Standing on the outside looking in

If you’re anything like me, you find it way too easy to get wrapped up in the day-to-day activities that keep the wheels of a business turning, and way too difficult to spend the time you need to map out a route of where you actually want those wheels to take it.

We hear it referred to time and time again as falling into the trap of working in the business, rather than working on the business. It’s true in all small businesses, but in advice practices in particular it takes conscious effort and discipline to manage the competing demands of being a business owner and being a client-facing adviser.

The challenges are more pronounced when what’s best for the client – say, doing a little bit more work for them that you haven’t budgeted for – is not the same as what’s best for the business, which would be to charge for the extra work you’ve done.

But some businesses seem to manage the balance between owner and employee better than others. We’re going to hear from some of those practitioners at the Professional Planner Advice Practitioners Summit on 8 February. There are enormous opportunities for growth and success for well-run financial advice businesses with a clear vision and a clear plan, and with the skill and dedication to execute the plan.

A business-as-usual approach may work for many firms. After all, we know demand for advice is increasing, and we know the supply of financial advice has declined sharply in the past five years. These fundamentals represent a solid foundation on which to build.

In addition, financial advice is well down the path towards becoming a profession, focused on generating revenue from the sale of professional services and, increasingly, uncoupled from the ups and, more pertinently, downs of investment markets.

But a business might not capitalise effectively on these opportunities if it’s not adequately prepared and if it doesn’t have a deliberate strategy for how to do it. A strategy doesn’t happen by accident, it must be planned and it must be executed. But a plan that exists only in a practice principal’s head is not really a plan at all. Or as wiser people than I have previously observed: vision without action is a daydream; action without vision is a nightmare.

Licensee support

That’s why licensees are increasingly offering practice management services to the practices in their networks and making the services of consultants and coaches available. Among other things, they’re useful in helping an owner articulate a vision for the business and what they want it to be.

None of this comes cheaply, and if the cost not reflected in the licensee fee then it is generally only available at additional cost to the practice. Every practice owner needs to weigh up the cost of buying the service (or the size of the licensee fee) against the value the service is expected add to the business.

That can be difficult to do if the owner doesn’t know where they want the business to get to. It’s even harder if they also don’t even know where they’re starting from.

Practice benchmarking is one place to start. A well-constructed benchmarking tool can give a good idea of the position a business is starting from, compared to other advice practices. The best benchmarking tools also help to map a path forward. For some benchmarking tools, that path forward will often lead the practice to a position of being on-par with other practices that have been benchmarked. Other tools will compare the practice to what’s deemed industry best-practice.

Having worked with the principals of some of the best advice firms in the country, one thing is clear: improving a business in any respect, let alone achieving industry best-practice, isn’t something that happens by accident. Nor is it a one-off planning exercise. The smartest practice principals are committed to the idea, both philosophically and in a pragmatic sense (including being willing to invest in people and processes to achieve it), and believe it always possible to do better, to refine processes, to make a business more efficient, to improve the quality of advice delivery, and to be a better place for staff to work.

Not all practice owners want to squeeze every last cent of profit from their businesses and drive the people who work in it at 100 per cent, all day every day. For them, there are other important factors and considerations as well. For example, it might be important to allow staff to take a couple of extra weeks’ annual leave each year, or to pay for their ongoing education and professional development.

Succeeding on purpose

These are all legit business decisions, but the point is that they need to be planned for, nonetheless. Successful businesses do them deliberately, plan for them, and factor them into measures such as the cost to serve clients. Which brings us back to the process of planning, and to the importance of understanding where a business is today, and where its owners want it to go.

At its most basic level, the owner of an advice practice needs to make a call: is this business something that will disappear when they leave it and retire; can it be made attractive enough to sell to someone else (including through a succession plan); or is it something built to last, that will continue to deliver top-quality advice to generations of clients to come?

The answer to that question is the start of any process to map out the future for a business. Because as the saying goes: You have to be very careful if you don’t know where you’re going, because you might not get there.