For years now I have been hearing that compliance will drive up costs, drive down pleasure, stuff up our businesses, become a bureaucratic nightmare etc etc. And then all of a sudden three things happen, firstly the market starts to harden a bit. Secondly all the focus goes on the other side of finances, firstly the finance companies and advisors and more recently the global melt down. Compliance looks a soft landing! I can still sneak off most Wednesday afternoons to play golf and take all day Friday off.
Someone asked me what would be the ideal business to own in these difficult times. I commented it would good to be the owner operator of a fire and general practice, provided that I stayed on top of the changing needs of my clients.
When you think of all the sectors of our financial community that are under stress from both interior and exterior changes, I think how lucky we are!
However how relatively comfortable we may be, nonetheless to preserve our current status still requires planning and execution.
Let’s have a look at the overall scenario. Nobody is setting up from scratch as a fire and general broker and the days when inspectors would leave the insurance companies to set up their own shingle are long gone.
Secondly the corporate model is taking over, there are fewer and fewer one and two man bands, and there are an ever growing number of medium sized brokers.
Thirdly, technology leads the way. Those brokers who have invested in quality technology are reaping the benefit of reduced costs, easier compliance, and a better understanding of the strengths and weaknesses of their businesses.
Now let’s look at the medium term. Most of us are familiar with the good old insurance clock; it’s currently spinning in the direction of a hardening market, increasing revenues for the broker, but possibly tough times ahead in terms of claims for the insurers.
We have mainly been through this before in one way or another, so apart from paying close attention to our customer needs and managing claims processes in an efficient way, there is not a huge difference for most of us. But what about five years out? That’s an all together different question. Who’s going to buy your business if it’s not efficiently run? Who’s going to merge with you or pay you out after your life time of work, when there are an ever diminishing number of people available to succeed you? For example could you name today four of five people who you think would buy you out in five years time? Most likely the people you think of will be the same age as you and facing the same issues.
Another new issue is that of trust.
Trust and confidence will be badly dented by the events of this year and next, and people will be putting trust as one of their top issues when they look for somebody to give them advice. (That’s unless you are a politician).
So having a plan to not only reinforce the trust that your clients currently have in you, but to see that expanding outwards, should be part of your plan. How?
- Become a local expert. Speak at local events; write articles for your local newspaper, become an identity in the fire and general space. Not only will you further support your relationships with your current customers, but you are likely to pick up some new ones along the way.
- Be a real expert. Attend all of the Seminars, not to enjoy the free drinks and nibbles but to build up your own expertise. People are going to look for a wide range of quality advice from you.
- Have a plan and a measurement system. We are currently handing our pedometers to our clients, we think the measurement of the number of steps we do in a day is a great way of motivating our selves to improve both our physical and mental health. In the same way it is a good idea to know exactly where your business is today by way of value, so you can measure the increase as the years go by. We have plenty of enquiry for valuations, but most of them for the wrong reasons. Things like marital settlements, share holder agreements, or for estate planning purposes. We should do more valuations for people who want to have an independent and objective assessment of the current value of their business, so they can pat themselves on the back each year as they go forward by seeing that asset increase.
In the same way the pedometer gives us daily encouragement to maintain or increase our activity, the knowledge that we are building an asset for ourselves and our family for the future is also an important daily motivator. Indeed when the times get tough, as they are at the moment, being able to see a growing asset in your portfolio is a very satisfying thing indeed. There are not too many other sections of the economy that will share in that opportunity!
Maybe the times that we are going through at the moment are necessary. In the same way that a stream occasionally needs a flood to clean it out of silt and sludge maybe the financial markets are going through the same process. In the same way our particular segment of the market is experiencing some substantial change which again is probably because of it becoming silted up over the years. The vast majority of the people we deal with have enjoyed really good times for the past 20 years; have been able to combine enjoyable work with a pleasant life style and a good income.
The reality of the world has moved on. Those who don’t pay attention to their business and have plans for it may find a very different world this time next year. But maybe that’s the way it’s meant to be. Unless we have tough times we obviously won’t have good ones. Business cycles are just that, cycles, and going into what appears to be one of the biggest down turns in living memory, simply is indicating that in some time in the future an up swing will occur. I suggest that this is a great time to write out what you think are the strengths and weaknesses of your business and what you see for it over the next two to five years. Those who think that the current days will continue “as is” for ever have their heads in the sand .Let’s all look up and not see the current scenario as being difficult or threatening, but rather what it really is, an opportunity in disguise. | 