Financial advisors are classic entrepreneurs, often starting a business from scratch with the goal of achieving financial security for themselves and their families. That’s why entrepreneurs with a pattern of demonstrated success — even those from outside the financial services industry — can be tremendously helpful.
In early February, I attended an IT conference in Miami Beach at which I had the opportunity to listen to Terry Matthews, a Welsh engineer who came to Canada in the early 1970s. In 1972, Matthews co-founded Kanata, Ont.-based Mitel Corp., which was bought in 1985 by British Telecom. A year later, Matthews founded Ottawa-based Newbridge Networks Corp., which was purchased in 2000 for $7 billion by Paris-based Alcatel-Lucent. Most impressive of all, Matthews has been involved with 89 tech startups. A remarkable 83 of those have been successful, and Matthews is still active in starting new ventures.
During Matthews’ presentation, he outlined his 10-step formula for new ventures. Here are five key elements that he looks for when getting involved in startups:
1. Focus on solutions, not ideas
In Matthews’ experience, most startups fail because the founders fall in love with an idea. Once launched, the founders become invested in the idea, ignoring bad news and continuing in the same direction, even when it’s clear that they’re on a sinking ship.
That doesn’t mean you should give up if you don’t see immediate success. But Matthews preaches the importance of connecting with customers in order to dig deep and understand their big problems. He calls this being solution-driven rather than idea-driven.
Matthews puts it this way: “If you’re really delivering what customers are asking for and solving their problems better than anyone else, you’ve driven most of the risk out of new ventures. When you’re tackling real problems, you can afford to be patient.”
Such changes need not be a dramatic departure from your current strategy. For example, an advisor recently saw a significant spike in referrals after he called retired clients to suggest that they meet with him to assess their monthly cash-flow forecasts compared with their expenses.
This advisor discovered that this issue is a top-of-mind problem for many of his older clients. Even clients who had absolutely nothing to worry about left the meetings relieved to know that their situation is well in hand.
By addressing a big problem for retirees, this advisor had created peace of mind for his retired clients. That translated into positive word of mouth in the network in which his older clients travel. That positive buzz led, in turn, to as many referrals in the three months after the advisor initiated these meetings as he had seen in the previous three years.
2. Monitor progress against stretch goals
Matthews is a believer in setting ambitious, “stretch” goals. In his view, too many businesses have what he calls a “corner-store mentality” and fail to think big enough. To be effective, these goals have to be tangible and measurable, not amorphous or vague.
Once those stretch goals have been set, Matthews wants to see monthly or quarterly updates on progress measured against those key goals. He looks for concrete actions and specific achievements that can be summarized in plain English on one piece of paper. Matthews insists that this update be written in terms that, as he puts it, “could be understood by Aunt Nellie, who gave her favourite nephew $25,000 to get started.”
3. Establish the right team
Matthews makes a practice of hiring recent graduates who have the drive to succeed but who also demonstrate the ability to function as part of a team. Matthews points to complacency and lack of work ethic as barriers to progress for many small and mid-sized businesses, in which the owners are making a comfortable living and don’t push themselves harder than they have to.
One of the things Matthews also points to is reluctance on the part of many business people to give up equity. In his words: “I’d rather own 20% of a big business than 100% of a small business. Not only is it more profitable, but it’s more fun. If you want to get a 24/7 effort from the very brightest talent, you have to ensure their incentives are aligned with yours. The only way to do that is by giving them equity.”
4. Get constant feedback
Matthews emphasizes the importance of forging tight relationships with customers and constant feedback from them. In Matthews’ experience, access to customers and clear awareness of their needs have been crucial to positive outcomes. All too often, he says, companies go too far down the road on new initiatives before running their thinking past their customers. As a result, these companies find they’re beyond the point of no return.
For the recent graduates who are involved in Matthews’ startups, Matthews advocates setting up an informal board of advisors consisting of retired or semi-retired business people, retired bankers and former partners with accounting and law firms. This board can provide perspective and experience — as well as credibility.
5. Bounce back
Matthews says that the single most important quality required for a successful startup is resilience. You are guaranteed to encounter setbacks; the only question is how you respond to them. After all, the real test of fortitude and commitment isn’t when things are going well; it’s when you stumble.
> Applying The Matthews Formula
Imagine that you had the chance to enlist Matthews as a partner in your business. Here are five topics on which he might ask questions:
1. Focus on big problems
What are the big problems your clients face and how can you solve them effectively? Once you’re engaged with solving big problems, how best can you let prospec-tive clients know about the solutions you have found?
2. Monitor progress against stretch goals
Do you have concrete, ambitious goals for your business? And do you track your progress against those goals on a monthly or quarterly basis?
Examples of such goals could include: upgrading your knowledge level in a key area; strengthening your team; shifting your business model or mix of clients; increasing revenue or broadening relationships with existing clients; regular communication with professionals who are potential referral sources; enlarging the pipeline of prospective clients with whom you’re in regular contact; bringing new clients on board.
3. The right team
Advisors don’t necessarily need the 24/7 commitment that it takes to start the next Facebook, but if you have ambitious goals for your business, you do need an above-average team with above-average motivation.
Have you fallen victim to the complacency and poor work ethic trap that Matthews talks about, even in a small way? If so, what would it take to get you out of this rut? Do you have a high-performance performance culture on your team? If not, what can you do to put a team in place that will allow you to achieve the full potential for your business? Do your people need different skills and training? Do they need a different mandate and objectives? Do you need to adjust how you compensate your team? Or are some of your team members simply not cut out for life in a high-performance environment?
4. Get constant feedback
Are you getting enough ongoing feedback on your business, whether through client surveys, client advisory councils or the kind of informal board of advisors that Matthews advocates? Whichever route you go, understand that constant assessment and outside feedback is the only way to improve.
5. Bounce back
Setbacks are inevitable. What’s your plan to ensure you bounce back from these hiccups on your path forward? How can you build the resilience and fortitude that will carry you through reversals as you move your business ahead?
> Getting Started
One of the challenges when listening to someone like Matthews is applying his insights to your business. That said, it’s remarkable how much of what he talked about is absolutely transferable to anyone who has ambitious goals to move their business forward.
To benefit from Matthews’ talk, you didn’t have to be in Miami Beach — just think hard about the five questions above. And then pick one of them to work on in the next 90 days. If you do that, and that alone, one of our generation’s most successful entrepreneurs will have helped you move your own business forward. IE
Dan Richards is CEO of Clientinsights (www.clientinsights.ca). For more of Dan’s columns and informative videos, visit www.investmentexecutive.com.