IFP Conference Report 2015 Day One

As a long-standing member of the Institute of Financial Planning I have always enjoyed attending the Annual Conference, held for the last few years in the luxurious surroundings of the Celtic Manor Resort in Newport. Today is the first day of the Conference and it’s already provided plenty of meaty food for thought.

I first got involved with the IFP in the early 1990’s, and much of what Chesterton House now practices has been learned from that long association. Members have always been generous in sharing ideas, and I’ve been highly impressed by their dedication to delivering great results for clients as well as wanting to know how to run highly effective businesses – two things that go hand-in-hand.

Twenty years ago the Annual Conference was held at Cambridge University, a mark of the aspirations of the leading players in the Institute at that time, during an era when salesmanship was much more highly prized by financial institutions than academic rigour. Since then, the regulators have imposed the need for learning on to advisers in the form of the RDR, which brought in the requirement for financial qualifications for anyone giving advice to the public. Many of the old school decided that was a time to leave the business, but for the IFP it felt like its time had come. With a burgeoning need for high quality advice from a wealthier, older and more time-pressured population facing an ever more complicated world, the IFP’s blend of holistic financial planning skills, high integrity and focus on long-term relationship based business models is proving successful for those practitioners who choose to follow it.

The Conference is the annual coming together of advisers and financial professionals seeking the latest ideas and techniques, as well as to enjoy the camaraderie of ‘front-line’ practitioners. It’s always an inspiring event and this year is proving no different.

We began this morning with a session specifically designed for members of firms holding the Accredited Financial Planning Firm designation, of which Chesterton House is proud to be one. An overview of a member survey that gave us some useful benchmarks on which we could measure our respective firms performance was followed by an excellent talk by Nicky Simonds-Gooding of Gazing Performance Systems about how to raise your performance in an increasingly pressurised world. Nicky taught us to use the Samurai principle of the ‘Double Gaze’ – being able to focus intensively on specific details whilst still having an eye on the Bigger Picture, something that resonated strongly with our approach at Chesterton House. She went on to remind us that the High Performance mind set says that however good we are, we can always improve, and suggested some techniques for generating that improvement. Inspiring stuff.

The Institute’s AGM was followed by a session discussing the future of the IFP, which has just agreed to merge with the Chartered Institute of Securities and Investments, a much larger body with an academic base. This has been a big deal for IFP members and, amongst general approval of the potential benefits of the deal, there was concern that the unique qualities of the IFP might be subsumed into the CISI over time. We were assured that wasn’t going to happen, and members were reassured by the obvious enthusiasm for the idea of an expanded organisation being able to spread the word about what real financial planning is and its potential to change people’s lives.

The next session asked, ‘Does Size Matter,’ with leaders of small, medium and large financial planning firms discussing how to continue to deliver a consistent client experience and the highest quality advice as firms grow. This is something that’s particularly relevant to me in my role as Chairman of Chesterton House as our own growth continues, and there were some useful observations from the panel that I noted down.

The next session from Alison Broadberry of Charles Russell Speechlys Solicitors explored the area of Estate Planning for Business Owners. This was another topic of great relevance to me as our Legal Team develops its role in working with families and successful business people to ensure that their assets end up where they intended. Alison explained how a ‘Company Will’ can be used to create certainty for business owners faced with the death of a partner or owner, as well as ways to use trusts to protect business assets on death and massively reduce tax bills. The session was a helpful reminder of these ideas that will be useful when advising clients who are in this situation.

The final session from Michael Langerup of ETF Securities asked, ‘What’s So Smart About Smart Beta’. This was a talk aimed at the investment geeks among us, investigating as it did the market for passive investments based on Exchange traded Funds (ETFs) and the differences between them. If you’re really interested in Systematic Factor Strategies based on key macro risks as a way to diversify your portfolio I’ll be happy to speak to you separately. Or send you to see Michael.

