6 Ways to Do a Reality Check on Your Business

Typically when owner advisors decide they want to grow their firms, they create and launch a marketing program and/or hire more employees.

But when owners seek advice from other advisors, business consultants, and friends and family who also are business owners, they usually are told to start by creating a clear picture of where they want their businesses to be (i.e. vision, mission, goals) and only then to start thinking about how to get there. While this isn’t bad advice, particularly when implemented at the right time, it’s not the best advice.

What could be more important than knowing where an owner wants their business to go? The answer: Taking a hard look at where the business is today.

I‘m still dumbfounded by how many advisory firm owners want to jump right into their growth plans without evaluating where the business is right now. That’s the real starting place.

Perhaps many owners skip this step because they believe they already know where their business is. But remember, I said a “hard” look — not just the view from the front office or from 30,000 feet.

The Importance of Clarity I’ve come to realize that many firm owners have lost touch (or “clarity”) with where their business is today. Not last year, or five years ago, but where it is right now.

And without that clarity, marketing, networking, and referral programs won’t get owners to where they want their businesses to be. Unfortunately, in many cases, the substantial amount of money lost in these attempts frequently discourages firm owners from trying to grow at all.

However, the loss of clarity about where your firm is right now is the real reason your business isn’t growing — or growing fast enough.

To help firm owners gain clarity about where their businesses are and what they need to do to reach their goals, we have developed the following questions. These have been used countless times within our consulting practice to get a business growing again.

1. First, we look at leadership and structure. What is your management strategy? Do you make all the key decisions, is there a CEO who reports to you, or do you have a management team made up of the firm’s senior people — who may or may not all be advisors — who have input on and some influence over major decisions relating to the business? Ultimately, who makes the final decisions?

Giving senior staff the ability to provide input about and influence over major business decisions not only increases motivation but greatly increases the likelihood of success for new initiatives.

2. It’s important to have a clear vision of what type of advisory firm you are building. Who are your target clients, and what type of services are you providing for them? Are you “fee-only,” providing fiduciary advice to your clients, or are you primarily a sales-oriented business? And how does this affect both the services you offer and the clients you attract? Knowing where you want to take your business is important, but it won’t help if you’re not clear about where your business is today. Once that is done, you can then match that up with where you want your business to go.

3. Ask about the firm’s core values: How often do you review those values? What is your management strategy to support those values — that is, to instill those values in all your employees and monitor their compliance? These questions help you design your culture. In RIA firms, these issues usually are easier to address. But even RIAs have their challenges, such as if or when they should raise fees and/or AUM levels or offer flat fees, and how to tackle client spending vs. saving for the future.

On the registered rep side, there are more conflicts, and management needs to make the firm’s approach to these conflicts clear and easy to monitor. In either case, the key is to know what your firm values are and to have a system to monitor them regularly.

4. What services do you provide, and are they the right services for your business and its clients? Considering your experience with these services, what type of clients tend to be attracted to them? Are these your target clients? What’s your delivery model for those services and is it right for those clients? And what makes your firm’s delivery of those services unique?

5. How does your firm manage its human capital? What is your overall organizational strategy? Do your employees work in teams, silos, independently, or in some combination of all three? Is the strategy working for you?

Start by addressing the “key” positions; that is, what jobs must be done well on a regular basis for the firm to be successful? And what career tracks do you have in place to assure that these positions will continue to be filled with competent people?

6. Now review your sales and messaging. What exactly is your sales strategy? Whom do you target? How do you target them? What messaging do you use to attract them to your firm? What do you like other people to say about your business? And perhaps most importantly, is your strategy and messaging working? Are you regularly attracting the number of new clients that you want for your business? And are they the right clients?

7. Finally, address your corporate finances. This usually isn’t the favorite topic of most owner advisors, but to get a complete picture of where your business is today, you can’t ignore the numbers.

To get a good handle on where your business really is, I suggest you start with your return on investment. If your business is returning an ROI that’s as high or higher than you could get in the stock market, or via another popular investment, then you have what would generally be considered a successful business. If not, your future plans should include a strategy to raise your ROI.

However, the more important question is whether you are getting what you want out of the business.

Are you more concerned about generating high cashflow for higher distributions now, or a higher value for the business to be realized when you retire? Of course, there’s no “right” answer. It’s purely a matter of what you want to get out of the business — and when you want to get it.

Once you’ve seriously considered your answers to these questions based on where your firm is today, you’ll have a much clearer picture of not only where you want to take your business — but also of what you need to do to get it there. Plus, you’ll have a far greater chance of success.

Growing your business from where it is to where you want it to go is about asking the right questions. Being honest — and clear — with your answers will help you attain your goal. Businesses don’t stop growing because of what the owners don’t know. They stop growing based on what the owners don’t take the time to find out.

Angie Herbers is managing director and senior consultant at Herbers & Company, an independent growth consultancy for financial advisory firms. She can be reached at angie@angieherbers.com.