Whenever I get hired to work with a new owner advisor, they almost always “know” what they “want” me to help them with: an organizational chart, a compensation plan, finding a rainmaker, technology, etc. Yet, rarely are those things what their business really needs. In most cases, what the client is really requesting is help with growing their independent advisory business. In rare cases, they say that they want to become a better business owner. While I might start working with them on what they think they “want,” I’m slowly but surely training them to run their firms better — by focusing on what they most need.
Here are the key elements of what many advisors need to be a successful business owner:
1. Commit to decisions. This doesn’t seem like it would be a problem for advisors who want to run successful businesses. Yet, it’s surprising how many firm owners jump from one project to another at the first sign of difficulty, without giving any project a real chance to succeed. Equally as bad is not learning from what they’ve tried to do.
I’ve found the real cause of this “failure to commit” is that most firm owners don’t really know where they want their business to go. I’m not talking about a “business plan.”
As I’ve said before, detailed long-term business plans, more often than not, overwhelm business owners and put them into a state of mental paralysis. Instead, simply having a general idea of what you want your business to be is far less intimidating — and far more motivating.
Consequently, the first step to successfully growing an advisory business is defining what you mean by “growth.” Many firm owners define “growth” as increasing profits and/or revenues. But these are not the only measures of growth, and often they aren’t really what owner advisors want to get back from the businesses they build.
Though it’s nice to make more money, typically that is far down on most advisors’ priority lists. And, in a privately held business, owners can define “growth” any way they want to. Instead of income, independent advisors tend to value control over their working environment, personal and/or professional growth, and helping others.
There are many definitions of “growth” beyond more revenues, profits, and clients. Before a firm owner sets out to grow their business, I highly recommend they have a heart-to-heart talk with themselves — and possibly their spouse or significant other — about what they really want from their business.
If you define “growth” as one or more of these intangibles, your progress will be harder to measure. For instance, you could have substantial “growth” without anything appearing to be different. When we have a narrow definition of growth, it’s easy to forget about seeing what’s changed for the better.
If these are your goals, you should assess your progress beyond the profit and loss statement: Is your client service better, staff more knowledgeable, tech interface more user friendly? And are you becoming a better executive and owner? And perhaps most importantly, is your business becoming more mature? In other words, as a whole, is it better for you, for your employees, for your clients? It’s up to you as the owner and your partners to define what “successful” growth is for your business.
There’s nothing wrong with traditional business growth goals such as increased clients, revenues, and profits. However, with easily “quantifiable” goals, there is the danger of putting too much pressure on yourself and your staff in order to attain them.
For instance, today, many firm owners have a goal of attaining $1 billion in client assets under management. While that’s a worthy goal, underneath their bravado, the magnitude of it can be intimidating to many.
It’s far less stressful — and more successful — to have a general idea of what you’re trying to do, like grow AUM. And then take steps to do that. If you later get to $1 billion, great. If at some point along the way you realize your firm’s AUM is big enough, that’s fine, too.
Once a firm’s owner(s) defines what the “growth” of their business will look like, making decisions about what to do next becomes much easier. Rather than having some massive plan that extends far out into the future, you can simply make decisions about what steps to take next, one at a time.