Owners of financial advice firms face two different types of business risk.
The risk of starting & the risk of growth.
I reckon the most significant difference between these risks is ignorance.
Initially, most brand-new business owners are ignorant of what is actually required to start a successful business.
This is simply because they haven’t experienced it.
Despite whatever experience they have technically, whatever networks and reputations they’ve built or the thoroughness of their forward plans, they are ignorant of what will actually work for them from that very first day they start working for themselves to build something successful that one day might be bigger than themselves.
However, building businesses is less about knowledge, networks and past reputations and more about skills.
Skills are gained by experience.
Experience is gained through a lack of skills.
Unfortunately, as the best lessons in life are the hardest ones, every start-up’s journey is dictated less by initial plans and more by the myriad of challenges, expected and unexpected, that founders have to overcome.
Growth risk is different.
Very different.
Once skills and initial success have been experienced, owners are very aware and less ignorant about the risks associated with any growth to yet higher levels of success.
As start-ups achieve a unique growth tipping point, a new momentum is ignited, shifting the risks founders face. While the risks of start-up are about survival, the risks of growth are about capacity – i.e. the capacity to grow.
If founders mismanage capacity, they face far higher risks than the risks they overcame during their start-up, as capacity growth risks threaten to undo much of the reputation, momentum, results, and potential created during their start-up phase.
Capacity risks are the risks encountered when introducing change to established partners, team members, clients, systems, networks, alliances, and suppliers, all of which are at different stages of willingness, understanding or ability to support the desired change.
Thus, founders face the most significant risk they’ve ever faced.
What do they have to let go of to grow?
Is it partners, clients, team members, systems, networks, alliances or suppliers?
Or is it their own paradigms, habits, or plans?
This is a unique small business issue.
Larger institutional advice groups can cross-subsidise, carve out different distribution models for various client niches, import growth leadership from more mature divisions or employ longer development cycles than smaller advice groups.
Understandably, the growth cycle can get too hard for many smaller advice firm founders.
As they reach their first or second growth tipping points and find it incredibly difficult to overcome their day-to-day demands, the time and leadership required to plan for the desired reality that inspired their courageous start-up steps just isn’t there.
There is an alternative.
Ambitious dreams and plans don’t have to be put on hold for a fictitious time when they will be better ready.
Advice teams can escape the activity traps created by their past success.
Capacity can be managed.
What do the founders of advice teams need to do?
They could start by stopping living by the priorities of others, placing deeper trust in the value of their advice that has driven the team’s growth, and re-adopt the leadership that motivated those brave starting steps back in their start-up days.
Otherwise, they may wonder what they could have achieved, as their day-to-day business life continues to be driven by the priorities of others.
These are great times to be building better, not just bigger, advice firms.
What do you reckon?
Jim
Photo Credit: shutterstock_1109089727