After a recent workshop I held in Dallas, an advisor came up and asked a common question: “My firm is about $500,000 in annual revenues,” he said, “and they are growing at about 7% per year. Is that above or below the industry average for a business my size?”
I tried not to give any indication that not only is this an frequently asked question, it’s also an off-base FAQ.
I asked the advisor for more specifics about his firm. He wasn’t having any of it, and the more I put him off, the more frustrated he got.
Of course, I knew the answer. And no, I’m not going to tell you for the same reason I didn’t tell him: It’s the wrong question.
And because it’s the wrong question, the answer will more than likely hurt you and your firm rather than help you, and frankly, I am not in the business of hurting a business.
I’ll let you in on a secret that’s closely guarded by us business consultant types: An average is just an average.
Someone simply collects the growth rates for many advisory firms over the same time period, divides that number by the number of firms, and voila: You have the average growth rate.
What does that number really tell you? For one thing, that roughly half the firms polled grew faster, and half grew slower, than that average number (if it was the mean growth rate, it would be exactly half and half).
But the real question is what does this number actually tell us? If you’re like most firm owners, the answer affects whether or not you should feel good about yourself — depending on whether their firm falls above or below the average.
The answer to the follow up question is more important: What do you do in response to being either above or below the “average” firm growth rate?
Again, if you’re like most firm owners, the answer will either be “celebrate and keep doing what you’re doing” (for those with above average firms), or (for those below the average) “get depressed, and start questioning all the decisions you made to get to this point.”
The Real Issue
Neither of these responses is likely to lead to building and growing a successful advisory business. That’s why your firm’s relationship to the average growth rate is essentially useless information.
And it’s why I try to direct my clients and other owner advisors toward more important questions, such as, how do you feel about your business currently?
I find that many firm owners get so focused on growing their business that they don’t stop to think about what they genuinely like about their business as it is, and how that will change if it grows.