A Founders Passion and Vision
Having read a recent Seth Godin — Dumb down and scale up blogI reflected on many of the businesses we support. What are the implications of society’s definition of “growth” on their passion and vision? Why was the business originally created?
People start a business because they believe in something
The ability to have an impact, make a change, earn more money, gain a greater degree of control, become relevant, help people, satisfy ego, do something they’re are passionate about, conduct business in a manner they believe in.
Depending on the individual, their vision for success will vary but one factor will always exist: The need to be financially viable
Society determines success by a businesses growth which creates a “belief conformity”. Continuous growth in revenue, market share, share of wallet, brand, staff, profit. Sometimes at the expense of what the founder/s set out to achieve. Those that sit outside of these norms can sometimes be deemed incapable of creating a truly successful business.
A personal experience and learning 9 years ago
I represented a successful licensee that provided B2B services to Corporate Authorised Representatives. I was young, cocky and had the “business growth belief conformity” entrenched in my psyche.
A particular business we supported was reasonably successful but small — One adviser (the principal), an administrator and a part time paraplanner (shared service with another adviser). The principal originally came from a corporate management background, the business had been operational for 17 years, was turning over approximately $550k and had modest growth (above inflation) year on year.
As an outsider looking in, I could see much more potential and opportunity. My own KPI’s at the time also influenced my behaviour — grow adviser numbers, revenue, FUM and risk premium. What was wrong with this guy? Why could he not see the potential to grow and add value to revenue & the asset value of the business? He had the opportunity to become someone of note, be placed on a pedestal?
He tolerated my enthusiastic conformist behaviour and my dismay for not engaging in a strategy to employ additional advice staff and leverage more center of influence relationships.
Over time I got to know him (and myself). It became apparent that he never lost sight of his original vision and passion. He was in fact a bloody good businessman who never wavered from his goal. This was his formula.
- Build a small client base built on an excellent service ethic + quality advice (within the realms of his competence) that met their needs
- Only accept referrals of like clients that valued what he did
- Do this in a manner that was profitable — his expense ratio was about 25% excluding directors salary
- Draw a reasonable salary to sustain a quality lifestyle — about 30% of the gross revenue
and here’s his kicker
- he chose to invest the rest outside of the business rather than reinvest — the balance of 45%
He chose to diversify across passive assets (superannuation & non superannuation) and his active asset (his business).
He saw his financial value and goals achieved:
- Personal income derived from the business that satisfied his lifestyle
- A capital value of approximately $1.5m in BOLR (buyer of last resort — a capital value offered by the license on certain events) but also had a structured succession strategy with a younger adviser who he shared premises with.
- Growing super and non super assets that also provided a passive income stream
He saw his personal value and goal achieved:
- Having close business relationships with a core group of clients that valued his advice and service
- Tight control of how the business operated
- Time with family, friends, sporting pursuits
- Succession that looked after his clients and family
This was his journey and maybe not yours
Small is not a right or wrong strategy
Size doesn’t matter but profitability does
He was satisfying his own client, personal and professional goals.