It’s ironic, but in my experience there’s no part of business management more misunderstood by financial planners than strategic planning. Time and again, I hear advisors lamenting that running their practices leaves little time to waste on academic theories and musing about the “big picture.” Maybe when their practice is more successful, they say, there will be some time for strategic thinking. They don’t realize how much they sound like would-be planning clients who want to wait until they “have some money” before they go see a financial advisor.
The truth of the matter is that strategic planning for an advisory practice is not very different from the process of financial planning for an individual client–and just as crucial. Where do you want to be at some point in the future? What’s the best route to get there, all things considered? What are the gaps and obstacles that are preventing you from achieving your goals? What steps can you take to close those gaps and overcome those obstacles?
And just like financial planning, the process of strategic planning is not really about vague concepts such as finding your vision and defining your mission. Rather, a good strategic plan gives you a framework to identify what specific actions you need to take to achieve your business and personal goals, gives you focus so that you don’t dilute your limited resources, and ultimately, helps you clarify how you will differentiate you and your firm in the market you wish to master.
Just Do It
Although strategic planning is one of those tasks that can only get better as you devote more time to it, it doesn’t have to be a long, drawn-out process. In fact, you can probably answer the key questions over a long lunch or two. And with the insight you’ll gain from finding the right answers for you and your business, the steps you need to take will, in most cases, be obvious.
To understand your business better, try looking at it from various points of view. For most advisory firms, there are four critical perspectives:
o Your marketplace
o Your competition
o Your current capabilities
o Your personal definition of success
Whether you go through a formal strategic planning process or not, it is important that you periodically revisit these points to position your business for the future. Here are some exercises to help you better visualize your practice from these perspectives:
Your Marketplace. Write down the names of your top 20 to 30 clients. Not just the most profitable, but those clients whom you enjoy the most, and who also happen to be among your top revenue generators. Then, list the characteristics of these clients: their age, occupation or preoccupation, location, net worth and income, special interests and special issues, how they became your client, and so forth. See if you can identify a common thread in this client base. Your goal is to discover what factors you can focus on to replicate your ideal client base many times over.
In addition to trying to find the common thread, also project what issues these types of clients are likely to face in the future. What do these issues tell you about the products and services you should be offering your clients to serve their needs? This exercise will form the basis for positioning you and your firm in your clients’ (and prospective clients’) eyes.
Your Competition. As with your marketplace, it is also a good idea to write down the names of your top five to ten competitors. While your inclination may be to say, “I don’t have any competition,” that is obviously an illusion fostered by a lack of competitive situations to procure clients. Face it: if you didn’t have any competition, you would have all the clients in your target market. The question isn’t whether clients would be better off coming to you, rather, ask yourself why some of them go instead to other firms.