In our work with independent advisory firms, we have always stressed the importance of creating a solid foundation upon which to build a successful business. Yet the vast majority of owner-advisors who come to us don’t see this bigger picture. Instead, they’re looking for a quick solution for whatever they perceive to be their immediate problem: slow growth, advisor recruiting, employee turnover, work overload, the need for a succession plan, etc.
For many years, we would try to convince our clients and prospective clients that what they were viewing as problems were actually symptoms of a larger problem: the lack of a firm-wide foundation that would maximize the contributions of all employees—and owners—while creating opportunities for growth.
We found that only about half of the firms we worked with took this advice and got to work overhauling their businesses: They have become our most successful clients. With the other half, we adopted a strategy of addressing their immediate concerns in the hope that, as our relationships developed, these firm owners would begin to listen to us and undertake the larger changes necessary to take their businesses to the next level and beyond.
While this approach did work with some clients, over time we’ve realized that over all it was a mistake. For one thing, most of these firms worked on their foundations only half-heartedly, lacking the commitment to successfully change the way they did business, which limited their success.
More importantly, with the advisors who wanted only one solution, we found that we were constantly backpedaling to fix problems created by the new solutions: under-capacity, over-capacity, under-trained employees, employees in the wrong jobs, poor client service, unprofitable clients, antiquated technology, owner burnout, employee burnout, high employee turnover, low prospect close ratios, etc. We realized that if we just built a good foundation first, solving their problems would have been much, much easier—and virtually all of these other problems would never arise.
What’s more, in recent years we’ve realized a more troubling problem with these firms. Without a good business foundation, it’s very difficult to make a smaller change work successfully, and bigger changes are even more problematic. As it turns out, things like organizational structures, recruiting, training, compensation plans, marketing, client service, advisory boards, M&A strategies and succession plans all depend on a solid business foundation to succeed. Even the client “perks” that we wrote about in our March 7 blog (see “The Big Secret to Getting Client Referrals) work better when you have a good foundation. Without that, it’s almost impossible for advisory firms to reach their goals.
To help you build a good foundation for your advisory firm, here are the four steps we use with our clients. Keep in mind that the order of these steps is the key: Each phase needs to be in place to successfully implement the next phase. Building them out of order is much more difficult and, way more often than not, creates more problems down the road. Taking them in order, one at a time, may seem as if it will take longer, but in our (sometimes painful) experience, it will get you where you want to go faster, and may take you farther than you thought possible.
Phase 1: The Foundation Vision
This is something that owner-advisors can do themselves or, if you’re the kind of person who needs a bit of structure and motivation, in a workshop, an online program or simply a printed Q&A assessment. Ironically, it’s very hard to get advisors to do this first (even the E-Myth doesn’t provide the details of the foundation vision, only the categories), even though it has to be the first step for owners of advisory firms of every size.