What You Need to Know
- Advisors have to focus on the drivers behind revenue, profits and valuation.
- Increasing a firm's referral rate is the first and most important step.
- Next steps are increasing advisor capacity, close rates and lead flows, in that order.
Like most advisory firm owners, you likely want to increase at least one of three numbers in your firm: valuation, revenue or profits. You may even have more than one that you are trying to improve now, and if you are doing well, you are improving all three at the same time.
The problem is that you can’t just set goals on growing revenue, profits and valuation. After all, how much control do you really have over your company’s performance? You can’t make profits rise merely by thinking more about them. You cannot set a goal that says, “We are going to increase revenue” and then have it happen simply by talking about it. Action must be taken.
Instead, you have to focus on the drivers behind revenue, profits and valuation. It’s no different than in financial planning; you can’t change a client’s performance by focusing on it alone. It is the financial planning that enhances the whole picture. With your firm, strategic business planning and implementation drive the performance upward.
So the big question is, what do you focus your strategic planning on to move the performance of your firm? The simple answer is something other than revenue, profits and valuation. The goal is to know the four key drivers of growth to increase all three.
First Step to Growth
Increasing revenue, profits and valuation (I know you do not want to hear this) begins with leadership training. Most often, when there is a revenue or profit problem in a firm (that leads to a valuation problem), leadership is to blame. The problem is usually that an owner feels they do not have enough time to focus on the drivers powering their potential growth.
How do you find the time to focus on your business without sacrificing client relationships? There is no magical formula to time, but it can be as simple as reallocating one extra hour a day, or as complex as hiring. Nevertheless, it starts with the simple decision to do something about it. This is the first decision you must make before you delve deeper into enhancing your growth.
At the core, you must decide to make time for growth, strategic planning and implementation. Once that decision is made, the work can begin.
Over the years, I have found that indecision comes down to two behaviors: (1) owners spending too much time comparing their firms to others, and (2) owners continually making excuses. This wastes time. You must make time for what is important, regardless of what everyone else is doing. As I say to advisory firm clients I work with: “Make the decision. Without the decision, you will never learn.”
4 Key Drivers of Growth
Our firm focuses on the four key drivers in a particular order — from easiest to hardest. Unfortunately, most advisory firms start backward and make their work much more difficult than it needs to be, again wasting time.
The four key drivers in order are:
• Increasing the referral rate. • Increasing advisor capacity. • Increasing close rates. • Increasing lead flow.
Most often, overall performance is influenced by retention and expansion. It is logical for firms to think about expansion first, but retention is more important. Learn to keep the clients you have, and keep them happy, before you can move on to bringing in more clients.
The same goes for employees.