Don't Be Afraid to Grow Your Firm

There is a common myth among many entrepreneurs that running a big business is harder and more complex than running a small one. This fear of complexity often prevents firm owners from taking their business to the next level. This is especially unfortunate because the belief that bigger means more complex is a total myth.

The sheer size of a company is not what drives complexity. Complexity comes from a lot of different areas, but size typically isn’t one of them. Your business model and the structures and systems you have in place (or don’t have in place) are the biggest drivers of complexity.

Big businesses can actually be less complex to manage, especially if you put the right business model, infrastructure, and people in place. For example, a big firm running a single service model will be less complex than a small firm running 10 service models.

So when the time comes for you to decide whether or not you want to grow your firm, don’t let fear of complexity be what stops you from answering “yes.”

The Myth of Scaling

As firm owners enter their third or fourth year, they often start to reach capacity as their brand is established, they're getting consistent referrals, and their marketing efforts are finally paying off. At this point, they have a decision to make.

Will they grow their firm, or stay small? Do they want a microfirm (shout-out to XYPN member Breanna Reish for coining that awesome term), or a megafirm?

I see a lot of misconceptions around what life looks like on either side of that decision. One of the most common is that being the owner of a big business is more difficult than being the owner of a small one. As XYPN LIVE keynote speaker Michael Gerber explains, ultimately, business is business. Just because a business is big doesn’t mean it will be hyper complex. Similarly, just because a business is small doesn’t mean it will be super simple.

I’ve seen this through my personal journey with entrepreneurship. I always thought I was going to be the “small firm guy.” I would keep my firm small—just me, maybe one or two other advisors—make a bunch of money, and not work as many hours (sound familiar?).

And then Michael and I launched XY Planning Network.

Before XYPN, the biggest company I ever worked for in my professional career had a total of six people. XY Planning Network now has 32 team members within its family of companies.

I quickly learned that life running a 30+ person company is not nearly what I thought it was going to be. I work fewer hours now as the CEO of two companies (with a total of four entities) than I did when I was on a two-person team.

Don’t be fooled into thinking that staying small means you get to work less hours. Very often, that’s not the case. When you’re the only person in the firm, you’ll work as many hours as you have to, whether that’s 20, 40, or 60. You’re on call all the time, whether you’re on vacation or not. If something goes wrong, it’s up to you and you alone to fix it.

When you are your only employee, you have to wear what can feel like a hundred different hats: COO, CEO, CMO, CFO, CCO, the list goes on and on…and on. While the control can be nice, this is actually much more complex than managing a team of experts. When it starts to feel like too much, it might be time to consider growing your team. But before you make that first hire, you have to be ready to let go and delegate. If you're not willing to do that, your business will never grow.

Stop Doing, Start Delegating

Learning to let go and start delegating is incredibly hard for business owners. In our first year or two of business, we’re on our own. We’ve built everything from scratch and we have a very particular way of doing things. We believe our way of doing things is the best way—the right way.

We are so used to doing everything ourselves, which makes it so hard to let go. This is where hiring becomes critical.

One of the most difficult transitions for leaders to make is the shift from doing to delegating, or leading. In the short term you may have the stamina to get up earlier, stay later, and out-work the demands you face. But shrinking resources and increasing demands will eventually catch up to you. At this point, how you involve others sets the ceiling of your leadership impact. The upper limit of what’s possible increases with each new hire you empower to contribute their best work to your shared priorities. Similarly, your power decreases with every task you unnecessarily refuse to relinquish.

You need to put yourself in a position to shape the thoughts and ideas of others instead of dictating their plans. Have a sought-after perspective but don’t be a required pass-through. See your own priorities come to life through the inspired actions of others. These are the signs of being a great leader of a great team.

Curb your survival instinct to protect your work. This will only dilute your impact.

The 50-40-10 Management Philosophy

I’ve talked before about the 50-40-10 management philosophy. It goes like this:

50% of the time, a team member completes a task exactly as you would have.

40% of the time, they complete a task differently than you would have, but that doesn’t make it wrong. They may use a different process, or different tools, but ultimately the way they completed the task isn’t wrong, it’s just different from how you would have approached it.

10% of the time, the team member has completed a task incorrectly. This is where you need to spend your time when managing people.

Unfortunately, a lot of entrepreneurs get stuck in the 40% zone, and that’s really where micromanagement lives. If a team member is doing something a way that works, and gets to the right answer, you have to learn how to let it go. Your way isn’t the only way. Moreover, your way might not actually be the best way. You must allow your team, and in turn your business, to thrive. Holding on to your way of doing things simply because that’s the way things have always been done will only stymie growth.

People commonly think managing other people is really complicated and difficult, but if you hire the right people, it isn’t. Your job as a manager is to remove obstacles from people’s way, not dictate everything they should be doing. As long as you bring in the right people, running a big business is no harder than running a small one.

Note: Strategic Coach has a business coaching program designed to help entrepreneurs streamline and hand off tasks as their company grows.

Hire Specialists, Not Generalists

The earliest hires are often the most difficult. Many times with the first hire, business owners hire a jack-of-all-trades: someone who is good at a little bit of everything because you just need them to take a bunch of work off your plate.

The problem with jacks-of-all-trades is that they are masters of none.

As your business continues to grow, you will need more specialists and fewer generalists. I therefore encourage advisors who are making those first couple of hires to hire specialists (a full-time financial planner or full-time operations manager are the two most common), even though these early hires won’t take as much work off your plate as a generalist might.

As your company grows, specialists will always have a place. Generalists, on the other hand, may no longer be the right fit as your team continues to grow. Their role will likely increasingly diminish to nonexistent as your business, and correspondingly your team, expands. Instead of focusing on someone who will lessen your workload the most, focus on someone who is a good fit both in the short- and the long-term.

Want to know a secret? Every team member at XYPN is better at their job than I am. When people are better at their jobs than me, I can’t micromanage them. Moreover, this kind of talent improves your firm. You should not be the only one who makes your business better. Every one of your employees should share that goal, too.

So when you’re hiring, hire someone who is better at the job than you are. Let people shine and focus on their strengths so you can do the same.

Don’t Be Afraid of Growth

The key here is don’t be afraid of growth. Growth can mean many things for your business—serving more clients, building a bigger team and in turn managing more people, bringing in more revenue—but it doesn’t mean that your business will be more complex or that your life as a business owner will be proportionately more difficult. Put the right infrastructure in place, surround yourself with the right people, and above all, let go. Ready, set, grow.

About the Author

Alan Moore, MS, CFP® is the co-founder of the XY Planning Network, a support network for advisors looking to serve next generation clients. He is also the CEO of AdvicePay, the first and only compliant payment processor for financial advisors. He is passionate about helping financial planners start and grow their own fee-only firms to serve Gen X & Gen Y clients largely ignored by traditional firms. Alan has been recognized by Investment News as a top “40 Under 40″ in financial planning, by Wealth Management as one of a “The 10 to Watch in 2015″, and was the first recipient of the NAPFA Young Professional award in 2015. Alan frequently speaks on topics related to technology, marketing, and business coaching, and has been quoted in publications including The Wall Street Journal, Forbes and The New York Times. He is also the host of XYPN Radio, one of the largest podcasts for independent financial advisors. He currently lives in Bozeman, MT so that he can hit the slopes on powder days.<