The founder of market research firm J.D. Power and Associates, James David Power III, told the story of how he got started in this month’s issue of Fortune magazine. Since co-founding my wealth management firm less than two years ago and becoming a CEO for the first time in my life, I’ve been drawn to these types of stories because I almost always find applicable lessons in them for my own challenges.
Power is 84 now and he sold his business to McGraw-Hill a few years back. The company started in the 1960’s at his kitchen table with his wife and kids licking envelopes. Last year, J.D. Power and Associates did almost $270 million in revenues.
Below, some snippets from the Fortune interview and my own takeaways as a financial advisory entrepreneur.
1. “Detroit carmakers in the 1970s weren’t interested in independent reports about their shortcomings. But Japanese rivals, he says, were ‘fanatical’ about understanding the American consumer”
Tell the truth – even when your customers may not want to hear it. At my shop, we take our fiduciary responsibility seriously and our commitment to financial planning is at the heart of what we do. Unfortunately, sometimes building a plan for a prospective client involves a reckoning of sorts – either their true financial picture is not as rosy as they’d assumed prior to doing the math or the returns they’re shooting for are unrealistic. We’d rather lose the business than tell someone what they want to hear even if it can’t be delivered on. If a competing advisor wants to sell fairy tales and worry about the consequences later, it’s all theirs.
2. “Back then, people weren’t doing market research correctly, especially the car companies. Market research reported to sales, so it had to come up with results that reinforced decisions the sales department was making. Researchers interviewed people and just tortured the data till it confessed.”
Being honest with ourselves about what’s working in the eyes of our clients and what needs improvement isn’t always easy. In fact, it took an 800-word email from a client inside of our first 90 days to wake us up to some harsh truths about our service efforts. In our rush to establish the firm and snap all the pieces into place, there were some real gaps between his communication expectations and what we were actually delivering. The email wasn’t a rant, it was a very thoughtful and methodical report card coming from a guy who genuinely wanted to see our venture succeed. We got on the phone with him a week later after addressing the stuff he’d brought up and first apologized, then thanked him for this piece of market research. I figured, “if one client is saying it, lots of them may be thinking it.” This spring, we had the chance to take this client to lunch and were pleased to hear that he’d been converted to a highly satisfied believer. Listen to your market.
3. “In the early years, I put our kids to work on the survey mailings; Julie supervised. We taped a quarter on each cover letter as an incentive to answer, and that got us a 60% response rate.”
Be creative and use the resources you have. Barry and I made a conscious decision to finance the business ourselves, with no outside capital, even though there were plenty of offers. This meant we had total autonomy and could make decisions based on what would be best for the long-term health of the firm, with no competing interests. But it also meant we didn’t have millions of dollars to throw at problems, nor did we have a huge budget for marketing and start-up costs. We learned to use what we had out of necessity and to make the best use of our incredible staff. When we’re working on a project – be it the launch of our automated advice service, the building out of our web presence, the set-up for our client calls and letters or the implementation of new software into the practice, everyone pitches in. We’ve discovered talents and skills among our teammates that we would never have known about otherwise. Necessity is the mother of invention and restrictions can unleash a torrent of creativity. Yes, we hauled on our bootstraps quite a bit in the early going, but I wouldn’t have it any other way.
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