Our business advisory/CFO clients are only human (queue the
'80s song by the Human League).
Humans are not necessarily logical. According to several studies (
here's one),
emotions drive more than 80 percent of our decision-making, while logic makes up the rest.
And, because 99.7% of all businesses are considered small businesses, they are all ran by - you guessed it - humans.
Therefore, our target clients don't make decisions logically.
(If you've been a CFO/business advisor for any length of time you've probably have found this out.)Most of the problems in their business are usually a
direct result of their (imperfect) behavior.
Logic says that if a client takes on a business loan, they won't spend it on non-profit producing expenses (like taking a vacation or decking their office out with high-end furniture).
Logic says that a client will be highly disciplined and focus only on the activities that will help them have a growing and more profitable business.
Logic says that a client will handle all issues in their business with empathy, sound reasoning and level-headedness.
Of course, we all know that logic doesn't prevail.
If a client didn't use logic to
get into their difficult situations (like a poor performing business) in the first place, we cannot expect them to use logic to
get out of the situation. We cannot expect them to all of a sudden change their behavior to something that's more logical.
So, what can we do instead?
We can appeal to their
emotions by helping them experience the powerful feeling of
momentum.
If they experience
momentum, they'll feel
motivated.
And
motivation is needed for them to change their behavior.
So,
momentum fuels motivation.
Here's two ways we can help our clients gain that much needed momentum so that they'll feel motivated to take action.
1. Set realistic targets for the drivers of revenue, profit and cash flowAt the beginning of an engagement (and annually thereafter),
we recommend you should set targets for the drivers that drive revenue, profit and cash flow.
However, these targets must be realistic. If they're not realistic you risk the client not feeling momentum.
If a client had a Gross Profit of, say, 18% last year, it would not (probably) be realistic to set the Gross Profit target at 50%.
If you set too high of a target, you run the risk of de-motivating your client because they feel they'll never win.
Humans like winning.
2. Give your client attainable 'objectives'Bottom line - we've got to get our clients to
take action.
To do
something.
To do something that will, hopefully, help them have a growing and more profitable business.
In our world, this means that we've got our clients to take action on the most important drivers that will help them stay on track to
hit their targets.
To do this, we've got to give them objectives (specific areas that you want them to focus on that will help them stay on track to hit their targets) that are
attainable within a
short period of time.
This means three things must happen:
a. There should be no more than
three objectives (less is better).
b. The objective must be written so that it's
attainable (realistically can be accomplished).
c. The objective must be written so that it could be accomplished
within the next 30 days (give or take).
Why? Because we want to give our clients a feeling of
momentum.
If you give your client a ton of objectives to focus on, and each objective is so large that it couldn't possibly be accomplished within a month
they will get frustrated.
This will produce the opposite feeling of momentum. This will result in them getting discouraged, upset, and feeling like a failure.
The bottom line: our clients are human. Our job is to motivate them to take action.
To get them motivated we need to give them the feeling of momentum.
As the old adage goes, "How do you eat an elephant? One bite at a time."
(No ill-wishes to elephants).