If I was to ask ten advisors to private business owners what they think the biggest issue is for their clients, they would likely say “profits.” The problem with this answer is it’s wrong. That is unless the business isn’t making enough money or losing money, then they would be correct.
If we lived in a rational world where everyone behaved in a rational way, the answer most advisors give would be correct. But, and this is a big but, we don’t live in a rational world.
You don’t live in this world and your clients don’t live there either. Let’s think about this for a couple of minutes.
In the private business world profits don’t come first.
This is a hard thing for professionals to get their arms around. Believe me, your clients aren’t interested in “maximizing” their profits. Yes, they want to make enough and enough is never the most they could be making.
One of the problems with getting higher implementation rates with our business owner clients is having the wrong idea about what your clients are trying to create. I can almost promise you one thing, it’s not maximizing profits.
Think about your own practice.
I want you to think about profits in your business. I want you to think about your role of being a business owner in your practice or as an employee in a practice. Do you or does your employer act like the most important thing in the business is to maximize profits?
I’m going to bet the answer is no, that is if you’re being honest with me. The fact is you might focus on creating a great product before making the most money. You might value taking time off or you might pay your people just a little bit more than you need to.
All of these things hurt your profits. It’s no different for your clients.
My ESOP story
Almost twenty years ago I was in a meeting with a client and a group of his advisors. He had a mail order company based in Burlington, VT. This is not the best place in the world to locate a mail order company.
He was having a conversation with us about what would be the best way for him to leave his business. He already had a company that was 35% owned by an ESOP. He was thinking about going to 100% ESOP ownership.
Every advisor in the room except me told him he couldn’t do so. The reason, if he became a wholly owned ESOP he wouldn’t be maximizing the price he could get when he sold the business.
The advisors never listened to the client. His concern was keeping the 200 jobs that he created in Burlington. He didn’t care about maximizing the amount of money he could get from the sale of his business.
I hope you don’t fall into the trap his advisors did. They weren’t listening to their client and they acted like he was wrong and needed their guidance. I hope you listen to your clients and help them achieve the outcomes they want even if it leads to a lower economic return.
Do you remember those surveys about what’s important for employees?
If you look at any survey of what’s important for employees you’ll find that salary is usually in the lower part of the list. Why would this be any different for our clients that own businesses.
Contrary to popular belief, making the maximum amount of profits is not the purpose of any company. The purpose of a company is to create a happy customer. Making money is just a result. If you put it anyplace else, you’re going to find that you might have some short-term success and in the end trying to maximize profits just might hurt more than help.
Meet your clients where they are.
This is where I see too many advisors miss the boat. I don’t want you to be one of them. I want you to understand that it’s never about what you think is important. The only thing that counts is what your clients want.
I know that sometimes I sound like a broken record and here it comes. Your clients get to decide what’s important. Every time you forget that, you could easily find yourself at odds with your clients.
And you know what happens when this is the result. Your ideas aren’t adopted and your client starts to wonder why they choose you to work with them in the first place.
Don’t let this happen to you. Make sure you’re aware of what’s most important and focus on that. You might even find that focusing on what’s important for your clients also improves their profit picture. And no one would be against that.
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