The Six Cardinal Sins of Small Business
by Peter Montoya
I’ve had the opportunity to work with several thousand small businesses across America, and I’m amazed by the consistency of their problems. Repeatedly, the same owner-induced sins cripple and kill promising business models and brands. In this trio of articles, I’ll explain the six biggest sins small businesses commit, and some solutions to abstain from them.
Cardinal Sin #1: Believing that Competency Equals Success. Competency is no freeway to prosperity. I’ve heard countless financial advisors tell me, “I’m twice as good as the guy down the street, but I’m only making half the money – how could that be? I have my designation. I have my degrees. I have a great staff. I take hours out of my day to really get to know my clients. I’m twice as good as anybody else in town. How come I’m not succeeding?”
Somewhere, somehow, someone created a myth that the more competent you are, the more successful you are. Just be competent, and clients will beat a path to your front door. But if they don’t know where your front door is, you can be the most competent financial advisor in town and starve yourself out of business.
Being competent is great; being visible is better.
You may be moping: “Why is that &#&*$% down the block killing me? Why is he getting all the business? He’s not as competent as me. He doesn’t do half of what I do.”
Consider this: maybe you’re not doing half of what you need to do.
In all probability, the reason the guy down the block is killing you is because his clients don’t know you exist. They only know what they know, and they don’t know you.
What do the most successful financial advisors do to stand out of the pack? They market their brands – their Personal Brands. They package and present their value, and the benefit of that value, to the prospects they want to reach – not once a year, not when business is slow, but all the time.
They do not believe that competency equals success. They know that effective branding and marketing will attract people to their competency, and then and only then can they be successful.
Cardinal Sin #2: Generalizing. It happens again and again – it happens to corporations, it happens to small businesses. They try to be all things to all people, and they get killed. The sin of generalizing muddies the clarity of their brand, and reduces brand value.
Not long ago, I was at a car wash. While waiting for my sedan in the lobby, I witnessed a REALTOR® negotiating the purchase of a small marquee advertisement. It was brass tacks time; she was talking price.
The salesman told her it was $500.00 per month. She said, “That’s an awful lot of money. How many new clients will I get out of it?” He replied, “Well, let me see your ad.”
Now, I was just a few feet away – so I could see it. It had her name, the company name and a bunch of bulleted words: “residential,” “commercial,” “retail,” “industrial,” “new sales,” “resales” and “consultant.” The ad salesman looked it over and said, “Well, surely if you offer all those different services, someone will need your services.”
When I tell this story to business owners and solopreneurs, most of them scoff or groan and think, “What a mistake.”
Most financial services professionals love to make this mistake.
If I could look at your business card, website or brochure, I would probably see a bunch of bulleted words, including – may I take a guess? – “financial planning,” “estate planning,” “tax planning,” “wealth management,” “risk management,” “insurance,” “asset management,” and “employee benefit specialist.”
You are doing the exact same thing that REALTOR® is trying to do. You are trying to be all things to all people, and you will end up being “nothing to nobody.”
It’s an expensive lesson. You would think that by being “good at everything,” you’d have opportunities to land every kind of client. But you’re not thinking like a consumer. If you profess to be a jack of all trades, you will seem master of none in an age in which consumers (and investors) prize specialists.
If the SEC or the NASD or some state agency wanted to revoke your license, incarcerate you and sue you for tens of thousands of dollars, who would you call? Would you call the general practice lawyer down the street? Or would you call a specialist , a highly regarded expert in securities law?
Most of my financial services clients tell me they would call a specialist.
Consumers call specialists for two reasons.
Number one, knowledge. You pick the specialist because he or she has accumulated specific knowledge, translating into specific value for you. The fee may be higher, but the job may done faster and better – because they know it forwards and backwards.
Number two, you call a specialist because they have the greatest chance of success. The truth is, past performance is the best indicator of future results. So in a legal matter, you want the attorney who has fought this battle before, who has gone to court and gone to arbitration a thousand times in this situation.
Now, here is the all-important question: do your prospects want a specialist? The answer is, “Of course.” They want exactly that. It’s true in medicine, law, auto repair, hairstyling – every service field, including financial services. So why are you still trying to succeed as a generalist?
Fear. The answer is fear. You’re afraid you might miss out on somebody. You’re so afraid of missing out on a possible prospect that you are unwilling to niche.
