The Winning Edge Revisited, by Duncan MacPherson

I believe that you will see two primary types of financial advisors in the future: salaried employees making a decent living and elite entrepreneurial advisors processing their business through respected firms while making awesome incomes. I am convinced that financial services will remain an industry with strong income-earning potential but that those who are adapting at a glacial pace will be left on the sidelines.

The Winning Edge is a fascinating premise with applications to these changes. In essence, The Winning Edge states that the disparities in the abilities of the best and the rest are often small. However, the difference in rewards can be huge.

In seminar presentations, I often use an athletic endeavor as an analogy. For example, this year’s Masters Tournament winner, Tiger Woods, collected just over a million dollars’ prize-money. With a four-round total of 272, he earned about $3,700 every time he hit the golf ball. In the same tournament, last year’s winner, Vijay Singh, carded a four round total of 282, two strokes a round off Tiger’s score. Yet Singh earned just [just? – ed.] $80,000, about $300 per shot. While Woods might have earned ten times more, was he ten times better? Clearly not.

Entrepreneurial Excellence

The key quality inherent in advisors with The Winning Edge is entrepreneurship. In other words, they treat their book of business like a business. Many advisors regard an entrepreneur as a maverick, flying by the seat of his or her pants, living month-to-month to keep creditors at bay while trying to close the next piece of business. True, those types exist. But my image of an entrepreneur, like those described in the E-Myth or The Millionaire Next Door, is the kind of entrepreneur who runs his or her business like a well-oiled machine.

With all respect, I’ve seen a chiropractor, making $100,000 a year in a suburban strip mall, or the owner of a small printing company, who makes $75,000, possess greater entrepreneurial savvy than a financial advisor earning half a million dollars. This isn’t meant as a knock. It is simply based on the fact that the advisor didn’t have to be business focussed, whereas it was non-optional for the chiropractor.

But in next five years, this industry will look very different than it did five years ago. I’m not suggesting that it was easy to earn big money in the past. I just believe it will be much more challenging in the future.

All Systems Go

One of the most important shifts you can make is to adopt a systems-based approach to your business. This means that every process and activity you and your team execute on a daily basis is planned, scripted, rehearsed, refined and well documented in a procedures manual. Before you dismiss this as a trivial and tedious concept, consider two key reasons why you should script your business from top to bottom.

1. Until your methodology is documented, it is not an asset.

2. If you don’t document everything, it is likely that your business will run smoothly only if you are there all the time.

The primary benefit of a systems-based operating approach is that you gain predictability and efficiency. Think of your business and marketing plans as a road map. Your operating manual serves as your Global Positioning Satellite device. Not having this approach would be like walking though uncharted territory at night with only a flashlight for guidance. A good plan, one driven by systems, would be like a beacon five miles off that is guiding you forward. It lets you see past short-term obstacles without drifting off course.

Don’t think of efficiency solely in literal terms. It’s true, you and your team will be more productive, more time and capital efficient in the process. However, what is really exciting is starting to quantify the fact that you are no longer the victim of squandered opportunity. Nor are you reinventing the wheel.

That’s the primary reason why people buy franchises. Anyone could make a sandwich as good as Blimpie Subs or offer business services like MailBoxes Etc. But people buy a franchise because the day-to-day procedures have been or are being perfected so that the franchisees don’t spin their wheels. Try putting your operation under the spotlight for a moment. Could you franchise your business? Could you sell it for a huge sum or hand it to someone to run, guaranteeing him or her a high level of success because of tight operational procedures?

It is an undisputed fact that an entrepreneur must constantly be looking for ways to increase revenues and lower costs. When it comes to increasing revenues, you can either increase the number of transactions you process or increase the size of the transactions. It’s obvious which one is more enticing. And what about lowering costs? Let me give you an example to tie all of this together.

Wal-Mart sells far more goods per square foot than its rival K-mart. However, that is only half the story. Wal-Mart is far more profitable because it actually "makes money" when it buys goods. Long ago, the company realized that it couldn’t raise its prices to increase profits because of competitive factors and market pressures. In response, it started buying more efficiently. Its costs for landing a skid of Tide or a container load of Huggies are so low that the company is able to widen its profit margins while holding down retail prices.

This philosophy can be applied to your business. Your success is no longer just tied to your ability to sell. It will be due in large part to how efficiently you run your business. Furthermore, systems ensure that you aren’t at the mercy of talent alone when it comes to your support staff. I think of my lawyer who, in truth, is held together by his legal assistant. As he said to me recently, "Every time she returns from holiday, I have to give her a raise because she can see how the business nearly caved in without her."

Don’t rely on talent. Become more talented by creating a systematic approach that you can hand to someone else to implement. As I’ve said before, you are truly on the verge of greatness when you have made yourself obsolete, meaning that your business could run like a Swiss watch without you being there every day. It’s not only liberating for the advisor, it’s rejuvenating too.

Most advisors I have met love what they do, but they are getting a little weary. You’ve given a lot to your business; it’s now time for it to give something back. Better efficiency leads to more free time so that you can charge up your batteries and balance your life.

This journey won’t be without its trials and frustrations, however. Shifting to an operational approach requires patience while it gains traction. It will require constant tinkering while you find the right mix of processes. But it will be necessary if you want to take your business to the next level and if you want to avoid obsolescence.

Never at a loss for an analogy, think of exercise. If you did thirty push-ups right now, it would be the last five or ten that would contribute the most to your strength building. However, you had to do the first twenty to get to the last ten in order to feel the benefit. You’ve already done the first twenty by honing your sales and marketing skills and by refining your financial knowledge. Now finish the job by developing your business. You’ll find that your confidence and interest in this industry, not to mention your sense of fulfillment, will be stronger than ever.