Mastering Organic Growth

Most advisory firms want to grow. That’s understandable, as industry surveys tell us that the advisory business owners who focus on growth get results.

But what most firm owners don’t understand is there is no one-size-fits-all approach. Therefore, it’s very important to choose the right strategy from the beginning to take your business where you want it to go.

Typically, owner advisors have one of two goals when they decide to grow their business: make more money and have more time.

Most owners, like the rest of us, would prefer to have both. But to successfully grow their business, they really have to choose — at least at first. That’s because there are essentially two basic, but very different, ways to grow an advisory firm.

When I work with an advisory firm owner, the first step (and often the one that is skipped when firms try to do it themselves) is to create a growth strategy. The growth strategy designs and outlines the result they want to have in the business. That is, a pathway to growth, however they define it.

The most common goal initially is to take home more money. Consequently, the most conventional path to growing an independent advisory business is to reach for a quick solution, and that typically is called “external” growth. As the name implies, external growth involves adding something new to the business: merge with or buy another firm, do a joint venture, attract new clients (sales and marketing), add a new service model, and so on. All these activities are intended to increase revenues and profitability.

Each initiative involves a certain degree of risk and a significant amount of capital investment. I’ve found most firm owners lean toward a conservative strategy.

That brings me to the other major goal of owner advisors — to have more time, that is more time working with clients and/or running the business and more time out of the office. As mergers and acquisitions involve a considerable amount of time as well as capital investment, they are rarely the choice of time-oriented owners.

For firm owners more interested in time, at least at first, we look to “internal” growth strategies. That is, rather than focusing on outside “quick growth” solutions, we look for ways we can improve the firm’s current business.

Once an external or an internal solution is determined, we must define a path to get there. A good first step is to take a hard look at our goals: Are they realistic?

Usually they aren’t. Most goals I see are unrealistic, and that is one of the surest paths to failure. They create undue stress, lead to premature decisions and implementation, include unworkable shortcuts and ultimately can lead to the abandonment of the project.

Once we’ve created realistic goals, along with the understanding that they are flexible enough to accommodate unanticipated results and circumstances, we decide how to implement them.

Going Organic For many larger firms, growing externally can be a successful option. However, for the vast majority of advisory businesses, the cost and the risks of external growth don’t make sense. For these firms, I typically recommend an internal “organic” growth strategy.

This strategy is based on taking what the business already has and making its market share bigger. An “internal” strategy is focused on using the firm’s current human capital, clients, client experience and service models more effectively to reach its goals.

Although virtually all owner advisors, regardless of firm size, think about external growth first, in my experience, internal growth is by far the best first step for most firms to exhaust and the one with the biggest opportunities for growth. Unfortunately, internal growth is also the most misunderstood.