What you focus on is what you get. When financial advisors come to me for advice and I look at their books of business, I usually find a hodgepodge – including hordes of ‘B’ and ‘C’ clients signed up simply because they were breathing. However, when I look at the book of a top regional or national producer, I see dozens of prime clients and recurring revenue.
If you want to live hand-to-mouth, chase after anybody and everybody. If you want the best clients, start by focusing on your best prospects – those who want and need your special skills, and the benefits they bring. Specialize, specialize, specialize.
Cardinal Sin # 3. Thinking Tactically vs. Strategically. When I look at many small businesses, I find that most do not have a business plan. Most financial advisers also lack a concrete business development strategy. They operate day-to-day, and try to develop business as time permits. They might be great at networking, or direct mail, or cold calling, or seminars. But there’s an underlying problem undermining their efforts.
Essentially, these advisors are substituting business tactics (their skill set) for business strategy. When you ask them how they will do in the coming year, they say, “Well, I hope to grow by 10 percent,” or “20 percent,” or “30 percent.”
But hope is not a strategy.
If you assume that your business will succeed just because the market improves, you’re in for a big surprise. If you are still operating as the wind blows, as the currents change, then one year from now your business will most likely be in exactly the same place it is today. You will be a rudderless ship.
However … the most successful financial advisors (and the most successful financial services corporations) share an important characteristic. They are goal-centered. To reference Stephen Covey, they start with the end in mind. Once you clarify your goals and the outcome you want to realize, then you can determine the tactics and strategies you should use.
Number one, set your goals. Clearly, precisely define the outcome you want. Then devise the strategy which will be most effective to get you from where you are to where you want to be.
If I came to your office and said, “I want to invest $100,000 in this mutual fund, and I want you to double my money within a year,” you would undoubtedly reject the opportunity to be my financial advisor. Why? Well, I’m not thinking strategically. I’m thinking tactically, putting my money in one fund.
If I actually came to your office and did this, you would question … well, let’s just say you would have questions. Out of concern, you would ask … about my salary, the nature of my career, my time horizon, my retirement date and my income goals. You would inquire as to my lifestyle priorities, my family priorities. You would try to discern my risk tolerance. You would want to consider every possible factor, and only after discovering and assessing these factors would you create a plan – a strategic plan based on specifically on my short-term and long-term goals.
The shocking thing is, many financial advisors fail to plan this way for their own careers and businesses. They run their businesses tactically, going from one action to the next. They must start running their businesses with a strategy based on pre-determined goals.
Cardinal Sin #4. No Client Development System. I’ve learned valuably from a brilliant man named Marshall Thurber, who studied with another brilliant man named Edwards Deming. Edwards Deming revolutionized the automotive industry in Japan in the 1960s and 1970s, and Marshall informed me of his brilliant, succinct definition of management:
Management is a system that creates a predictable outcome.
The three key words in that sentence are “system,” “predictable,” and “outcome.” Financial services professionals want a client development system to give themselves a predictable outcome – X new clients and/or $X new revenue in a given period.
A system is a group of interacting, interrelated or interdependent elements forming a complex whole. For example, your car is a system based on interacting parts. Its ignition, steering wheel, drive train, transmission, gas pedal and brakes combine to give you a reliable outcome. This predictable system allows you to get from Point A to Point B in a very predictable manner.
I believe that your business and your business development system should also be very predictable. How many new clients will you attract in the next 30 days? The next 180 days? The next year? Okay, you may have an answer for 30 days, but probably not for 180 or 365. Why?
You don’t have a system. Why is having a system important? It lets you know how much office space you need, how many employees you need, and what sort of problems to anticipate. But most financial advisors are “driving blind.” They have no concept, no clue, and no system to gauge clients or client revenue. You must have a branding system that will reliably, measurably attract business – based not on the weather of the financial markets, but on your brand value to investors.
Cardinal Sin #5. Collecting Customers, Not Clients. There is a profound distinction between marketing and branding. Mostly, that distinction is unrecognized.
It begins with the distinction between “customer” and “client.” A customer is a transaction, a client is a relationship. A customer buys once and may not buy again. A client buys each and every time they have a need for your product or your service. Which do you want, customers or clients?
Obviously, you want clients. However, you are focused on customers – and that is because you are focused only on marketing.
For many small business owners and financial service professionals, marketing is the Holy Grail of business. The myth is: if you are good at marketing, you will succeed. And make no mistake: that is a myth.
