The following is based on one of The Covenant Group’s clients, Colin. All of the names and telling details have been changed.

When Matt helped Colin prepare his income and expense pro forma, he gave him the solution to his greatest business concern. Matthew (Matt) Asser is a Covenant Group coach. Matt is passionate about helping financial advisors build profitable practices. Colin is a financial advisor whom Matt started coaching a few months ago.

Typically, when we start working with financial advisors, they don’t have a good handle on where their income will come from beyond the next few weeks or few months. They are working in their business to generate income, but not on creating a scenario where their income and expenses become predictable over a one to five year timeframe.

Colin was a good example of an advisor who spent very little time working on the business. He is a good salesman and relationship builder. He also understands the seniors market and has become quite knowledgeable about the financial products seniors need. As a result of his knowledge and expertise in the business and his interpersonal skills, he has become quite successful. His income has grown to the $200,000 range. However, his income seems to have reached a ceiling and he is worried about his ability to maintain or grow it. His motivation to become involved in a coaching program derives from his desire to make his income more predictable.

Initially, Colin was quite skeptical about his ability to predict where the income would come from beyond the next few months. Like many financial advisors, Colin had a list of prospects and clients he expected to close over the next six to 12 weeks. He knew with reasonable certainty where his income would be generated over the next one to three months. Beyond that, he was counting on his ability to do the things that he had been doing for years to drive income. That was the extent of his planning. To change the game and gain mastery over the growth of his income over the next one to five years, he needed a different approach.

A key element of the new approach was to put together a business plan. In preparing his business plan he worked with Matt to develop a one year and five year income and expense pro forma. The purpose of the pro forma is to identify your sources of income and the expenses you will incur in running your business. The first step was to prepare his income projections for the next 12 months. The income side of the pro forma is based upon five levers: product mix, average case size, number of sales, seasonality and cyclicality. Colin’s product mix consisted of annuities, life insurance, LTC and MedSup. He knew the average case size for each of these products.

Matt then asked him to project how many sales of each product he would make over the next twelve months. In doing so, he had to take into account any seasonality in his business. Colin knew from past experience that he did more business during tax season and less during the holiday periods of Thanksgiving and Christmas. When he took holidays, his business increased just before he went away and slowed down while he was away and just after he came back. Armed with this knowledge he built these seasonal variances into his projections for the year.

Over a five-year timeframe, he was asked to look at cyclicality. Markets and the economy move in cycles. Colin addressed the impact of cycles of expansion and recession on his business going forward. When Colin completed his one year and five year income and expense pro forma, he was surprised to see that he was projecting growth of over 50 percent in the next twelve months and a tripling of his business over the next five years. He became really excited about the potential in his business. Anxiety is blocked excitement. The best way to eliminate anxiety is to get in touch with your excitement. The income and expense pro forma allowed Colin to reconnect with his excitement about the business and its potential.

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