Maybe the lessons you give as an adviser don’t all have to be about money. Have you considered that most of your advice is based on maths, stats and law? There may be some social advice thrown in around estate planning and general well-being around money but it may not be enough given the level of trust your clients award you.
Maybe you’ve suppressed the creative and emotional side of your brain and it’s time to let it out of its cage so it can serve as a point of difference with your clients in your practice?
Some of the biggest and best ideas in history are born in the realms of art, craft and self expression. They often end up being monetised into the stuff you know best, money.
Often advisers come at a business from the logical left side of the brain, when really that can limit the business in several ways. Innovation, exciters, delighters and originality are all born in the right side of the brain.
Here’s some ideas to consider when advising small business owners that come from the exciting and flamboyant right side of the brain.
Maybe small, simple and less is good, not bad?
We humans love to benchmark ourselves against others. It drives us to compete with friends, neighbours, other businesses, career colleagues, etc. Maybe less turnover, smaller business and simple structure existences are better? While there are many economies of scale, there are also dis-economies of scale. Metrics that relate to size, growth and dominance can be considered to be vanity metrics. Re-thinking what metrics matter relative to your clients’ personality and goals can help to ensure wealth is also accompanied by happiness.
Business models are like recipes
Your business is actually a blend of business models. You add exposure, capital, ideas, emotion, art and resources in a planned way. You cook it up and hope it makes a really nice meal people want to keep buying. Only a portion of what you do is in the financial realm.
I see startups that decide to source materials, manufacture and retail their product. They see themselves as one business in this simple example. I can see a blend of three business models. It’s a complicated recipe with lots of execution risk if just one of the three fails.
Intangibles are hard to value
Intangibles don’t have one value as they really do mean different things to different people. If I said I would pay the same price for a $200k business with a $100k debt as one with just $100k of assets and no debt then I’d be a fool. One of those business has a problem. The problem is not financial difference, but it is still a real and tangible difference being the costs of stress, risk and uncertainty to the small business owner who left their job to have some control over their future. There are in reality dozens of problems or benefits in a business that are not priced or valued appropriately that lead to bad decisions in investment and in general business decisions.
Optionality in intangibles is everywhere. It takes some intuitive and creative thinking to assess them. Business valuation models do not factor them properly. Examples are valuing the trust component of a customer base. Valuing the long term customer value (LTCV) for a business. The emotional detachment in favour of the analytical approach in the valuation process gets the valuation wrong. The simple adage that the buyer’s value is the right one is true. It’s what it means to the buyer and it isn’t what the seller thinks. This is because the intangibles (and even the tangibles) have different meaning and value for each buyer.
Language creates wealth
Language can change how a business is perceived in terms of brand as much as raw dollars spent on advertising. If I say, “We unblock your drains” versus saying, “We clean up after the job is done right” then I create a difference in value for the same task by selling the experience as an additive to the commodity service. The logical left brain will always take us back into commodity thinking while the right will tend to use language that creates added value of experience over and above the commodity in the business.
You started with a dream…
Did you warn your business owners about what they were getting themselves into? I quote this often now but I think all new small business owners should be given the “Disclaimer of No Guarantee of Happiness” – You may pay Income Tax, PAYG, SGC, workers comp., payroll tax, excises, stamp duties, filing fees, capital gains tax in addition to everything else you will need to pay to the banks, your staff and investors.
You will probably give 50-70 percent of all your money to the government. Then some goes to banks and you might get lucky and have some of what’s left if you make it. Know that you are going to be a slave to the tax and debt system until you are a very large enterprise, a billionaire or broke.
Get personal before getting financial
Their way isn’t your way. The type of business model their personal comfort levels can endure will be different to yours. As an example I have at least half a dozen family and friends, people close to me, in SMSFs (self-managed superannuation funds) who clearly shouldn’t be. It has been bad advice that hasn’t considered those individuals’ investment skill levels and risk appetite for compliance, understanding of investment sectors and the added worry over having a super company manage it.
A SMSF can feel simple enough to us, feel low risk and worry-free but small risks for some can be a cage of fear and dread for others.
Are you really as skilled up in verticals as your client is? Maybe your client knows more than you do. Your logical left will tend to instruct, recall stats, cite figures and facts. Your creative right will listen, think and coach more. This will work much better if you have a client who is a really smart cookie that should be coached rather than told.
Artisans and craftsmen
Think more like an artisan or craftsman and less like a business person. Being clear, simple and elegant in your approach at the expense of tricky, complex and beautiful can have big rewards. As an example I sometimes see people put into tax structures, even basic trust structures, in order to save a few thousand dollars here or there.
They end up in an accounting headache each year that in which there is no elegance or simplicity just to save them a few thousand dollars. The structural complexity outweighs the uncertainty, confusion and accounting bills they deal with in the aftermath. There are intangible costs of complexity that have been swapped for small tax savings.
Black Swan risk
Stats and maths don’t explain everything. Outlier risks and events occur more frequently than they should statistically. This is because we have many unknowns. Accordingly, relying a little more on intuition ahead of logical thought might help avoid some risks.
As an example, sherlocking is a common risk businesses and accountants alike don’t understand. It’s when a big company adds a seemingly small addition to their product or service that wipes out a bunch of little businesses in an instant. Many of these little businesses never see it coming. The iPhone app that tunes your guitar is a good example of one.
Anyway, I hope these are some ideas to get the creative juices flowing in the less logical and more emotional side of the brain. I love the logical left but the right side of the brain is a great opportunity for your practice to differentiate. As a species we mostly cast it aside in the world of finance which is a shame so instead choose to embrace it and enjoy it.
This is an edited version of a post that originally appeared on the Saasu blog.