It's well known that most small businesses fail. By some estimates, 95% bite the bullet. A big reason for this high failure rate is that most of these entrepreneurs aren't entrepreneurs at all.
In the words of business consultant and author Michael Gerber, they are technicians. That is, people who can skillfully perform a function, but not necessarily run a business. They are job owners, not business owners.
In Gerber's book, The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It, he says many of these technicians-turned-entrepreneurs ignore the managerial aspects of their businesses.
Brokers are notorious for their lack of business acumen. Good salespeople do not always know how to manage and administrate.
How do you get from producer to entrepreneur? First, make sure it's what you want, recommends Gregg Fisher, president of Fisher Gerstein & Associates, a Nathan & Lewis firm in New York.
It's a lot of work, Fisher says. You could just be a producer. It's a better lifestyle for certain people less stress and responsibility.
If you decide to build your own business, there's a large cost personally in time, quality of life, stress, energy and money, Fisher says. Speak to someone else who has done it already. Get some of their ideas. Find a mentor.
Broker coach Leo Pusateri, who runs Buffalo, N.Y.-based Pusateri Consulting, recommends other prep work. Create an organizational chart five years ago, today, five years from now, he says. Think about decisions and investments you need to make. Are you willing to take the necessary risks?
Get your family on board. Sit down with your significant other or spouse, and talk to them about your vision, says Joe Lukacs, a coach who runs International Performance Group in Melbourne, Fla. If you share goals with your family, you'll be supported.
Commit to some planning and careful thought. You don't just flick a switch and become an entrepreneur, Lukacs says. To lay the groundwork, he suggests reading the biographies of successful entrepreneurs like Bill Gates and Charles Schwab.
Another important element is strategizing (see Working On the Business, left). Not only must you step back and evaluate how to begin building your business, you'll also need to continue planning once you're there.
Running Without You
Gerber says the test of a business is whether it can run without the owner. If not, it will probably be tough to get away from and difficult to sell.
Lukacs says financial advisers shouldn't totally accept Gerber's philosophy. You can't walk away and be an absentee owner, he says. Can you go to Australia for two weeks? Yes.
When brokers can't be out for extended periods, that's a sign they're job owners. And putting in lots of hours doesn't always pay.
I've never been able to correlate number of hours worked and income, Lukacs says. A lot of people get caught up in the shopkeeper mentality. Lukacs suggests a goal of taking off one week each quarter and one weekend a month.
How? By developing systems.
Pretend you're going to sell the business in five years, says Steve Saenz, a business consultant who runs Paragon Resources in Atlanta. When you start bringing in buyers, what are they going to buy? Loyal clients, recurring revenue, a strong team, systems in place for everything. You don't want it to be too dependent on you.
Within your firm, build a strong team and divide job responsibilities. Do what you do best with diligence and delegate the rest, says Steve Booren, a rep who runs Capital Consulting, a Linsco/Private Ledger branch in Greenwood Village, Colo. I don't deal with any operations or administrative paperwork, inquiries about checks or taxes. I have people who are dedicated to each area.
It astounds me that people in our business don't have a procedures manual, Booren says. It's so simple. Each staff person writes about his or her own area of expertise. What happens when people are out? Pick up the manual.
Achieving success as an entrepreneur can be rewarding. Being in business is a choice, Lukacs says. You better make sure you're enjoying it. Brokers who believe in their businesses are happier and more satisfied than advisers who view it as a job.
Booren is a happy entrepreneur because of continual improvements he makes. We have a responsibility to clients to do better every day. If we do, our value goes up.
Being an entrepreneur is a passion that runs deep for Fisher, too. It's exciting, like a sport. There's never a day that's the same.
Fisher describes his accomplishments with a certain degree of awe: I'm a young guy, sitting in a conference room looking out the glass window. I can't believe this is mine cubicles of seven to eight people, offices of seven to eight more people. Less than nine years ago, I was working out of an apartment. It's very rewarding. I took an idea and very little money, and developed it into something that lives and breathes without me.
Part of becoming more entrepreneurial, according to author Michael Gerber, entails working on the business, not just in it.
Marc Freedman, president of Freedman Financial Associates, a Peabody, Mass.-based Linsco/Private Ledger branch says: If you're running a business, you need to find time to walk away from the business and get educated. If you're not finding time to do that, your business will fail. He suggests reading trade magazines and attending industry educational conferences.
Consultant Steve Saenz, of Paragon Resources in Atlanta, recommends thinking like a CEO. Do strategic planning, he says. Cast a vision for your business. Spend 5% to 10% of your time doing this.
Strategize with your team. For some advisers, that goes against the grain, Saenz says. They think it's a waste of time. When I suggest meeting with the team, their eyes glaze over.
Larry Waller isn't one of those. We have an annual retreat to map out strategies for the next 12 months, says Waller, president of Waller Financial Planning Group, a Royal Alliance firm in Columbus, Ohio. We have it at a country inn 60 to 75 miles away. It's two days of strategy. His staff of 12 also has weekly meetings and quarterly strategy sessions.
Freedman even enlists his clients to help work on the business. We have a client advisory council, he says. Twice a year, we take 12 clients and their spouses out to dinner. We open our books to them and ask what more we should be doing.
An important step at a strategy meeting is to determine your unique value, says broker coach Leo Pusateri, of Buffalo, N.Y.-based Pusateri Consulting. Ask yourself these questions: Who are you? What do you do? Why do you do what you do? How do you do it? Whom have you done it for? What makes you different? Why should clients do business with you?
Set goals in all areas. When most people set goals, they're usually only about financial aspects, such as production or assets, Saenz says. But don't forget other areas of your business, including client service, marketing and operations.
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