With a lively exhibition area used as a meeting and eating venue for the evening it was great to catch up with some old acquaintances as well as make some new ones. After such an interesting day in a great Conference venue its no wonder some of us keep returning each year.

Tomorrow is an early start as sessions start at 8.15am, and it’s just turned midnight as I write this so I think that’s enough for now. Over and out!

 

Build Recurring Revenue

Andy will be speaking on the subject of ‘Profit’ at three ‘Love Business’ breakfast workshops to be held in Leicester, Nottingham and Derby on the mornings of 23rd, 24th and 25th June 2015 respectively, and he has written a series of blogs to set the scene for the workshops. If you’re in business entry is free. Each one will be packed with dozens of ideas around the theme of doing great business in the new age of the millennial buyer. Click here for more details and a registration form.

Most businesses survive on their next order. If the order doesn’t materialise, their business is dead.

But it doesn’t have to be this way. There is usually scope to focus on building recurring revenue as the route to higher profits, greater predictability of income, and more capital value in your business.

What product, service or benefit will your customer enter into a contract with you to provide? Could you make your life – and, more importantly, your customer’s life – easier by agreeing the details now?

I’m constantly amazed by how many businesses completely fail to capitalise on this future revenue stream. For example, for many years we have used the services of a heating engineer to carry out an annual gas safety check on property we own.

Has the engineer ever suggested a regular contract to guarantee that this important check will never be missed? Perhaps offering priority attention in the event of breakdown or emergency? Maybe even special ‘favoured customer’ terms on other work?

You can guess the answer.

We’ve periodically required our offices to be refurbished and painted. Has the contractor ever offered to schedule future work in advance to an agreed schedule on a regular monthly payment scheme? If so, might there have been other work that could have been included on the schedule – other properties, or maybe our home?

I’ll let you speculate on whether this ever happened.

When we’ve taken a car for service, did the garage recommend a service plan to cover the cost of future work and guarantee a high standard? No – although the very same garage offers a five year service plan on a new car we bought from them.

I could go on and on (and as my wife tells me, I often do!).

But you get the idea.

Some businesses don’t lend themselves to this type of regular-payment arrangement, but in my experience they are the exception, not the rule .

So let’s say you achieved this, and were successful in getting a substantial part of your work onto a recurring, contractual basis. What implications would that have for your work scheduling? For your staffing needs? For your ability to seek efficiencies in delivery as a result of your new focus on consistently repeated processes?

Being able to predict revenues, costs and profitability in advance, what effect would there be on the value of your business to a potential purchaser?

Of course, if you’re going to make promises you need to match them with great performance. Don’t offer what you can’t deliver.

But for many customers seeking great service from a business they can trust, entering into a long term contract is one less thing to worry about. And one more step towards your highly successful business.

Income Less Expenses Equals Profit

Andy will be speaking on the subject of ‘Profit’ at three ‘Love Business’ breakfast workshops to be held in Leicester, Nottingham and Derby on the mornings of 23rd, 24th and 25th June 2015 respectively, and he has written a series of blogs to set the scene for the workshops. If you’re in business entry is free. Each one will be packed with dozens of ideas around the theme of doing great business in the new age of the millennial buyer. Click here for more details and a registration form.

I have a friend and long-standing client who is focused on cost reduction in his business, and has been for years. Over time his business has become more efficient, leaner and better run.

His problem is that, in all of that time, his turnover has remained stationery. He now delivers his service for less money than he did ten years ago. His business is slowly, inexorably, strangling him to death.

He hasn’t learned the lesson that Ken Blanchard expressed in his seminal book, ‘Big Bucks,’ the third of his cardinal rules of business. It’s a simple rule, and it says ‘Income Less Expenses Equals Profit.’

Now you might imagine that is just what my friend is practising. If you do, you’ve missed the most important part of the equation.

There are two variables in play here; Income and Expenses. One has limited application. The other is completely without limits. Which will you spend your time working on?

