Creating value to go from 'start-up' to 'scale up': a case study

Smart practice

Wednesday 23 November 2016

How building relationships helped one business owner step into a new phase of growth

Like many of his peers in the Australian financial services sector, James Taylor began his career as a financial planner before launching his own advisory practice, Choice Capital.

Once the business was up and running successfully, James faced the next burning challenge: how to grow the firm from start-up to established SME?

As CEO, James was responsible for driving the business to its next phase of growth. The problem was that he was so ingrained in the daily technical operation of the practice that he needed to rethink the business value proposition – and the value he attached to his own role.

His journey offers lessons for other business leaders on how to step out of the day-to-day and into the next phase of growth.


From start-up to scale up

James Taylor was only 29 years-old when he left his full-time role in one of Australia’s major banks to start his own financial planning business.

What many would consider a risky venture turned out to be the best decision of James’ young life.

Eleven years later, the 40-year-old now owns Choice Capital, a thriving financial planning, mortgage broking and legal advisory firm with more than 15 staff in its Melbourne headquarters.

His success would not have been possible if James’s role as CEO had remained static. Early in his business plans, James understood that he couldn’t spend his time growing the business if he was spending most of his time working in the business.

Like many of his peers, James was used to being a subject matter expert to clients. He knew that in order to free up time to develop his business strategy, his role had to evolve from a technical one to a leadership and mentoring role for his staff.

“As the business grows your role must grow with it – or the business won’t,” James explains.

Like many in the financial services sector, James’s career had initially been about developing specialised financial planner skills.

After graduating from RMIT with an economics and finance degree he worked as a stockbroking analyst before moving into portfolio and funds management and then onto an 18-month stint as a credit analyst in London.

He returned to Australia shortly after the 2000 Olympics and spent three years as a financial planner at Westpac, before establishing Choice Financial Advisers in 2005.

“At the time I had enough experience to be technically sound and mature enough to start and run a business,” James says.

“I learned a lot about working hard and being extremely thorough because ultimately it was my reputation on the line. But we were running at a pretty quick pace. I thought I can’t run at this pace all my life – or I will burn out.”

As the business grew quickly and attracted more clients, James found himself hiring more staff to get through the workload. The result was that revenue and costs grew in tandem, squeezing profitability.

James faced a growth conundrum common for small business owners: “What’s the point of having a larger business if it’s no more profitable than a smaller one?”.

This critical insight made him realise he needed to shift his focus from acquisition and related staff incentives, to a relationship-based business model that centred on creating more value for existing clients.

The first step was to pull back from the amount of daily contact with clients. James made the strategic decision to offer key staff the opportunity to purchase equity, in order to share the management load.

“When you’re in a small business you have a small number of people who generate the majority of the profits. We wanted to provide incentives to these staff members through equity, so the burden of profitability didn’t just fall to me,” James says.

“I spent a lot of time researching options and we determined the equity buy-in for staff was probably best for us and we created a shareholder agreement.

“We also changed the way we paid our staff, in terms of both incentives and salary, and the focus shifted from pitching for new clients to service our current ones much better. We have not needed as many staff and our profitability has improved.”

Understanding the importance of having honest and valuable conversations early on, James faced little opposition from clients with respect to his ‘new’ role.

“I have had no resistance from clients. They understood that the commercial reality of running a business means they cannot have the bulk of my time, particularly as the business grows, because my time is required across a growing number of areas.

“I explained that others could step in and provide them with that day-to-day client contact and they knew that I was always there if they needed me.”

“One of the reasons we have been successful is that we have stuck to what we do well. We are financial planners and mortgage brokers,” he said, adding that value is created through partnerships both internally and externally.

“Growing a business cannot happen exclusively by organically winning new clients. As a business owner, you also need to collaborate with like-minded firms in the supply chain.

“We did that by embarking on a joint venture with an accountancy firm – this has opened up a whole new segment of client opportunities.”

It is a clever move and means that while Choice’s business development team is pitching for new business, other clients are walking in the door through the new referral arrangement.

James says working with larger ‘partner’ firms was another tactic that helped get him get his business to the next level.

“Leveraging the expertise of a large company is invaluable for a smaller organisation like ours, which has limited resources. Some of the skills we drew on included business advisory, support and connection with like-minded peers and communities.”

James boils down his success strategy into three broad steps.

  1. Adopt an internal succession plan that allows the CEO to take on a more strategic role as the business grows. Where there are gaps, hire specialist service staff to fill them.
  2. Look for opportunities to partner with like-minded firms in the supply chain. This is how you build scale.
  3. Rely on external expertise from larger business advisers to help you get to the next level.


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