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November 25, 2019 at 09:00 AM
With 2020 rapidly approaching, it’s time to address one of the main challenges that owner advisors face: establishing goals for the coming year.
How can setting goals for a business be a challenge? By themselves, goals in business are basically harmless. Typically, they are expressed as a number, a time frame, an innovation, an addition, or a change.
The problems arise from how we think about them: as something that we now must do, create, attain, or achieve. And once we’ve set our goal, or goals, we usually believe that not attaining them is a failure on our or our teams’ part — an indication that we’re not really as good at what we do as we previously thought.
Today this behavior commonly is referred to as “setting ourselves up to fail.” An example is setting a goal for your AUM growth to be attained within a specific time frame (for example, reaching $1 billion in AUM within the next three or five years.)
You can see some of the flaws in this approach, starting with the tendency to select an arbitrary number. That is, it’s just a figure we’ve pulled out of thin air, based on nothing but wishful thinking.
In contrast, a more rational approach would involve making a realistic assessment of:
• What could you do to attract more client assets, more quickly, than your current rate and strategy? • What can you do to better train your people serving clients? • How can you be better at changing and leading your organization?
In my experience, most growth plans fail not because the firm owner was lacking the required skills, but because the owner’s goals were unrealistic.
The reality is that growing an independent advisory business takes a lot of capital, time, hard work and realistic planning. While setting a big goal like the above may seem motivating, the other side of that coin is it also can create a lot of stress — and the more unrealistic the goal, the greater the stress.
Move Outside the Box
What’s more, goal setting — whether unrealistic or not — tends to limit an owner’s thinking. When firm owners set goals for themselves and their businesses, they often get so focused on reaching those specific targets that they fail to consider other alternatives that could be even more beneficial to their business.
For instance, a focus on reaching a specific AUM by a set date can prevent owners from looking at other non-AUM based services they could add to their business, such as tax planning, estate planning, 401(k)s, and more. Often, these other services can be more easily implemented at much lower costs — having an even larger impact on a firm’s profitability and diversity of services.
Finally, setting goals can blind owners to existing issues in their businesses that may hamper the growth they are looking for. To help owners both reduce the stress of unrealistic goal setting and the fear of failing to attain those goals, they should start their growth plan by first making an assessment of where their firm is today, and how it would have to change to support the kind of increase they have in mind.
This assessment is not about what your goals should or shouldn’t be, but rather creating a solid foundation in your current business before setting the goals and/or building and adding something new. Here are seven areas of advisory businesses that owners need to review prior to setting goals for the coming year.