Let me expand. You cannot cut your expenses by more than 100% of their current level. The more you cut, the harder it will be to grow. A business spending nothing is unlikely to move forward (although if you know of a way to run a business with zero costs, I’m all ears!).

Income, on the other hand, can be expanded exponentially without limit. Yes, this expansion is likely to mean higher costs, but my point is that the fastest way to more profit in your business is more income, not lower costs. That’s why the world’s great companies devote so much of their revenue to marketing and revenue expansion.

My friend lives in the shadow of the stigma of failure. Yet unless he changes his ways, failure is inevitable. In your business, are you prepared to countenance the risk of success by focusing on growth?

Profit is a Way of Being

Andy will be speaking on the subject of ‘Profit’ at three ‘Love Business’ breakfast workshops to be held in Leicester, Nottingham and Derby on the mornings of 23rd, 24th and 25th June 2015 respectively, and he has written a series of blogs to set the scene for the workshops. If you’re in business entry is free. Each one will be packed with dozens of ideas around the theme of doing great business in the new age of the millennial buyer. Click here for more details and a registration form.

In your business and mine, profit is a state of mind and a way of being. It derives from how you see the world, which in turn reflects in the actions you take and the results you achieve.

It sounds obvious to say that making more profit is the first objective of business, but in my experience that most often isn’t true, especially in smaller businesses. Ultimately you are driven by your values, which are the keys to your world. Understanding your own values is essential if you are to leverage your effectiveness.

For example, if you are in business, will you act to put more money in your bank before you focus on producing a great product? Before excellent design? Before building a first class reputation and the respect of your customers?

Is profit more important to you than working with a great team? Enjoying turning up for work each day? More important than doing work that fulfils you and gives your life purpose?

Or do you believe that doing these things will lead to profit? If so, how will you know?

Do you actually believe that making high profits is a ‘good thing?’ Or do you carry a secret belief around with you that suggests that companies that are highly profitable are somehow unethical, devious or self-serving? If you do, you’re not alone.

Who knows, you may be right.

If you’re running a registered charity.

Assuming that you’re not, perhaps it’s time to get your thinking straight about profit.

Here’s my view;

The level of profitability in a business reflects the value that the business delivers to its customers multiplied by the efficiency with which it delivers it.

That efficiency extends into all areas of business activity, encompassing production, finance, sales and marketing, people, etc. It’s what makes for the day to day challenge of running a successful enterprise. It has to be at the heart of everything you do, or eventually your business will fail or, much more likely, it will be completely without teeth in the fight to deliver your best work to the widest audience.

Which is where your profit will come from.

Ken Blanchard expresses this superbly in his excellent book ‘Big Bucks.’ In it, he describes the three cardinal rules of business.

Firstly, your business must be about something much more important than just making money.

Secondly, making money has to be the most important thing.

The resolution of this apparent dichotomy is what makes good businesses great. My advice is to get very clear about what your business brings to the world in words that are meaningful and inspiring to both you and your customers before you try to figure out how to deliver it profitably.

And the third of Blanchard’s cardinal rules? That’s for another blog.

 

 

Beauty And The Beasts

As our plane gains height above Naples we get a fantastic view of the lights of the city spreading out before us, the dark shadow of Vesuvius just visible in the background. The last night-time takeoff we experienced was at Los Angeles, and we remember being impressed by the clearly laid out grid structure, each ‘block’ in sharp definition. Here perhaps it’s no coincidence that the city from the air resembles a plate of spaghetti, with the sodium lamps even adding the hue of tomato sauce.

So what are my impressions of Italy after our first visit?

It’s tempting to continue the American comparison, not least because the place is full with Yanks. I’m sure that Sorrento, our home for the last week, is no more representative of Italy than L.A. is of the States, but it’s all I’ve got. I’m sure you’ll draw your own conclusions if you’re familiar with the country.

