The opportunity cost of the control illusion

By Natalie Dolan

Giving up control can lead to even greater control, but taking the first step can be confronting to business owners who may not see the long-term benefit and it can lead to strong M&A opportunities stalling.

Control is often a good thing.

Someone who is in control of their life, financial affairs and emotions is admirable. Similarly, when driving a vehicle or operating heavy machinery, control is critically important.

However, it’s not a compliment to be described as controlling or a control freak. The need to be in control all the time is often detrimental to a person’s health, relationships and happiness.

Therein lies the problem with control.

Too much of a good thing can be hazardous.

For self-employed entrepreneurs, control is clearly important. They give up the ‘security’ of a job and take on the risk of business failure and financial loss for the opportunity to be their own boss, increase their earnings potential and build an asset of significant capital value.

Business owners also cite the freedom and flexibility to choose their hours and terms as a major attraction.

As a strategic capital partner to professional advisory firms, we regularly meet business owners who want to grow, corporatise their business and solve their succession issues.

They have done a fantastic job of establishing their business and getting it to a certain point but are struggling to take it to the next level. They recognise that they need additional capital and expertise to achieve their goals, yet many baulk at introducing a strategic partner for fear of losing control.

They talk about the importance of controlling their own destiny and maintaining balance.

But how much balance and control do they truly have? Running a business is tough, particularly in highly regulated industries like financial advice.

There are strict rules and legal obligations to follow, and they are prone to change. So too are the rules around tax, superannuation and social security.

Business owners must effectively manage risk, people and costs, yet they have little to no control over the price they pay for office space, debt, technology and financial products.

As a result, there’s a constant focus on expense management, meaning business owners end up wearing many hats and working harder and longer than ever.

In many cases, there are also multiple partners and shareholders who all want a say in how things are done.

When looking closely at a business’ structure and operations, the control that principals think they have is an illusion. The are ultimately beholden to other shareholders, regulators, financial institutions and their clients.

Arguably, what business owners want is not control over every facet of their business but autonomy over their lifestyle including the days and hours they work, where the office is located, when they go on holidays, and how they structure their remuneration.

The right capital partner should empower business owners to make those decisions.

Ideally, a capital partner should come alongside business owners to help them scale up, drive efficiencies, and increase capability and capacity.

Sadly, many M&A transactions stall because principals can’t let go of this idea of being in control.

They’re still keen on a strategic partnership but they want to strengthen their position and get to a decent size before doing a deal.

It all sounds fair and reasonable except that when they come back to the negotiating table years later, nothing material has changed. They are still the same size, they haven’t improved their client and employee value proposition, or achieved the short-term goals they set out to.

They’re still grappling with the same challenges around capacity, efficiency and succession.

In life and business, a critical skill is knowing what functions to hold onto, and what to let go of, particularly if others can perform them better and more efficiently.

Advisers are experts in their field and they should control the aspects of their business where they can add value. For example, their strategy, who they employ and how the incentivize them, their offer and how they take it to their market.

However, controlling all things just for the sake it can inadvertently hinder business growth and progress. A partner may be able to help improve a business’ operations, balance sheet and brand, without impacting the autonomy of owners and leaders.

While admitting that you don’t know everything can be difficult (especially if you’re a Barrett), it can also be incredibly releasing.

Ironically, by letting go, business owners can gain greater control and autonomy over their lives by creating more time and space for the people and things they enjoy.

By enabling others inside and outside their business to play a bigger role, they can potentially deliver a better value proposition to shareholders, employees and clients. They can accelerate their growth, and build a stronger, more competitive and impactful business.

Read more of Paul Barrett’s articles in Professional Planner.

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