I’ve been studying the world of private business for over 35 years. Both as an advisor to business owners and as the owner of several small businesses.
I can tell you one thing, if you’re main focus is around helping your business owner clients more money, you’re probably barking up the wrong tree. It’s not that money is important, it’s just that it’s not the most important thing for most small business owners.
Unless this one thing is happening.
The only time I can absolutely tell you profits is at the top of the list is when your business owner clients aren’t making enough money. Or, more likely when they’re losing money.
I can tell you that when we were making a pretty good profit in my vending company making more money wasn’t even on the radar screen. I can also tell you that when we were losing money, there was nothing more important than finding a way to get to positive cash flow.
For you to be effective it’s simple; just find out where your client is as it relates to how much money they’re making.
It’s not the most, it’s enough.
The key for you as an advisor is to understand that for most business owners the word enough is much more applicable than the most. Understanding whether your client is making enough money is really the key to how you’re going to approach the topic of improving profitability.
Enough is always from the viewpoint of your client. Remember, it really doesn’t matter what you think. It only matters what your client thinks. And, this isn’t just around how much money the business is making. It’s around every aspect of working with your business owner client.
Your job is a tough one…..why the amount of money being made is probably wrong.
This is where the challenge comes in. Although your client might be making enough money from their point of view it might not be when you factor in your client’s goals.
For example, if a business is making $200,000 per year and the owner is living on $150,000 there is a very good chance that your client isn’t putting enough money away for retirement.
In this case, if you’re not a financial planner, your job is to get your client to meet with a planner and get a plan done. I want you to make sure that you work with this planner. The reason is very simple……planners often have no idea how to treat the business and it’s value.
When you get a realistic value for the business, your client is likely to find out they really do need to pay attention to profits. That is if they ever want to retire.
Try using the word sustainability with your clients.
If you truly believe that your client needs to make more money and you’re not getting anywhere, try using the word sustainability.
Ask your client if they believe the business is economically sustainable for the next twenty-five years. If the answer is no, or I don’t know, this is your opportunity to start a conversation about profits.
Just be aware that this conversation could be a frustrating one for you. Even though the business owner admits his or her business isn’t sustainable, doesn’t mean they’re willing to do anything about it.
This is where why comes into play.
I’ve never been able to get a business owner or myself for that matter change direction unless I worked on the why behind the question. This means that you aren’t likely to get your client to change unless your client has a true understanding of what the end result of their present course is when it’s aligned with their why in life.
You just might find that there is a good why to wanting to retire. And, you might find your client isn’t saving enough to retire. In this case you have to find out which is true…..does your client want to retire or don’t they really care.
Remember, it’s not your company.
This is the really hard part. I’ve been watching advisors for a very long time. Most of the time I see advisors giving advice as if it was their business.
Here’s a clue. It’s not your business and it’s not your job to act like it is. There is no right or wrong. There’s only what your client wants for an outcome.
Your job is to help figure out what the outcome is, why it’s important and help craft a solution with your client. If you do this, you’ll find your clients implement a lot more of your suggestions. And, isn’t that what it’s all about.