Consider this: if a man walked into your office and said, “Hey, if you give me $1.00, I’ll give you $2.00 tomorrow guaranteed,” would you give him a dollar?
Sure – it sounds good. He guaranteed 100% return on your investment within one day. Now, if he walked into 100 offices during the course of the day, chances are he would probably get $100.00.
From a marketing point of view, has he succeeded or failed? He’s succeeded spectacularly. But day two comes around, and he’s not around, and he never does appear … and later, you find out he’s going to jail.
Would you ever give this guy $1.00 again? No. He didn’t deliver on his promise.
Branding is delivering on the promises you make in your marketing.
Any hobo today can get licensed in financial services, make all sorts of outlandish promises and get customers who will buy once. But you don’t want a transaction. You want a client who loves you and trusts you and buys from you over and over again.
That’s called brand loyalty.
Your marketing attracts customers, but the strength of your Personal Brand turns those customers into clients. Marketing is not enough; today, people respond to branding. Your best clients are attracted to your Personal Brand – your evident integrity and value, not marketing claims you made.
Branding is not just the name on your door, your slogan, or your advertising. Branding is much more than that. Branding is everything that you do to attract and maintain quality clients.
If you wrench a prospect into a close, is that part of your brand? Of course. Sales is part of branding. If you opt for high-profile advertising (TV, radio, blimps, billboards), will that create a dramatically different perception of you than sophisticated networking and professional referrals? Absolutely. Marketing influences your brand. Have you ever entered an office and found hideous carpet, shoddy furniture and one producer at one messy desk? Would your impression change if you saw marble floors, cherrywood walls and a gorgeous receptionist? Absolutely. Your personal image and your office image are part of your brand.
I hope you will try to rewire your brain so that when you hear the word “branding,” you think “business development.” Branding is not just style, and not simply claims or promises. Branding is substance and integrity to complement your marketing, your style and your image. Substance and integrity are critical for brand success.
Cardinal Sin #6. Ignoring the Power of a Personal Brand. I ask this question regularly when I speak: “Who do you trust more, corporations or people?” The answer is almost always “people.” I ask my audiences: “Who would you rather do business with more – a corporation, or a person?” Almost always, “a person” wins out.
So if a person and a corporation offer the same service at the same quality and price … who would you choose to do business with, the corporation or the person?
Repeatedly, my audiences choose the individual, not the monolith. They choose the Personal Brand over the faceless entity.
Why? Well, first of all, you can build a relationship with a person. They get to know you, you get to know them. You may enjoy their company.
Second, there’s an accountability factor. Increasingly, when consumers have problems with corporations, they don’t bother calling. The feeling is “why bother – they don’t care about me.” There is no faith that the problem will be resolved, and no fun in dialing up some call center on another continent. On the other hand, if a local professional makes a mistake, who do you call? Well, you call the local professional – and they handle it, because they care about your business.
And third, we have the most invaluable factor of all: rapport, or good will.
Have you ever had a client ask you “How’s your business going?”, and you knew that client was interested in seeing you do well? That’s when you know your client is “with you,” and maybe with you for life. There’s no anxiety, no discomfort, just mutual respect (or camaraderie) born of good will.
Your Personal Brand brought you that moment – and you can’t put a price on how much that moment is worth.
Consumers often perceive that corporations make money from naked greed, off the backs of their employees. Their moneymaking is tainted by a perception of exploitation, and indifference to lives and communities. On the other hand, when you succeed, there is a sense that the money is going back into the community, and that the community ultimately benefits from your success.
We put people first. Some financial advisors think that they can’t possibly build a business around a Personal Brand. Hmm, let’s look around … Charles Schwab … Raymond James … H.D. Vest … Dale Carnegie … Mary Kay … Jenny Craig … from our industry to other industries, giant businesses have been built on Personal Brands. So the two ideas are not mutually exclusive.
Keep in mind, a person can also be a firm. Being bigger is not necessarily better today; a small business can be synonymous with a caring individual.
It’s tempting to believe that branding involves just a few components of business: your name, your slogan, your business card, your image, your USP. In truth, your branding actually is the total system you use to attract and maintain clients – from lead generation, marketing, sales, and client service to personal image and office design. Branding is actually the way you get and keep your best clients.
If you want to attract the biggest and best clients, then roll out the biggest and best branding techniques to demonstrate your quality. Today, branding is everything.