Sorrento and the Amalfi Coast are very lovely to behold. Yesterday we took the boat to the island of Capri, probably the jewel in the area’s glittering crown. Riding the chairlift to the highest point on the island was an amazing experience, and the views from the top were stunning, not least the near 2,000 foot sheer drop to the sea below. The limestone cliffs, the sun reflecting off the azure sea, the multicolored buildings below – if you’ve seen it you’ll know what I mean, and also agree that words can’t do it justice.

Capri View

Capri View

One reason that the Americans come here in droves is clearly because of the antiquity of the place. In San Diego, California, our bus driver proudly showed us the City’s oldest building, dating back to 1850. Here, our walking tour of Sorrento included a visit to a pub proudly displaying a portion of original 2,000 year-old Roman wall in its basement along with a number of earthenware pots discovered during renovations. It could easily have been part of the pub run by the landlords’ ancestors.

Of course, many Americans have Italian roots, their own ancestors moving continents only a generation or two ago. No wonder they want to explore their past.

It’s no wonder either that Americans are so entrepreneurial given our experience in Sorrento. Every restaurant, it seems, has a staffer stationed outside ready to explain why you should visit their establishment, pushing a menu into your hand whilst pointing out the chef’s recommendations. Every shop beckons you inside, and they all have their sales pitch. Capitalism is in full swing here.

So why is Italy apparently in such economic trouble whilst it’s sons and daughters in the US are racing ahead?

I don’t know the answer to that one, although I suspect it is to do with a combination of politics, Eurozone austerity and demographics. However one factor that I’m sure is a contributor is the absence of the large corporation.

In America the streets are dominated by the big chains, from McDonalds’ to Applebee’s, from Days Inn to Marriott, and from Starbucks to Dunkin Donuts. Here there is no sign of any of them. On the contrary, every establishment we visit seems to be owned and run by a family, anxious to please and committed to great service. It’s one of the features that makes a visit here so enjoyable.

We order some bottles of Limoncello, the delicious local liqueur speciality. We are served by Roberto, who proudly tells us that he is the sixth and youngest child in his family. His parents run the farm that supplies produce to the shop, whilst his sister manages the fashion store across the road that is another family venture. He seems very happy, with no plans for world domination. This is a family business, not a corporation.

I’m intrigued by this so I look up the statistics. According to a report from PwC, in 2014 American companies accounted for 47 of the top 100 firms in the world. Italy had 1, Eni Spa whose oil and gas business was ranked 92nd (the UK had 6). I’m not at all surprised.

Now I’m a fan of business, and I understand that they need to grow to survive. But I have to say that it would be a real shame if Italy – or at least the bit of Italy we got to see – got taken over by mega-corporations. It’s happened elsewhere, not least in the States where many people lament the loss of the ‘mom and pop’ stores that used to be the backbone of small town retailing across America, squeezed out by the Wal-Mart’s and the Safeway’s.

Ultimately it will be the consumer who chooses where and with whom they want to shop, and times of austerity make it easier for the retail big guns to attract business, so who knows what the future may bring.

But I suspect that, so far as Sorrento and the Amalfi coast area is concerned, it will be business as usual for a while yet. So if you haven’t yet discovered this lovely area, come and visit Roberto and friends. I’m sure that, like us, you’ll get a very warm welcome.

 

A Lesson In Entrepreneurship

I hadn’t heard of Graham Mulholland or his company, epm:technology, before last Thursday. If I had passed him in the street I doubt I would have given him a second glance. A quiet, unassuming figure, slight of build and modest in dress, Graham doesn’t come across as a person of great power.

Until you start to listen to his story. Because Graham is one of the finest examples I’ve ever come across of a true entrepreneur.

I was at Simon Bozeat’s Midlands Leadership Experience Money Debate listening to a group of successful local business people talking about how they did it and what they’ve learned. Gold dust to someone like me.

