It appears to us that the principals of Australia’s advisory practices face an interesting dilemma. How do they react to an improving marketplace? With the ever-present limitation on resources available for small businesses, what should be the strategy in 2010?
Should the major focus be on recouping “lost” revenue, or should the focus be based on a return to better business practices? Or maybe a balance in between is more appropriate?
Of course, there won’t be a “one size fits all” answer to these questions. The key findings from the recently released Business Health Future Ready IV research paper provide real insight.
As can be seen from the following graph, when comparing the health of practices today to the position in 2007, we have seen incremental improvements in some areas; but at a high level, there seems to have been little progress.
While the stronger practices seem to have become stronger, the number of firms rated Healthy or better dropped from 82 per cent to 75 per cent. On the other hand, the number of Poor and Average Health practices has actually increased over the past two years – they now stand at 25 per cent of our data set, up from 18 per cent in 2007.
Although in many regards this still represents a strong result, and Australian firms remain at the forefront of global practice management, the fact remains that one in four of the better firms in this country are still in need of a stronger “health” plan.
With so much talk being devoted to practice management/business development over the past two years, this obviously begs the question: Why are we not seeing more dramatic progress being made?
While each practice is unique and the challenges (and hence solutions) vary from firm to firm, without doubt, the tumultuous market conditions of late have had an enormous impact. Many principals have (in most cases quite rightly) had to divert much of their management focus and attention to addressing other more immediate concerns.
While most acknowledge it is important to develop and strengthen their underlying business processes, dealing with the fallout from the global financial crisis (GFC) has caused a lot of the practice management initiatives to stall.
The results recorded in the areas of communication (client and staff), business, and succession planning are good examples of the reactive responses many practices have taken to the “immediacy” of the situation (over longerterm, directional activities) – at what cost will be determined over the next few years as practices begin to climb out of their GFC predicament.
However, one has to also question the appreciation and commitment of some principals to best practice and perhaps even the capability of the people charged with the responsibility of delivering practice management support (business coaches, advisory boards, business development managers and practice development managers).
Nonetheless, it remains incredibly difficult to run a successful (and profitable) advisory practice in today’s marketplace and it is almost impossible for one person to be totally across all of the issues. The skill sets required to do everything that needs to be done exceptionally well, are now just too diverse.
Practice owners are in need of, and are searching for, help and support. They are looking for people they trust and respect; people who bring complementary and valued capabilities and resources; people who can help them position their business for sustained success into the future.
And given that, according to our latest analysis, the average age of principals is 57, the clock is certainly ticking!
Rod Bertino is a partner and director of Business Health, a consulting firm specialising in the financial services industry