Many business owners play a loser’s game without even realizing it. About 20 years ago, I wrote Building a World-Class Financial Services Business to help financial advisors and industry professionals be more successful business owners. I wrote this book because it was apparent to me that many advisors needed help figuring out how to be a business owner who could enjoy the life they created for themselves. Now, 20 years later I still see many advisors making these same mistakes and I want to get the word out and help fix it. This topic has been so popular on my podcast Bull Bear Radio, that we decided to dedicate an entire section of our blog to the Bussiness Building Corner. To get started, here are some common business owner mistakes I’ve seen repeated around the country.
#1 Wearing Too Many Hats
The first question I ask anyone seeking my advice in this area is “How many hats do you wear?”
- Are you the accountant for your business? ✅
- Doing bookkeeping? ✅
- Are you the chief salesperson? ✅
- The operations specialist? ✅
- Answering phones? ✅
- Filling out paperwork? ✅
Often people get excited to check off all of those boxes, but this is one of my most common business owner mistakes. When owning a business, being the guy wearing the most hats does not equate to success. You cannot build an effective business unless you’re doing the things that give the business the highest value. Ask yourself, “What is your highest, best use to your organization?” Do that, and let the rest of those checked boxes be fulfilled by someone else. There’s only so much time to go around in life. The solution to this conundrum is to institutionalize your business and it’s a must to be successful.
#2 Focusing on Gross Revenue
When I came into the business, the focus was on building a commission-based business. Today, continuing with that focus of growth for your business is extremely short-sighted. Gross income means very little in terms of building equity in your business. Focusing on building a business with recurring revenue that provides a more predictable cash flow allows us to plan for business expansion and profitability. By doing this, we can fund business expansion while increasing our personal income too.
#3 We Eat What We Kill
I call this the hunter/gatherer syndrome. When I started as an independent financial planner, I focused almost exclusively on my payout — if I could get an 85 percent payout, that was great. If I could get 95 percent, that was better. And if a broker-dealer would pay me 105 percent of my commissions, that was ideal. Little, if any, money went back to into the business; I spent everything I made — no matter how much that was. Earn high current income and spend it has been the business model for many of us in the financial planner/broker community. This out-of-date model permeates most of our industry and may continue as the single biggest struggle many of us face. Building a business requires significant reinvestment of capital, but many planners take 60 to 80 percent of each sales dollar out of the practice as compensation. Most successful service companies have a direct sales cost of between 20 and 50 percent. To build equity, we need to pour some of our income back into the business.
#4 Personal Vision Does Not Match Corporate Objectives
Have you turned into a workaholic? Do you feel your life is a nonstop freight train that you can’t jump off? Feeling personally bankrupt? Too often business owners put the needs of their business ahead of their personal lives and feel drained when they finally spend time with their families. The best way to avoid this is to ensure your personal goals align with your business goal by drafting a solid business plan. When done well, developing a written strategic business plan is one of the hardest things that you’ll ever do as a business owner. This doesn’t need to be something fancy to market your company. The goal is to create an operating business plan, where you lay out what your vision for the company is, what your objectives are, what your goals are, personally and for the company, and make sure those things are working together. Because if you don’t, the company will become a rapacious creditor for your life. It’ll steal your life from you.
Ask yourself first — what do you want your personal life to be like and what are your financial goals? Start here, then reconcile that picture to what your corporate objectives need to be to satisfy that personal vision. I decided long ago that our corporate mission would reflect the personal goals I set for myself — God first, family second, and business third. Let whatever this is for you to drive the strategic business plan. Don’t get caught playing the loser’s game and avoid these common business owner mistakes.
Use our downloadable worksheet to get started on developing a successful business.
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