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Practice Management > Building Your Business

Turning a profit in a struggling economy

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Finding success as an independent financial advisor requires more than just having a large number of assets under management or overall sales, an efficient marketing strategy, a growing client base, and the best staff. In today’s economy, the success of advisors will be defined by their ability to run profitable businesses that exceed their client’s expectations.

At a recent training event, one of my clients presented the topic of profitability and how to maximize your return on each dollar spent on you business. In his presentation, he explained how he runs his business similar to a Fortune 500 company and a few points resonated with me. The first question you may have is, “How do these large companies do it?”

Fortune 500 Companies focus on:

  • Return of capital
  • Operating efficiency
  • Budgeting and forecasts
  • Cash flow management
  • Earnings per share
  • Accountability to shareholders

So how does this relate to a small-business owner such as an advisor? Let’s take the six points listed previously and break them down. The first step and primary focus of most businesses is to make money and receive a return on their capital. To increase the chances of a return, the business must run in an efficient manner to reduce the risk of wasting money on unnecessary resources or inefficient business endeavors.

Efficiency can be improved by tracking the metrics of your business as it empowers you to make educated decisions based on past performances of your activities (i.e. marketing), removing bottlenecks that may be wasting your time and resources, resulting in a better chance of seeing a return on your business investment.

The next step, which also ties into efficiency, refers to operating the business on a budget and establishing forecasts of future expenses and income as well as effective cash flow management. Do you operator your advisory business on a budget? My guess is most advisors do not have a clearly defined budget. If you are one of those advisors, you may be leaving your success to chance.

The key to profitability is to control the variables that impact your bottom line. Some of those variables may be marketing expenses, payroll, your office rent or mortgage, and the list continues. I’m sure we have all hear the phrase: it’s not what you make; it’s what you keep. Revenues don’t matter if all your money is going out the back door in expenses.

Make sure you are adding staff when necessary to grow your business but not too soon. Also, set your marketing budget based on the number of clients you would like to add in a given year. If you are tracking your numbers, you should know the cost associated with adding and/or retaining a client, which in turn will enable you to forecast expenses and establish your budget based on the desired number of clients. When forecasting future income, you will once again be able to establish the approximate amount of income you receive for each added client, and then base your forecast accordingly.

The final step requires an understanding of your earnings per share and accountability to shareholders. At this point, you are probably thinking, I don’t have any shareholders since I’m not a publicly traded company. Wikipedia defines shareholder as an individual or institution (including a corporation) that legally owns one or more shares of stock in a public or private corporation.

If that is the case, then despite the fact that you aren’t a public company and don’t have shareholders (according to the Wikipedia definition), couldn’t you consider your clients and your family as shareholders? Not in the sense of ownership, but defined as having a shared interest in the success of your business. Both clients and family would be better served if you are profitable. Through running a profitable business, you could provide more improved services and resources to help your clients reach their financial goals.

At the same time, your profitability would be driving to a more financially secure future for your family and give you the freedom to live the life that you want outside of your business. How will you choose to run your business and will you hold yourself accountable to your shareholders, your clients and family?

Todd Greider is the training manager at Asset Marketing Systems, a leading Independent Marketing Organization (IMO) based in San Diego. With over six years experience in the financial services industry, his primary focus has been offering independent financial advisors comprehensive training programs designed to help them grow their business. He is active in social media communities and has written content for more than 100 e-mail marketing campaigns, websites and event promotional materials.

Connect with Todd on LinkedIn at

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