Financial Advisors

Turning Entrepreneurial Insights into Actions

Understanding the financial health of a company is critical for all business owners, leaders and investors.

That’s the “lens” one of our associates, Jack, has in mind. He is working with a privately owned business “suffering” from the speed of their success and was retained to reorganize teams and departments, advise on further hiring and to assist with business culture. He called me to get some advice.

Jack explained that too many daily changes to plans and, more worryingly, little budgetary control were real issues. He was troubled by the company's financial health and believed that most, if not all of it, stemmed from the owner, Steve, who appeared to have a total disregard for financial planning and analysis.

For example, Jack referenced the purchase of top-class vehicles for Steve and his second-in-command, followed by the purchase of a fourth warehouse in anticipation of use, but with no contracts on the books to support the buying. In fact, simultaneously, previously acquired warehouse remained empty and unused.

Fiscal control is not a given

This entrepreneur-business owner, Steve, was on an upward incline, but Jack discerned that he was heading the business into disaster if no fiscal control was asserted. Several department managers told Jack they had queried the lack of budgetary control with Steve, but to no avail. Instead, they were concerned that Steve was chasing too many contracts without clearly defining a) what they added to the business and b) defining the return on considerable investments.

Jack's discussions with Steve only served to concern him further as the response was always the same, “I'm going to be the biggest and the best; I'll get to the details later." At this point, Jack realized he was dealing with a behavior issue and not a strategy one; hence coming to talk to me.

Measure risk, success factors

Based on a behavioral analysis finding, I advised Jack to focus on potential performance risks and performance success factors.

The results of the discovery process that Steve completed revealed:

  • A 90% predisposition to take inappropriate chances.
  • An 84% propensity to set overly ambitious goals.
  • An 82% tendency to be financially disorganized.
  • A 76% high desire to spend.

This insight made it clear that Jack should focus on Steve's financial behavior driving his interactions and decisions.

Reveal, then manage

For any person, regardless of their role in life, understanding what drives decision-making around the emotion of money and the entrepreneurial hunger for success might genuinely be inherent and in need of management.

Why? We all have inherent behaviors – of which we may not even be aware – and those can really be a challenge when money and money decisions come into play. When these are revealed, understood and managed, success is far more likely to be achieved.

Entrepreneurial success begins with self-awareness: Having a clear understanding of your entrepreneurial character, personality, strengths, limitations, motivation and emotional intelligence is crucial.

Quantifiable characteristics

Our research over 20 years has established five characteristics often found in successful entrepreneurs who have revenues over $1M (and present more strongly in those with revenues over $10M). If known and managed, success was an outcome. If not, the venture was more likely to fail.

The “fiscal five” characteristics are:

  1. Resilience - the ability to achieve results, manage setbacks, and rationally take quick action.
  2. Risk-taker – capacity to confidently take risks and be tolerant of losses.
  3. Creativity – inherently innovative with ideas and seeks to differentiate.
  4. Work Ethic and Focus – pursues goals and is often ambitious and competitive, in thoughtful, strategic ways.
  5. Charisma – outgoing, connects with a lot of people, and influences people to follow them.

Armed with this behavioral insight, Jack was able to work with Steve to streamline his processes and achieve his goals. But crucially, it required Steve to understand his financial personality and how to manage it. And importantly, he needs to avoid the triggers that would take him off course again.

Our two decades of behavioral research around mastering and managing “entrepreneurial style” is voluminous enough that it now fills an e-book, so we will no doubt be addressing various aspects of this again in this space. In the meantime, if you have entrepreneurial insights or challenges to share, I’d love to hear from you and may be able to help roll our research into your solutions.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Hugh Massie

As a Behavioral Finance Insights Pioneer and Identity Trailblazer, Hugh Massie empowers advisers, business leaders, families and individuals to unlock their identity in order to accelerate dramatic change and discover how unknown behaviors – which intensify through un-managed differences, money attitudes, pressure and emotions – derail performance.

Read Hugh's Bio