The many hats of advice
Advisers who work and own their own practice need to juggle many hats to get the most out of their business.
It is a well-worn saying, but for most practitioners who are also business owners, working on the business is as challenging as achieving that elusive “work-life balance”. As a business owner who is also working in the business, you need to wear two hats - a director’s hat for working on the business and an adviser’s hat for engaging clients and providing quality advice.
Our experience suggests that in many cases owner advisers are pretty good at working in the business as an adviser. This is the area you would usually have experience in and where your interest lies. Working on your business is a different story. Many people who start their own business do not have a lot of experience in small business management.
There is a huge amount to learn, and it can seem like a chore. There are many government regulations to comply with (outside of FoFA) such as employment entitlements, occupational health and safety, tax responsibilities, privacy issues etc. There are also forecasting and strategy plans to develop to ensure your business has the future you want it to have. Then there is the actual day-to-day management of all the people involved with your business – employees, suppliers, customers, contractors, partners, shareholders and other stakeholders.
Public companies have a board of directors, the majority of whom are independent non-executives, to address many of these issues Unless you have multiple shareholders, a board is not necessarily appropriate for a private company, but the ability to step back and take an objective look at your business gives you an advantage in assessing your situation. This objective look is greatly assisted by having a formal structure through which to test ideas and help the decision making process. Many businesses create a Board of Advice for this very purpose.
In addition, for small, privately owned businesses I would recommend these principles to guide good practice managment:
1. Give clearly defined responsibilities to decision makers and design reports that give those decision makers the necessary information to make informed choices, forecasts and devise strategy. The documents that are necessary for this principle:
- A Business Plan that includes business objectives or goals, financial budgets, strategies to achieve them and a breakdown of activity required.
- Job descriptions for managing director, finance manager, operations manager, sales manager, marketing manager (even if these are all the same person) and members of your Board of Advice.
- Monthly financial reports
- A revenue generating activity report
- A Work in Progress report which includes all current activities of both your front and back office staff and which clients have work outstanding.
2. Ensure those in decision making roles have the experience and ability to perform their duties professionally and objectively. You want to have the confidence that decisions made about your business are done so without fear or favour. In other words, it should be the business that benefits from all decisions first and foremost.
3. Write a Code of Conduct for your business.A company Code of Conduct can be displayed in the workplace, be advertised on your website and become a reference guide when debating sticky issues or reminding employees of their duties to the business.
4. Have your accounts reviewed regularly by outside parties. This could be done as an audit by your accountant (if they are not directly involved with other aspects of the business), or through allowing a Board of Advice access to the financial reporting and giving them a mandate to question the finances if anything is not clear.
5. Disclosure is necessary even if you don’t have shareholders. Your financial situation and state of the business is of pertinent interest to your suppliers, financiers, employees and clients. At the very least you should have disclosure policy and procedures in place in case the very worst happens and you have to declare insolvency.
6. Respect the rights of your stakeholders. Again, if you don’t have shareholders and even if you are the sole operator of the business, you have responsibilities to others. Promote effective communication with all stakeholders in your business to prevent any tensions or accusations of being kept in the dark.
7. Manage your risk. Often this is phrased as “minimise your risk”, but risk is an important part of being in business. Most small businesses wouldn’t have been started if it wasn’t for a certain amount of risk. However, it is very important to understand the risks you have taken, know the reason why, the benefit to be gained if it pays off and have planning in place to manage the situation if disaster strikes. As General George S. Patton said: “Take calculated risks. That is quite different from being rash.”
8. Manage the performance of your people and encourage initiative. If your staff don’t know what is expected of them it is very hard for them to deliver good results. Give regular formal and informal feedback to your staff and outline goals for them to achieve. If you communicate effectively with your staff you will know when they can be pushed harder, when they need a break and how your business will be affected in either case.
9. Attract and keep talented, reliable staff by paying them according to their contribution to your business. There are industry guides to pay rates for different levels of skill and responsibility, but I think the best guide to paying your staff fair and equitable rates is to consider what their contribution is to the company. If a staff member is the lynchpin of your business pay them accordingly. I’m not suggesting that staff should be on huge salaries, but if they are truly unique and committed to working with you, reward them. Small businesses cannot afford hangers on. On the other hand a small business can do extraordinary things in the hands of talented staff.
10. Create value by better managing human capital in the form of stakeholders in your business. Ensure commitment to your Code of Conduct, make your reporting and decision making transparent and maintain open communication channels with all parties.
It may take a little time to plan and establish, but once you have your business guidelines in place you will feel less impeded when working in your business and perhaps find that your directors hat fits a little more comfortably when working on the business.
About Matt Fogarty
Matt Fogarty is the National Practice Development Manager at practice management consultancy The Encore Group, a subsidiary of van Eyk Research.
Matt has been crisscrossing the country in the past two years helping practices build business models to survive and thrive under FOFA.
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