At its core, our work with advisory firms centers on helping them become more valuable enterprises. Building value is predicated on improving the firm’s ability to profitably sustain growth. In other words, valuable firms don’t simply grow—they grow in a sustained and profitable manner.
One way our firm, FA Insight, provides guidance for advisors is through its industry research. Many of you may be familiar with the annual FA Insight of Advisory Firms, which for five years now has served to benchmark industry performance and identify best practices. In even numbered years the research coverage tilts toward the topic of advisory firm growth.
Our 2014 Growth by Design study is currently open for fielding, with all advisory firms encouraged to participate.
Based on the hundreds of participating firms who generously shared their data, some path-breaking insights emerged from our last Growth by Design effort in 2012. In that year 85% reported experiencing significant recent growth. Of those, however, 76% reported that growth stressed their firm in the form of negative impacts such as overworked staff and systems that cannot keep pace.
For the roughly one-quarter of firms who managed significant growth without suffering negative consequences, the rewards were high. These “sustainable growth firms” maintained lower overhead expenses, achieved higher productivity in terms of revenue per team member and were more efficient in converting revenue to owner income.
3 Proven Keys to Sustainable Growth
Sustainable growth firms were distinct from their peers in a number of ways, but three key areas stood out. They are:
1. Having a Clear Target Client
Sustainable growth firms demonstrated a clear understanding of the type of clients they were best suited to serve and how best to deliver value to these clients.