News & Views

Running vs growing a business

The challenges, like the opportunities, for financial planners today are numerous and varied. Along with serving clients, developing referrers and directing staff, there is a constant need to focus on business management, its status and direction. Do planners ever find time though to reflect on whether they are running OR growing a business?

With this in mind, Macquarie recently held a series of workshops with Financial Planners predicated on the concepts of running versus growing a business. Peter Maher, Head of Macquarie Banking and Financial Services globally, led the sessions and shared insights gleaned from working with financial planners over several years. Peter also drew upon his own experience and offered some insights into the management philosophy that is adopted by the Macquarie Bank Group. A broad summary of these sessions is provided below:

From the outset it is important to acknowledge that there are significant differences between 'running' a business and 'growing' a business. It all depends on your vision and if you want to take your business to the next level ('growing') or are comfortable with where it is at and are focussed more on maintaining its current status ('running').

To help answer this one, consider the following questions:

• Where do you want your business to be in 5/10 years?
• Do you want more clients, offices, staff?
• What is your succession plan for the business?
• Do you have a strategy in place to preserve or grow value?
• Do you have the capital, time, resource and leadership to keep on track with your growth plans?

The following are areas to consider if you are gearing your business up for growth.

Encourage ownership and entrepreneurial spirit

When looking to grow your business, you are unlikely to have the time to stay too close to your key staff. It is important therefore to provide key people within your business with an autonomous environment to work within and empower them to make decisions that are consistent with your plans. This can result in team members having a sense of ownership and accountability and feeds entrepreneurial spirit (and often, some great ideas).

Macquarie's own approach to this is summed-up by the term 'Freedom within Boundaries' whereby considerable freedom is given to key individuals within the boundaries of agreed areas of responsibility. This approach, is designed to be non-hierarchical and encourages a sense of ownership and entrepreneurial endeavour by individuals whilst also giving them ownership of the risks and the rewards of their efforts.

Ultimately, the idea is to create an entrepreneurial culture and grow a dynamic team which will be fundamental to (and may accelerate) your growth plans.

Time off the 'Dance Floor' and on the 'Balcony'

When growing your business, it is important to regularly make the time to consider where you want to be and what's changing around you rather than always being bogged down in the detail. Applying this to a metaphor, spend less time 'dancing' and more time looking down from the 'balcony' at the dancers to assess whether there is a better way to do things. On the 'Dance Floor', you can find yourself in action, consumed in the day to day running of the business. On the 'Balcony', however, you can take a step back from the detail and take a clearer, more strategic view of what is going on in your business and your industry, helping you to work out what you need to do to achieve your business goals. Spending regular time on the 'Balcony' is important so that you can work out what you need to do in order to grow your business.

How much 'Balcony time' have you budgeted within your business this month/this year?

Get your strategy right and the structure will follow (it won't work the other way around)

If you are clear about the strategic direction for your business, then the structure of your organisation will become clear. Businesses that are geared up for growth and scale are usually structured around the opportunities available to them as opposed to businesses that organise their structure around their processes.

The best laid plans...

Strategic plans are useful but should never be prescriptive in growing your business – in 5 years time, your business will most likely look meaningfully different to the 5 year plan that you create today. As the saying goes, even the best laid plans can change and our experience of working with planners is that you shouldn't always have to stick rigidly to your original thinking, because you (or your team) will come up with better ideas. Iterative planning is important and forward thinking organisations are expected to continually change. It is important to be flexible and take advantage of opportunities that present themselves to you in growing your business.

If it works, do it again….and again

If you find something that works, scale it up and move it through your business. You don't need to keep reinventing the wheel - if you find a process that works, it is likely to be more efficient for your business if you replicate it. Understanding and mapping out business processes is important so that you can see where your staff are spending their time. Gaining efficiencies within your business, can assist your overall growth.

Be confident about your value proposition

If you are confident that you have researched the market, understood the opportunity available to you and have your strategy right, you have every reason to be confident about your value proposition. Your value proposition is a clear, concise and compelling description of what your practice does which, at least in part, is better than anyone else.

Believe in your strategy and execute it with conviction.

Grow your revenue line faster than your cost base (of course)

This may seem like an obvious statement but someone who is simply running a business will probably focus often on bringing costs down. Those focused on growing their business will focus on growing revenue faster than costs and will constantly look for new and better ways of generating that revenue. This may involve understanding the real value drivers of your business and include looking at the operational efficiency of the practice.

Have a positive mentality towards change

If you are running a business, there is a tendency to focus on problems and what is not going well. In this case, change will need to be justified. However, if you are growing a business, it is important to focus on the positives and what is going best. The bias in this case will be towards saying 'yes' and it is decisions to stop that have to be justified. When growing a business, change is fundamental.

Resource up

Those running a business will focus on the cost of resource, ensuring no wastage and maximising the value from existing staff. When growing a business, the focus needs to be on ensuring the availability of resources to get the job done, especially if you believe that you have got your strategy right. Don't be afraid of investing in valuable (not just 'any') resource – it leaves no way for key staff to blame failure on the business and lack of support. Obviously, getting the right people in the organisation is critical too.

Cultivate a 'no-blame' culture

Everyone makes mistakes and that is acceptable providing they can be learnt from. When running a business, there is often a focus on minimising mistakes. However, providing mistakes are of a sensible size and do not keep being repeated, in many ways, this is an investment in education and simply means that there can be a culture of continuous improvement in a 'growing' business.

From another perspective, potential 'buyers' of a business expect to see mistakes having been made, lessons learned and appropriate changes made to further 'sure-up' the business going forward – there is real value in this.

Recognition and reward

If you are growing a business, it is important to recognise people within your team whether through remuneration, bonus or profit share structures or incentives. If you are running a business, you may want to control those rewards or place limits on them, however when growing a business having an award structure that truly reflects outcomes and not limits should be encouraged, as should empowering your team and giving them increased accountability.

We hope that there have been some useful insights here as you grow (or run) your business. As you can see, there are some distinct differences between the two. It is important to have a vision, be clear about your strategy and to structure your business for growth. Finally, adopt an entrepreneurial culture and empower the individuals within your team to each be accountable for the expansion and development of your business – their success will be yours.