Man in the Mirror

Joyce Carol Oates' short story "Where are you going, where have you been?" is an eerie little tale that you probably don't want to read while home by yourself. The questions raised in its title, however, are worth considering at any time, in particular as they relate to your financial planning firm. How have things been running? Where are the potholes? What can you improve? And the question made famous by job interviewers: What do you want to be doing five years from now?

Scrutinizing your current situation and mapping our your plans for the future are crucial to the success of your business. Because, as Yogi Berra so aptly put it, "If you don't know where you're going, you'll end up somewhere else."

As Yogi Berra said, "If you don't know where you're going, you'll end up somewhere else." Here are some road signs to keep you on track

Now is as good a time as any to take a look at your business and determine what changes are necessary to serve your clients better and to move your firm closer to your ideal. This column will show you how to perform a quick analysis of your current business and develop an action plan to turn it into the business you've always wanted.

When evaluating a business, we typically look at five major areas:

Mission & Goals. Without a vision, you'll lack a focus for your time, energy, and other resources. Your business is ultimately an expression of your basic values and beliefs. The more clearly you can identify your values, the stronger your sense of purpose will be. As CEO, it's your role to develop the company's vision, determine where the business is headed, decide what types of products and services it will provide, and identify its target market. Establish an expectation that your mission will be successfully accomplished within three to five years. Defining where you want your business to go will set you on the path to make the choices that will take it there. Each year will become more and more fulfilling, meaningful, and profitable.

Management Systems. Management systems turn your vision into reality. This is the nuts-and-bolts part, where your dreams and goals are broken down into various tactics and strategies.

It's the president's responsibility to implement the decisions that you make and ensure that the business's day-to-day activities steer the company in the direction you want it to go. Formalizing your vision into a written plan helps you clarify how and where you should be spending your most valuable resource: your time.

Create a team of professionals who will take responsibility for meeting their departments' goals and objectives. Set up a tracking system that will ensure that you maintain control over your business's results, yet allows you to delegate the processes once you have defined them.

Business Development Processes (Marketing). After you've clarified your vision and developed your management processes, you need to determine what products and services you're going to provide, who you're going to provide them for, and most importantly, how you're going to consistently find new people who want what it is that you provide. Clearly, all businesses must continually acquire new clients in order to survive. Ultimately, you want to create a business that grows through referrals so you can enjoy the rewards of effortless marketing.

Marketing generally encompasses three primary areas:

  • Positioning and Communications. These activities establish who you are in the marketplace and control how your target market perceives you.
  • Lead Generation. This includes tactics and strategies designed to encourage prospects to say, "I know who you are, I like what you do, and I would like to find out how you can help me."
  • Lead Conversion. In the past, we referred to this area as sales. As clients become more sophisticated, traditional sales skills can become in many ways a liability, so we prefer to use the term lead conversion. When you meet with a potential client, don't be preoccupied with "closing the sale." Use the opportunity to ask questions and determine if you are a good match. Wait until you both agree to work together, and then think about opening the account.

Product and Service Delivery Processes. It's not about the product anymore, it's about the processes and payoffs. Service delivery must now be incorporated into your business model and into your cost structure. If you're planning on spending most of your time finding new clients, you will require an assistant or an associate to fulfill your current clients' expectations and meet their needs.

Fee-based money management is the core revenue generator for many high-end advisors. It is crucial that you exceed your clients' expectations in client service and provide services beyond the core product. When your clients bond with you emotionally, they will feel that the total package you offer them - products, services, and relationship - is worth their annual investment with you.

We typically break product and service delivery processes down into three sub-categories:

  • Analysis and Recommendations. This includes the planning processes that you typically perform for clients to help them make informed decisions.
  • Money Management Services. This is generally considered the investment advisor's core service. It includes selecting the original assets for the portfolio, monitoring the portfolio, rebalancing when appropriate, and reporting. This area requires a substantial amount of administrative work and is probably the most labor-intensive area of running an investment advisory practice.
  • Client Meetings. If your business provides fee-based money management, client meetings are a tremendously important service. I prefer not to think of these meetings as portfolio performance reviews, but rather as service meetings where you help clients organize their financial affairs, assist them in making informed decisions, keep them on track, coach them, and educate them about how to be a more successful investor. Client meetings provide an excellent opportunity for you to build strong relationships.

Financial/Administrative Procedures. This is a critical area, yet it is often neglected. It includes budgeting, bookkeeping, compliance, administrative systems, hiring processes, office equipment, technology, and other internal and external resources that allow your company to operate smoothly.

We usually divide this area into three primary sections:

  • Personnel. The importance of hiring phenomenal employees who support your marketing and product and service delivery cannot be understated.
  • Information Systems. This area includes systems such as accounting software, database software, and filing systems that manage the paper flow and the information in your business.
  • Equipment. This is the hardware part of the business, which includes computer systems, telephone systems, voice mail systems, office space, furniture, and all other tangible equipment that supports your operations.

Once you've looked at the five areas of your business and identified those areas that are stronger and those that are weaker, what's next? Ask yourself a series of specific questions that will reveal to you one step at a time what it will take to improve your business.

First, ask yourself, "What's right with my business currently?" You can focus it as narrowly as you want. Identify the areas you're doing well in and congratulate yourself.

Second, ask yourself, "What would be ideal?" What would your ideal business look like in terms of number of clients, dollars under management, services provided, types of clients, size of staff, location, etc? Take the time to dream a little.

The third question to ask yourself is, "What's not quite right?" This question will help you to identify the gap between where you are and where you would like your business to be.

The last question is the most important of all: "What would make it right?" Identify what's necessary to get you from here to there.

Looking at the five major areas of your business and identifying where your business is, where you would like it to be, and what it's going to take to get it there is a very rewarding process. It allows you to focus your energy and resources on the areas where the improvement will be most noticeable, and the benefits most valuable. Be careful as you go through this process, however, and remember this: You want to have the most impact with the least amount of effort. If you identify a few areas that require improvement, focus on the areas that will have the most impact on the success of your business. For instance, if you are weak in administration and marketing, focus on marketing so you can attract new clients and generate revenue. In other words, focus on the highest payoff activities and be discriminate with your time.

By simply ranking the different areas of your business and evaluating what you want to change, you will begin to focus the necessary resources. Change will follow. If you complete this exercise every three to six months, you'll find that the numbers in all five areas will increase, and you'll be on your way to creating your ideal business.

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