Tag Archives: entrepreneurship

The article reminds me of an old allegory.

4 generations of women are in the kitchen preparing a Thanksgiving meal. The youngest great-granddaughter watches her mother cut the ends off a ham and place it in the pan. “Mother,” she says, “why do you cut the ends off the ham?”. Her mother answers, “That is the way we have always done it. Your grandmother taught me.” The girl goes to her grandmother and asks the same question, and gets the same answer. She was taught by the girl’s great-grandmother. So the girl goes to her great-grandmother who is dozing in a chair by the window. She wakes the old woman and asks why the family cuts the ends off the ham. Her great-grandmother answers, “I do not know why your mother does it, but when I was growing up our pan was too small.”

This is a WAKE UP CALL. I had never thought about the vulnerability of the franchise industry to the demise of the boomer generation. I have to sit back and think about this. My focus has been on the impact that the boomers will have on the succession plans for independent financial planners, wealth manager and insurance agents. Just like your food and hotel franchise examples, these individuals poured their lives into building profitable practices and it is unlikely that the next generation has the motivation to continue the growth of the industry. For more than a year we have been in conversations with large corporations that provide regulatory compliance and package insurance products to support these aging entrepreneurs. The companies are finally recognizing the imapact of the loss of their top producers. I will use this franchise analogy to paint the picture for them. Thank you.

John, The beauty of this article is its simplicity. Rule #3 is of particular interest to me because I recommend another simple tactic that helps in identifying the priority of actions to improve the generation of profit. I am referring to the 80/20 Pareto Principle that approximates to “80% of your profit comes from 20% of your customers” or “80% of your costs come from 20% of your operations.” This is an oversimplification but applying the thought process across a company does reveal where to apply resources. Richard Koch’s book The 80/20 Principle is the reference work on the subject.
Another comment is more controversial. I like to see business owners measure the value that they are creating in their company and track its change year over year. This is preparation for the day when they will depart, but it is also a check on the health of the company and the industry it is in. The measurement includes a standardized process of a three year forward projection and calculation of the Net Present Value of the cash flow, plus a simple terminal valuation at the end of the third year, discounted to the present. If this valuation is growing, the owner has added comfort in his/her commitment to the company and supports making suitable investments. If it is declining, it is time for a serious look at future plans.