re paid great money and are building an asset that can be sold for three times as much as your average accounting practice. Happy days.
All businesses, no matter their size, can create value and increase their enjoyment at work by focussing on improving their business management skills.
If you run a larger business, good business management is mandatory; otherwise the complexity of the organisation can begin to wear you down.
In ambitious smaller firms that want to grow larger, the sooner you master and institutionalise good business management practices, the sooner you can realise your goals.
In lifestyle firms where the owners are focussed on their work/life balance and time off, good management is key; without it, there is no lifestyle to be had.
Great businesses have mastered three key management disciplines. What are they?
1. Gaining insight from their management information (MI)
Most firms can supply a ton of MI, but rarely can they use it to generate insight to help them make better management decisions. Without that insight it’s difficult to pinpoint problems and resolve them.
Do you know your three key metrics (Gross Profit Margin, Overhead Percentage, Net Profit Margin) and what they’re telling you about your business? If not, this is exactly the sort of information you need to master.
If your Gross Profit Margin is less than 60% you’re probably paying away too much top line revenue to the advisers within your firm. If your Overhead Percentage is greater than 35%, you’re probably not working efficiently and could benefit from sorting out both your business processes and your team.
You can begin to manage your business more effectively once you know the metrics you should be monitoring and what they’re telling you. By working on the issues that will give you the biggest return on effort, you’ll find your business works much more efficiently – and profitably!
2. Building a high quality and cohesive team
The minute there’s more than just you working in your business, you’re building and managing a team. In modern business this definition of ‘team’ can expand to include external suppliers and contractors as well as internal employees.
Regardless of the makeup of your team, you need to recruit people with the same set of values as you and your company. Without this alignment of values, you’ll find yourselves at cross-purposes and struggling to perform.
Conducting an honest evaluation of your existing team can be an emotionally challenging exercise, but is crucial to achieving your business goals. Hiring new recruits can feel like a black art at times, but it’s a skill you need to master as a firm if you want to perform and grow profitably. In both situations you need a process that allows you to identify, recruit and retain the talent required.
As Gino Wickman explains in his book Traction, everyone on the team has to “get it, want it and have the capacity to do it”. If they’re lacking in any one of these areas, they won’t be an effective member of your team.
Very few adviser/owners have natural HR skills, so getting some help in this area – either by hiring an HR expert as part of your team, or by bringing in an external consultant – is essential.
3. Creating an effective management structure
The final core skill is having a management structure that works. To create this you need: an effective leadership team at the top; effective meetings and communication throughout the organisation; and a finger on the pulse of the business – week to week, month to month and quarter to quarter.
I speak with lots of firms where, across the company, meetings are an infrequent occurrence; it’s almost a source of pride. However when I dig deeper, I find that while meetings used to be held, at some point they’ve been stopped because they were dull, boring, ineffective and no one wanted to attend them. As a result, poor communication and decision making leads to a slow growing or stagnant business.
Slow growth or stagnation creates major frustration at all levels of an organisation and also makes it difficult to attract and retain good talent. This is a killer because in a small team, everyone needs to be a performer to ensure success.
Successful firms hold weekly meetings (that start and finish on time) during which they discuss issues and resolve them. These firms get results and grow, creating a more positive environment with greater opportunities for everyone involved.
If business management hasn’t been your main focus up to now, it’s understandable. However to create the business of your dreams and to have fun while you are doing it requires mastery of some good business management skills.
Get to work – and don’t be afraid to ask for help if you need it!