As advisory businesses grow, their needs change. Unfortunately, some owner-advisors may not fully grasp what this means to the business side. Perhaps the best — and most important — example of these changes is the role of the “rainmaker.”
Typically, when advisory firms start up, the owner-advisor has the role of attracting clients. In the case of two advisors starting a firm, one could take on the rainmaker role, while the other delivers financial advice to clients.
Regardless of who fills the rainmaker role, a growing business requires that the rainmaker change along with it. And firm owners and/or rainmakers who fail to fully appreciate this dynamic can greatly impede the growth and success of their firm.
Think of the rainmaker as a “business developer” with more responsibilities than simply bringing in new clients. What most needs to be recognized is how that role shifts as the business grows.
Like many people in business, firm owners tend to think of a rainmaker/business developer as being responsible for growing “topline” revenue via the addition of new clients. (When a business is starting out, this is typically the case — and exactly what the business needs.)
But as advisory businesses grow, their needs tend to change. To continue to succeed, their focus needs to shift, too. One of the most important changes is to move the emphasis of the business away from increasing revenues and onto increasing profitability.
What to Do
It typically takes firm owners a significant amount of time — usually a few years — to get their heads around the transition from being focused on revenues to zooming in on profits.
The simple explanation for taking this approach is that while “high” revenues are be nice to brag about at industry conferences, increasing profits boost compensation for owners and employees and provide the business with resources it needs to keep growing.
As the requirements of the business shift (due to the emphasis on higher profitability), the business developer’s job expands beyond simply adding more clients to include playing a critical role in the growth of the firm’s profits, too.
Simply put, this means going from a focus on bringing in “any” new clients, to bringing in “profitable” new clients. And the more profitable they are, the better.
In other words, for most rainmakers, the game shifts from quantity to quality, with more emphasis put on the criteria for deciding who will and won’t make good clients.