Recently I made the decision to close my firm. It was more emotional than I expected so I wrote this blog to address the demons in my head.
As we grow older death enters our circle of family and friends. Death is a traumatic experience however some people use their remaining time on earth to share honest and enduring advice. Professor Randy Pausch and his Last Lecture resonated with millions. The honest reflection of a person who knows they have a defined amount of time left on this earth cuts through the typical cocktail party or social media banter and addresses the elephant in all of our rooms. We are scared of dying and when a dying person has the courage to share what the process is like we should listen. A very distant second is our fear of losing our job. Most of the time this is sudden and at best we have two weeks to clean up our desk and complete our exit interview. Your coworkers exchange pleasantries but they avoid you like the plague because they don’t want the boss to think they are simpatico. The story is a little different with a founder. They are the boss so the only people that can fire them are their investors. I was recently told by my investors that I had three months to wind down my business and return as much money as I could. A business death sentence that has forced me to reflect.
I Didn’t Know What I Didn’t Know
Mistake One - I underestimated the motivation of most breakaways to own and run a business. Their common belief was that breaking away allowed them to make more money and be their own boss, which it did. They also belived that their brokerage team could run the new business just like they did on Wall Street. My firm’s business support was ultimately viewed as an expense that could be cut and it was by many of our initial firms.
Mistake Two - The mechanics of running a business were much more important to me than my clients. Another mindset change for breakaways that doesn’t happen on day one is the realization that they do need outside help to improve and grow their business. An essential service most breakaways need is a compliance consultant. Market Counsel isn’t the cheapest but they are the market leader for a reason. Creating a credible growth strategy for the business is an essential item for breakaways who know how to sell but aren’t as knowledgeable on how to effectively position the services of their new independent business. The people at CEG have helped several friends of mine and are worth a look. Each breakaway will identify other needs based on their business plan and professional staff. My only caveat is to not choose your consultants based exclusively on price. Choose consultants who are not conflicted and offer their services at a discounted price that is offset by selling other high margin products you might not need. Sound familiar?
We both didn’t know what we didn’t know on day one.
Over the last seven years My firm has competed against many of the top firms in our evolving space. While each firm has a slightly different value proposition that can be confusing to breakaways and the financial press who both want to define each business in an easy to understand sound bite. Our internal internal research segmented the market into three groups. The brand builders, the platform providers and the strategic investors. The brand builders HighTower and United Capital were very difficult for us to compete against as they had scale, capital and unique advisory tools. HighTower used its scale to develop a bench-marking tool called Blue Print for Growth and United Capital developed a planning tool called Money Mind. The top platform provider Dynasty has a similar value proposition to my firm but they differentiate their offering by providing a client portal and internal experts like, Scott Welch. The multi-billion dollar advisors and the firms they had built were drawn to the ownership structure and support of AMG Wealth Partners. AMG was already road tested by elite money managers like AQR, Harding Loevner and
All of these competitors have succeeded because of their focused message and because of the ability to raise capital to implement their strategies. Unfortunately my firm failed at both.
Business Death Bed Advice