I’m always interested in the characteristics of successful business people, and how they got to where they are. There are some common features that are evident across this group, and Graham exhibited many of them. Features such as;

Vision. Graham told how he had realised that his business needed to grow, and that meant a new building. He described his vision of a factory purpose built for his business, a shining example of a modern icon for the high-tech field he operates in, with room to grow in line with his plans. The resulting construction (so new it doesn’t yet appear on Google) is clearly a product of Graham’s imagination and vision and he’s obviously very proud of it.

epm technology building

Single-mindedness. Graham negotiated government funding for the building project, tapping into an allocation of money available to businesses in the Derby area. When the auditors charged with approving the grant checked Graham’s books, they questioned why he was writing off a sizeable value of machinery to purchase new equipment at the same time as moving to the new premises. Graham pointed out that the project was designed to future-proof the business and relying on ageing plant, despite it still having life left in it, wasn’t part of the plan.

The auditors prevaricated. Graham dug in. If he couldn’t build the project as he’d envisaged it, he told them, let’s call the whole thing off.

I believed he would have done, too. They obviously believed him as well, because he got the money, got the new machinery, and created the platform for his business that he’d set out to achieve.

Problem-solving. As an engineer at the leading edge of technology, Graham is obviously used to solving problems. But what was so impressive about his approach was that he doesn’t just solve problems – he blows them apart. Like a true entrepreneur, his mind set is to view problems as a challenge to be solved, and if you can’t go round it, or over it, or under it, then just go straight through it. Very inspiring.

Courage. Graham described the process of acquiring other businesses along the road, and how he was doing deals with companies at a time when his own business wasn’t in the best of financial shape. Yet he knew that the acquisition was the right thing to do, and he made it happen.

Self-reliance. Whilst Graham clearly understands how to build a great team of people, he also realised that in making the decisions he needed to make he wasn’t going to get support from some key players, especially the banks. His willingness to look for other options meant that, instead of being in hock to them he was a few steps ahead, meaning he could dictate terms when it mattered.

There were other qualities I could highlight, but you get the picture. The point is, if you want to get things done then find someone like Graham in your life or your business who will show you that you don’t have to take no for an answer, and that if your vision is clear enough you really can change the world.

Thanks Graham, and the other speakers at the event, for sharing your story. I for one appreciated it.

If you’re interested in meeting people like Graham, the Midlands Leadership Experience is a great way to do it. You can register for more information on their website.

 

Standing In The Way Of Trade

I’m in Cologne, Germany, a city with a history from pre-Roman times. Like so many great cities, Cologne was built on trade, being ideally placed on the mighty Rhine and an important crossroads for different peoples over the centuries. It’s magnificent Cathedral is now one of the most popular attractions in Germany, with an average 20,000 visitors a day.

Cologne Cathedral

Despite losing almost 9 out of every 10 buildings in the Second World War, Cologne has reinvented itself as a new trade centre, with its easy access by plane, train and automobile making it a highly successful conference venue, it’s Koelnmesse centre hosting 2,000 conferences for 2.7 million visitors each year. It has also built a reputation as a  media town, with major TV networks and production facilities based here.

If you want to do business it certainly pays to stand in the path of trade. Open your shop where the people are, or where they can get to you easily. Even just being on the sunny side of the street can make a big difference.

Although opening your restaurant in the shadow of a Cathedral with this many visitors would still seem a wise business decision to me.

Controlling The Crazies

Recently I met with David Williams who has been instrumental in building Geldards into a leading East Midlands law firm.

Among numerous insights that David generously shared with me was his observation that you will employ people who are crazy and people who are sane. His job, he reflected, has been to make sure that every crazy person in his organisation was paired with a sane person.

Putting crazies with crazies is a recipe for chaos. But putting the sane with the equally sane means surefire stagnation.

I’m all in favour of giving my organisation a crazy edge, but I don’t think our business would work if we were completely bonkers.

Hire Great People, Then Get Out Of Their Way!

