Most entrepreneurs are built to act, not to plan. Yet, those who have been able to transform their preoccupation into an enduring business have done so by surveying their environment and deploying a strategy to cut through the headwinds and ride the tailwinds.
As an example, financial advisors may have been lulled into overlooking the need to navigate their business plan because of the persistent rise in markets, assets, income and revenue over the past decade. With an oversupply of clients and an undersupply of people to provide advice, life is good. Why plan when we can let this magic carpet take us on the ride of our lifetimes?
Regrettably, this joyride may be running out of gas or worse. Do you know what lies ahead? Wise leaders inform themselves of possible hazards. At least then, you can decide whether to react to changing conditions on the fly or deliberately plan your course.
How does one create a plan? Taking stock of the “four corners” of your business provides a simple starting point. It also enables staff to share opinions and insights. When you include others in your planning exercise, you generate practical leadership training for them and constructive input for you.
The four corners to examine are:
1. Market Trends – When you look out 10–15 years, what forces of change will be influencing how clients choose to do business? What are the economic implications? Are clear market segments emerging? Are others disappearing? Most advisory firms were created to serve the baby boomers. Think about the filters and assumptions that drive these clients’ goals. Think about your technology and the way in which you communicate. How might these be different for subsequent generations of clients and staff?
2. Competitive Landscape – Take stock of who is performing well and who is underachieving. View competition beyond your immediate community, such as firms who serve a niche or feature a technical specialty. What do your best competitors do well? How are they setting themselves apart? Examine firms that are attracting your optimal client, even if you believe your firm is superior. When you view your competitors with respect instead of disdain, you develop a healthier approach to differentiation.
3. Core Capabilities – Look inside your business. What do you do well? Is your offering aligned with your optimal client? Where are the gaps? What can you capitalize upon? Are you leveraging your partners and vendors effectively? Advisory firms tend to be small businesses whose greatest strength lies in the founder’s ideas, passion and presence. Advisory firms are part of an interconnected network of professionals and providers, however, adding supplemental capabilities allows you to be big when you need to be and small when you want to be.
4. Definition of Success – When you started in this business, survival may have been your goal. Now that you have built a viable enterprise, you need to define success differently. What metrics signify greatness for you outside of revenue, assets or personal income? Career development for your team? Strong continuity and succession? Operating leverage? Becoming the leading brand in your defined market? Financial metrics are critical from a business standpoint but tend to be lagging indicators. Key data points around personnel, clients and the client experience are helpful leading indicators of success (or failure).
Ask employees and partners to investigate one of the four corners. Let them loose on the research to learn about their chosen topic. Invite them to present their observations to the rest of your team and encourage debate in order to hear multiple points of view. Then bring all of the topics together for a healthy discussion of current trends and strategies. This helps ensure buy-in from others and gives you a foundation on which to build a solid plan.
This holistic analysis of firm strategy may reveal conflicts between the different areas. For example, you may find that your research points to a focus on early accumulators, but your current definition of success prohibits you from serving that market. Or you may discover that your competition dominates the market segment that offers the most potential, making it difficult for you to pursue that area.
The goal is to sharpen your focus and hone your strategy. This process clarifies where you need to invest as a business, what type of talent you need to hire to execute your plan, what your training and technology gaps may be and what type of client experience you need to create.
Your next step is to translate the analysis into a framework for making decisions. Ask these critical questions:
1. How do we capitalize on the changing marketplace? 2. How do we differ from the competition in pursuing our optimal client? 3. How do we build on our core capabilities to defend against the competition and grow our client base? 4. How do we define success?
In order to achieve consensus and commitment, listen to the presentations and invite the party with the strongest view to make a recommendation. Ask participants to vote: “Yes,” “Yes With Comment” or “No.” A majority “Yes” vote moves the plan forward. “Yes with Comment” feedback refines the proposal and staves off risks. And “No” voters can share what it would take to get them to a “Yes.” This structure minimizes polarization and helps get everyone on board and pulling in the same direction.
Of course, some may reject the new strategy. This doesn’t mean they are bad partners or employees, simply people who lack commitment to your vision. Be careful not to isolate dissenters; try to find ways to bring them into the fold or help them to transition to a more compatible firm. Perpetual dissension ultimately will undermine your strategy. While there is a higher probability of success if everyone has a chance to contribute to the deliberations and make a choice of common assumptions, there is no guarantee that everyone will want to be part of the future of the business.
The four corners approach allows you to stretch your thinking and consider new issues. If you doubt that things will change in the next 10 years, simply reflect on the year 2008. Or think back to when you first came into this business. Advisory firms have modernized how they deliver on the experience. A fresh generation of employees has transformed the workplace dynamic. And different firms have risen to dominate a new landscape.
Reflection enables us to learn lessons from each victory and each defeat. We gain perspective from our choices and the way people react to them. The truth is, a successful business needs planning. Your strategy requires systematic review and regular adjustments to stay relevant and robust.
Mark Tibergien is CEO of BNY Mellon’s Pershing Advisor Solutions. Tibergien is also the author most recently of “The Enduring Advisory Firm,” written with Kim Dellarocca of BNY Mellon and published by Wiley. He can be reached at email@example.com.