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Systematize, systematize, and when in doubt… systematize

Published: August 15, 2017 by Rob Macdonald, Fundhouse

You are technically competent, that’s why you have a business

“Most businesses fail to fulfill their potential because most small business owners are not entrepreneurs but rather technicians suffering from an “entrepreneurial seizure.” So says Michael Gerber author of the books, The E-Myth, and The E-Myth Revisited.

Gerber says that most small business owners start their own business because they either realize they don’t want to work for someone else, or they want to make more money or have more personal time. As a financial planner, because you understand the technical work of financial planning, you courageously assume that you know how to build a business in your field of expertise. Gerber argues “this is a fatal assumption: that because you know how to do the work of the business, you know how to run the business!” In essence this is the “E-Myth” or “Entrepreneurial Myth”.

You are not just a technician, but an owner and manager too

Being technicians, means an entrepreneur knows how to do the work of the business. But to run a business, you need to play the role of owner and manager of your businesses. Gerber believes that entrepreneurs often don’t elevate themselves above the technician role, or recognize the need to get someone else in to take on the management role if they don’t want to let go of the technician role. And importantly, they often don’t think or act like owners.

So probably the most fundamental mistake that a financial planner makes after starting their business is not to evolve beyond the role of technician. This is where your business started. You start doing financial planning for clients. You are the technician. You are effective at this. Your client base grows. So the management needs of the business grow accordingly. And of course you believe that your role as owner is benefitting. After all, you have more clients. So the value of your business must have grown. Not necessarily….

Valuable businesses are scalable businesses

Valuable businesses tend to be scalable businesses. Gerber likes to tell the story of McDonald’s. When McDonald’s started, there were many “mom and pop” hamburger stores, who in Gerber’s words, were “doin’ it, doin’ it, doin’ it”. Flipping hamburgers, taking money, slicing rolls, and buying supplies. Flipping hamburgers, taking money…you get the message.

Ray Kroc, the visionary behind McDonald’s, in contrast had never made a hamburger. Yet as a milk shake mixer salesman, he had been in approximately one thousand kitchens. And when he saw the hamburger business of the McDonald brothers in San Bernadino, California, he believed that they had the best-run operation he’d ever seen. The restaurant was clean, modern, mechanized, and the staff professional and well groomed. He saw that by being systematic about how you make and sell hamburgers, you could build a business that went beyond being a “mom and pop” shop.

Now any financial planner worth their salt will take umbrage at learning lessons from a hamburger business. But the key lessons we can learn are simple and applicable.

Ray Crock recognized the need to go beyond the technician role. Thinking like a manager and an owner, he was able to see how you could build value in what some might argue is the simple business of serving hamburgers. He also saw how the key to building value in a business is having a system for how your business operates, and that the business is not tied to the persona of the owner.

Systematizing is about process, not necessarily about technology,

So when we talk about “systematize”, it doesn’t mean having an IT “system”, although often that can help! Systematizing is about having operational efficiency through having robust, consistent processes in place. Processes that can be undertaken by people other than the owner.

The obvious argument against this from the financial planning “technician” is that financial planning is a “professional personal service” that requires the “personal” touch, and you can’t systematize this inherent aspect of the business. There is certainly some merit to this perspective. Financial planning is undoubtedly a professional personal service, and ideally a bespoke one at that.

Systematize the predictable, humanize the unpredictable

Yet there is some predictability about a financial planning service. Not all of it requires the astute, qualified, empathetic and intuitive financial planner on the job all the time. In fact these attributes are wasted on many of the repetitive, predictable tasks that financial planners often get drawn into. As US financial planner WJ Rossi puts it, “Systematize the predictable” and “humanize the unpredictable”.

The personal interaction with a client can be systematized to a certain extent. There can be very clear steps that you take each and every client through. For example, you may have two distinct processes for client engagement. One involves new clients, and the other existing clients. Your take-on process is likely to be different from your review process. But without at least these two processes in place, you are very likely to be “doin’it, doin’ it, doin’it ” for each and every client engagement.

Build value in your business, not in any one individual

Instead, if for example, you have documented each distinct step for taking on a new client, this begins to make the business scalable. New staff can be brought in. Trained on the steps in which they are involved. The client experience remains consistent even though there will be those unpredictable moments that are “humanized”, like when you are actually meeting with the client and they require “in the moment” advice on a dilemma they face. Or when they phone your office to moan about the statement they didn’t get. But the more your predictable processes are systematized, the more you begin to build value in the business, rather than in any one individual.

The financial planning industry is systematizing globally

To a certain extent systematization is a global phenomenon in the financial planning industry, driven by the rise of the so-called Robo-advisor. In a recent article, Josh Brown of Ritholtz Investment Management in the US argues that Robo-advice “is just a tool that advisors are using to scale, drive down costs and make the decision process for how to help people a little more streamlined and uniform.” His view is that: “The entire wealth management industry is going to converge with the robo-advisory space in terms of both the degree of automation and the price.” Brown points out that the standalone Robo-advisory businesses are now recruiting humans to support the automated interaction with clients – in effect, they are “humanizing the unpredictable”, and traditional wealth management businesses resourced by human advisors are implementing Robot technology to make their businesses more efficient and scalable – “systematizing the predictable”.

Change is difficult for business owners

Both “Robo” and “Human” businesses are simply making their value propositions more complete, and their businesses more scalable. The problem for many businesse owners, as Michael Gerber identified, is to change the way they operate. Many business owners love “doin’ it, doin’ it, and doin’ it!” Why use a fund manager when you can choose the shares? Why use a DFM when you can pick the funds? Why use a lawyer to draw up a will when you can do it yourself? The idea of systematizing your business is not an admission of weakness. It is not to say that you “can’t do it”! It’s more to challenge you to consider whether you “should” be “doin’ it”.

As Gerber says, “Most business owners think like technicians, constantly doing the work of the business, unable to pull themselves out of the daily grind. They’re so busy working in the business that they don’t work on the business.” He believes that “Doin’ it, doin’ it, doin’ it, will never get you where you want to go.”

Systematizing begins with a shift in thinking

So what can you do about this insight? Gerber suggests that “It all begins with a shift in thinking . . . a change in how you approach your business.” He in fact proposes that you adopt an “entrepreneurial way of thinking” and by doing this that you change your relationship with your business. Easier said than done.

But perhaps a way to start this shift is, every time you do something in your business, ask yourself the following question: Given that I only have limited time to add value to my business, should I be doing this? If yes, keep doing it. If no, ask yourself: could a person and/or a “machine” do this? Then delegate it in the appropriate direction.

As Michael Gerber puts it, “A truly “E-Myth’d” business is a systems-dependent business. In an ideal business, systems run the business and people run the systems. This will ensure that the business can function efficiently without your daily involvement or, ultimately, without your actual presence. If you want to create a business that provides you with a high-equity return, a turn-key (comprehensive) business that gives you more life, you need to create a proprietary business system. We believe that in truth, your systems strategy is your business strategy, and the business systems you put in place are your business.”

Put more simply, if you want to build value in your business, “Systematize, systematize, and when in doubt, systematize”.

Joshua M Brown, If everyone is a robo-advisor than no one is a robo-advisor, posted on, 30 July 2017
Michael Gerber, 3 Secrets Every Business Owner Needs to Know,
WJ Rossi (US Financial Planner), Presentation at Discovery Financial Planning Summit, 2014