View more on these topics

Danby Bloch: Prevent your business from becoming a victim of its own success

Business owners easily fall into the trap of misunderstanding the difference between truly scaling a firm and just letting it get bigger

Few business owners genuinely scale their firms; most just let them get bigger. The difference is not so much a question of semantics. Scale is about having a model that can easily and efficiently be made bigger, with sustainable benefits and greater profitability from the increased size. Simply getting bigger without scalability often leads to failure and certainly increases risk.

All of this came to mind chairing a panel at the recent Money Marketing Interactive conference, where I had the privilege of listening to three wise and experienced people on the matter: Rebecca Aldridge, who has built her greatly admired financial planning business Balance: Wealth; Jeannie Boyle, who runs the environmental, social and corporate governance oriented wealth management company EQ Investors; and Malcolm Kerr, industry veteran and now non-executive director of consolidator Fairstone.

The normal approach to starting a business – or running a small one – is to set up processes, systems and structures that will be just about good enough to scrape by for now. After all, why over-engineer the firm when the key issue is to get enough clients through the door and provide enough to satisfy their needs?

Growing pains
However, with a business based on that approach, the systems will always struggle to keep up with the demands of it and its clients. Every spate of growth will be a pang of pain and involve some avoidable risk.

Such businesses can grow but they will develop erratically and with high levels of hazard, subject to poor recruiting, inadequate monitoring, strained record-keeping, inconsistent treatment of clients, and sporadic or non-existent profitability.

As more advisers and other staff are added to the mix, it will deteriorate further.

What is needed from the start is a systematic and scalable approach, so that key staff and functions can be added relatively painlessly.

Even more important, according to the experts, is the need for a clear vision for the business that can be communicated to clients and colleagues. Culture is what makes good things happen and stops bad things occurring when the systems and processes alone are not enough.

Taking on new staff always involves a major risk. Most of us are much worse at judging character and capability than we think we are. The more that is clearly expressed about what the business is aiming to do and its direction of travel, the lower the risk of misaligned expectations.

Hire slowly, fire quickly
That said, with all the preparation in the world, and with the best systems, processes and structures going, things can still go wrong with bringing in new people. So remember the old adage about employing people: hire slowly (take your time, get to know them really well, explain the business thoroughly and listen a lot) but fire quickly (once someone is on the inside of the business, you will see them for real; be prepared to say goodbye fast if it is not working out).

All businesses should be scalable from the start. A single-person operation will double when the first employee is taken on.

All the thinking that hitherto only went on in the pioneer’s head now has to be transmitted to the second person in the team.

Finally, decide what is likely to be the future of the business. Does it make sense to fatten it up for sale to a consolidator or some other large organisation? Or is a lifestyle operation an option, with a good income and limited objectives of making a large lump sum? Whatever the aim, scalability remains a good way to get there.

Danby Bloch is chairman of Helm Godfrey and head of editorial strategy at Platforum

Recommended

Malcolm McLean: Does new guidance body name hit the spot?

Which came first, the chicken or the egg? The question for which there is no one right answer. In most situations, of course, it is usually more clear-cut. In the case of acronyms, logic would suggest that, as they are supposed to be derived from the title of the organisation, product or whatever they represent, […]

Pension freedoms possibilities cause angst for retirees

Advisers say retirees have mounting concerns they will run out of money and that pensions freedoms provide too many options to consider alone, Aegon research shows. Adviser respondents to the research say three quarters of major challenges for their clients revolve around generating retirement income. A total 38 per cent of adviser respondents say running […]

4

Society must confront ‘financial shame’ says SFGB chief

Single Financial Guidance Body chairman Hector Sants says “society must confront financial shame” in a keynote address to delegates at a conference today. He explained how the guidance body will look to boost financial awareness across the country at a Pensions Management Institute conference in London. He said it will launch a consultation next Monday […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Straight out of the MBA course book no doubt! However the one thing not readily scalable is the advice process, the beating heart of an advisory business. You may have heard there is a real shortage of advisers so that acts as a brake too! Otherwise an excellent article that probably applies to many businesses outside of financial services!

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com