Episode 136: The Bottom Line - Risk

So the big question is this: how do small business owners like us grow our leadership, develop our teams, and scale our business in a way that allows us to get our products and services out to the world yet still remain profitable?

That is the question, and this podcast will give you the answers.

I'm Bradley Hamner, and this is the Club Capital Leadership Podcast.

Welcome to The Bottom Line, a new weekly podcast series that we drop every Thursday to complement our weekly Monday podcast interviews with the industry leaders. These podcasts are going to be designed to give you short, impactful, and value-driven information that you can start using right away in your business. I value your time and attention and will do my very best not to waste it. Just get what you need and go. So with that, let's get into today's episode.

Are you an agency owner looking to grow your revenue, increase your bottom line, and better manage your taxes? Club Capital is here to help. Club Capital is the largest accounting and advisory firm for insurance agents in the country, providing monthly accounting, tax strategy, and CFO services. Way more than bookkeeping and your everyday run-of-the-mill tax prep, Club Capital is focused on providing financial and tax advisory services that help you plan and forecast your agency's performance. Their financial dashboards and agency forecasting tools help you better understand your agency's historical performance, create, measure future targets, and see how your agency compares to your peers around the country. Imagine what it would be like to understand the impact to your bottom line when deciding to hire a new employee, or forecast the impact rate changes or commission rates will have on your business. With over $200 million in tracked annual revenue and $140 million in tracked annual expenses, Club Capital has the data and the team to help you make better informed decisions for your agency. They will help you turn that back office stress into the backbone of your agency's success by giving you the tools to take your agency and your leadership to the next level. Visit club.capital today to book a solution overview with one of our business consultants. Club Capital, way more than a CPA firm.

Hey everyone, hope you've had a great week. So a couple weeks ago I started in the series, The Most Important Thing, and I got that idea of the most important thing loosely from this book that's written by Howard Marks. He is the founder and chairman of Oaktree Capital. And the idea is really this book is about investing. It has nothing to do with leadership and your team, etc. But I'd picked that up and it was recommended to me, uh, from someone I look up to. And Howard Marks is one of the few people that anytime he writes something, then Warren Buffett reads it. And so if Buffett's reading it, then say it's good enough for me. And what I'm specifically going to talk about today is this idea of risk. And it came up twice in two conversations I was having. And so I'm going to actually read a couple passages to you to kind of frame our conversation. But in particular, the main message that I want to get across that I took away from this, and I've been able to apply it in my own business and think about it in my own business, and hopefully it serves you as well, is the less risk you perceive the more there actually is. The less risk you perceive, the more there actually is. So let that sit. And let me read this couple passages. This is on page 59 in the chapter Recognizing Risk. Now again, this book is written from the perspective of value investing, which obviously Warren Buffett is very famous for, and as, as is Howard Marks. So he says, usually when things have been going well for a while, People tend to say, risk is my friend. The more risk I take, the greater my return will be. I'd like more risk, please. Goes on to say, when people aren't afraid of risk, they'll accept risk without being compensated for doing so, and risk compensation will disappear. One more. There are few things as risky as the widespread belief that there's no risk, because it's only when investors are suitably risk-averse that prospective returns will incorporate appropriate risk premiums. Now, again, basically what he's saying is, is— and he actually wrote an article in— after— this is in 2007. So it's right in the middle. No, no, no, I'm sorry. It was in October of 2009. He wrote an article that was entitled He's talking about the obvious economic meltdown, and it was titled Too Much Trust, Too Little Worry. Okay, well, enough of that. What does this have to do with our businesses, and how can you prove this idea of the less risk I perceive, the more there actually is? Well, let me give you an analogy. If you knew or felt that there was 100%, an absolute 100% chance that you would not get into an accident the next time you drove your car to the grocery store, how would you operate? You would absolutely probably text and drive. You would look at your phone the entire time. Number one. Number two, you would not buckle up. And number three, you would run red lights going as fast as you possibly can because you feel there's a 100% chance that you will not get into an accident. Well, how much has your risk actually gone up that you're going to get into an accident by driving that way? And then number 2, how severe is that accident going to be whether you're texting and driving, not buckled up, and going, uh, well over the speed limit and running red lights, right? So that analogy was really helpful for me to begin to think about, okay, well, how does that apply to my business? If you have a really strong team member, sometimes maybe somebody that's running your business, a 2IC, a second in command, and you think there's no way that they are going to ever leave. Well, that's the time that actually you begin to let your guard down and something like that actually happen.

Are you an agency owner looking to grow your revenue, increase your bottom line, and better manage your taxes? Club Capital is here to help. Club Capital is the largest accounting and advisory firm for insurance agents in the country, providing monthly accounting, tax strategy, and CFO services. Way more than bookkeeping and your everyday run-of-the-mill tax prep, Club Capital is focused on providing financial and tax advisory services that help you plan and forecast your agency's performance. Their financial dashboards and agency forecasting tools help you better understand your agency's historical performance, create, measure future targets, and see how your agency compares to your peers around the country. Imagine what it would be like to understand the impact to your bottom line when deciding to hire a new employee. Or forecast the impact rate changes or commission rates will have on your business. With over $200 million in tracked annual revenue and $140 million in tracked annual expenses, Club Capital has the data and the team to help you make better informed decisions for your agency. They will help you turn that back office stress into the backbone of your agency's success by giving you the tools to take your agency and your leadership to the next level. Visit club.capital today to book a solution overview with one of our business consultants. Club Capital, way more than a CPA firm.