Sometimes the content for these blogs gestates over a period of time with various ideas coming together. Other times it just springs out of somewhere, often a conversation I’ve had with someone, and that was what happened today! So this blog is dedicated to you, David. I hope you find it useful.

We were talking about the problems of running a business and in particular finding really good people to be able to drive things forward for you. He had found a potentially really good candidate who could really take his business forward with lots of knowledge and industry expertise; but the asking price was too high. So what is reasonable to pay for a highly productive member of staff?

To help answer this question I turned to some of the people that I’ve found helpful in my quest over the years and the first one of those was Jim Collins. Jim has written a couple of books, one of which I found extremely helpful in formulating some of the philosophies in my business. It’s called ‘Good to Great,’ and it’s a classic. Some of the key ideas from the book are listed on Jim’s website at www.jimcollins.com . Let me take just one of those for you now.

 

It’s headed ‘Disciplined people – ‘Who’ before ‘What” and the way that Jim Collins describes it is to imagine yourself as a bus driver. The bus – your company – is at a standstill and it’s your job to get it going. You have to decide where you’re going, how you’re going to get there, and who’s going with you. Most people assume that great bus drivers (read: business leaders)immediately start the journey by announcing to the people on the bus where they’re going; by setting a new direction; or by setting out a fresh corporate vision. In fact the leaders of companies that go from ‘good to great’ start not with ‘where’ but with ‘who’. They start by getting the right people on the bus, the wrong people off the bus and the right people in the right seats; and they stick with that discipline –  first the people, then the direction – no matter how dire the circumstances.

 

Collins illustrates this principle by telling the story of the CEO of Fannie Mae, the big mortgage Corporation in the States, David Maxwell. Fannie Mae was losing $1 million every business day and the board wanted to know what he was going to do to rescue the company. Maxwell’s response was to say, you’re asking the wrong question. To decide where you want to drive the bus before you’ve got the right people on it, and the wrong people off it, is absolutely the wrong approach.

 

He told his management team that there would only be seats on the bus for ‘A-level’ people who were willing to put out ‘A-Plus’ effort. He interviewed all of his team and told them all the same thing; this is going to be a tough ride, it’s going to be demanding. If you don’t want to go along, that’s fine, just say. But now is the time to get off the bus. No questions asked, no recriminations.

 

When he put that to all of his executives, 14 out of 26 got off the bus. He replaced them with some of the best, smartest and hardest working executives that he could find, and with the right people on the bus in the right seats he then turned his attention to the ‘what’ question, and only then did he try to address that. By the end of his time with Fannie Mae, Maxwell had turned a performance of losing $1 million a day into earning $4 million a day at the end. Getting the right people on board was crucial to that success.

 

Here’s another article by Jim Walton, President of Brand Acceleration Incorporated in America. He describes how a great business friend of his was running a highly successful organisation with just two support people in his office. When asked how they managed that work load the boss had one simple answer; ‘These are the best people in the industry. I make it a point to hire great people, pay them very well, and then get out of their way.’

 

He gives the example of another boss with a similar style. On one particular day, he says, he had a management related question that he reluctantly took to the boss. After asking his question, the boss calmly walked across the room, closed his office door, and came back to his desk. Sitting down he said, ‘Jim we hired you because you’re very good at what you do. You’re paid very well and I’m pleased with your performance. However; if I have to handle management issues for youthen I don’t need you. Other than our regular P&L meetings and occasional chitchat at the coffee machine, we don’t really need to talk. Do we?’

 

That’s what it means to hire great people, pay them well, and then get out of their way. If you can find someone who can be creative, productive, intelligent, efficient – and those people are out there – how much are you prepared to pay them? That’s the question I would ask. Because when you find someone like that you really don’t want to stint.

 

So really there are two questions here. Firstly how deep are your pockets; but secondly -and this is actually much the bigger question – are you the sort of person that can pay them well and thenget out of their way? That takes a lot of confidence, a lot of trust, a lot of discipline, but in my experience it’s the way to riches.