Or what if the last 3 sales hires that you've made have all been hits? And so you think, well, I seem to just have figured the, the process out. I'm going to go hire 2 or 3 more people. Maybe I'll do it all at one time. You begin to let your guard down. You begin to not do some of the things that actually got you to where you are. And so therefore you begin to be a little bit more reckless in business. Now, this isn't to say that you should operate from a constant state of paranoia. That's not obviously going to help you into being able to, to grow and scale your business. But I do think it is healthy whenever you begin to have a little bit of a nagging thought, something that you just have not left processed, you haven't spent the deep thinking time necessary to really begin to unpack that, then I think it's where you need to lean into that. Take some time, go get a legal pad and piece of paper to begin to kind of work through, okay, well, what are some of the things that I can do to not necessarily be completely risk— you're not going to be able to eliminate the risk, but what are some things I can do to begin to control the risk? And he talks about being risk adverse versus controlling the risk. And so I think that in our business, we can do things like that as well. We can begin to put together redundancy plans. We can begin to build a bench for our sales team or a service team so that in the event someone were to leave, then you obviously have a shortlist of people to be able to reach out to, as opposed to having to start from scratch. I think that redundancy plans, even if you go and recently interviewed interviewed Mike Michalowicz, and that podcast is going to come out soon. He talks about the orchestration of, of resources, creating redundancy plans, and the value of actually taking or beginning working to take a 4-week vacation. Because if you're able to take a vacation from your business and your business is able to take a vacation from you, then think about all the systems and processes that you have in place that don't require even your risk. Think about this. What if it's not a vacation? What if you, um, you know, have a severe health crisis that impacts you? I mean, if it's not you, I'm sure you can certainly speak to someone else who is young and has gone through a really tough time with their health, and they've had to be out of work for 3 months, 6 months, etc. And so that— there is risk involved with that. And so I do think it allows us as business owners and entrepreneurs to begin to think about, okay, What are the things now that I can do? And if I can actually begin to think that, you know what, maybe there is some risk, something could happen, and not allowing us to let our guard down, then we can build the right systems, processes in place, redundancy plans, so that if in the event that does happen, we are prepared. So that's been helpful for me to think about business risk in that way. I really love to try to take stories, uh, especially books, uh, podcasts I listen to, things that are seemingly very unrelated to business. I'm actually starting to read some books that are not specifically business books, in fact biographies. And one of the ones I just, um, recently, uh, picked up the other day when I was finishing a book called The 5 AM Club was the book by— what's actually the audio autobiography by Nelson Mandela. I had not known much about his story, and maybe I'll end up doing a Bottom Line episode about that at some point. And so I just started it. But even in just the little bit of what I've read, it makes me think of his situation and how to be able to apply that over to my life and to business. And so I thought I'd share that with all of you. The MIT came loosely from the title of this book. Again, this book is really about investing. I mean, if you're a value investor, love the stock market, I think you would love to read that book. But I thought that idea of risk, the less risk you perceive, the more risk there actually is. All right. Hope this has helped you and to serve you and your business. Till next episode, lead well. If you're listening to this podcast, I know you're someone who has a growth mindset.

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That is the question, and this podcast will give you the answers.

I'm Bradley Hamner, and this is the Club Capital Leadership Podcast.

Welcome to The Bottom Line, a new weekly podcast series that we drop every Thursday to complement our weekly Monday podcast interviews with the industry leaders. These podcasts are going to be designed to give you short, impactful, and value-driven information that you can start using right away in your business. I value your time and attention and will do my very best not to waste it. Just get what you need and go. So with that, let's get into today's episode.

Are you an agency owner looking to grow your revenue, increase your bottom line, and better manage your taxes? Club Capital is here to help. Club Capital is the largest accounting and advisory firm for insurance agents in the country, providing monthly accounting, tax strategy, and CFO services. Way more than bookkeeping and your everyday run-of-the-mill tax prep, Club Capital is focused on providing financial and tax advisory services that help you plan and forecast your agency's performance. Their financial dashboards and agency forecasting tools help you better understand your agency's historical performance, create, measure future targets, and see how your agency compares to your peers around the country. Imagine what it would be like to understand the impact to your bottom line when deciding to hire a new employee or forecast the impact rate changes or commission rates will have on your business. With over $200 million in tracked annual revenue and $140 million in tracked annual expenses, Club Capital has the data and the team to help you make better informed decisions for your agency. They will help you turn that back office stress into the backbone of your agency's success by giving you the tools to take your agency and your leadership to the next level. Visit club.capital today to book a solution overview with one of our business consultants. Club Capital, way more than a CPA firm.