By Joni Youngwirth
There is a tipping point in the making. A small but increasing number of advisors are saying they have a business, not a practice. I suspect, in short order, everyone will understand that running a business is different from running a practice.
In a practice, a heavy dose of subjectivity influences decisions ranging from, “Shall I accept this client?” to “Shall I hire this employee?” to “Shall I spend money on this or that office expense?” Contrast that with a business, a more formal organization that employs business principles to run daily operations and objectivity to make top- and bottom-line financial and nonfinancial decisions.
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Trying to be everything to everyone leads to mediocrity. |
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To roughly assess where you fall on the practice-to-business continuum, see how many of the following questions you can say yes to when it comes to your production. Call it sales, revenue generation, consulting—whatever, but if you can’t be successful in this area, your organization won’t be around for long.
Do you track revenue-generating activity? Activity begets business. Yet it is so easy to shy away from tracking your own activity, such as the number of meetings you have each week. You may shy away because you don’t want to acknowledge the numbers. But if you hire a new producer, isn’t this one thing you would want to keep your eyes on to give you a sense of what future production might be?
Do you have a written growth strategy? There is no single way to grow revenue. For example, you can acquire new clients one at a time, buy other practices, work with strategic alliances to informally partner on acquiring referrals or perhaps form a formal partnership, align with a bank to provide services, and so forth. If you don’t formally articulate your growth strategy, you can find yourself jerked around by the last industry article you read, the last presentation you heard or the last colleague you spoke with.
Do you say no to bad business? It may seem counterintuitive that a key revenue-generating strategy is to say no to business. But bad business costs you time. In your gut, more often than not, you know when you are taking on clients who are not right for your firm and that you should be saying no to.
Do you create a written revenue goal annually? Advisors usually establish a “realistic” goal and a “stretch” goal for themselves. Occasionally, an advisor refuses to do this. One such advisor told me that if he set a goal, he would be so goal-oriented that he would be tempted to write bad business. Suffice it to say that a revenue goal is made up of 100 percent of good, solid, ethical business. Can you imagine what would happen in a Fortune 500 company if those who generated revenue didn’t forecast a revenue goal? How would the company be able to budget and make wise decisions about how to invest its resources for maximum gain?
Do you use referrals and introductions? Because referrals and introductions from clients are the most economical, fastest and most effective way to get new clients, it is an approach you should maximize. Those who do this well are among the most successful people in the industry. But it is critical to find your own voice to implement this approach so that it is natural and comfortable for both you and the client.
Do you have a clear picture of your ideal client? It helps with the math if you know who your ideal client is because you can calculate how many new clients you need to reach your desired growth. Knowing your ideal client is the first step. Sticking to it, which means saying no to clients who are not ideal, is often the greater but more critical challenge. Trying to be everything to everyone leads to mediocrity.
Do you have multiple producers? There is financial data to support the fact that multi-producer firms have a lower overhead than solo producers. Another key reason for this variable is that you want revenue generation to be a constant for your firm. In solo firms, new revenue generation stops when the producer—you—is gone, be it for a vacation or to attend a conference or because of more serious issues like disability.
Do you know your close rate and your client-retention rate? One way to increase revenue is to see more people. Another way is to ensure that the people you see become clients. The advisor with a close rate of 75 percent would likely do better to enhance his skills and competence working with the clients he has than to increase his activity to see more people. A similar case can be made for retention rate data.
This is part of a much longer speech that was given at the 2007 MDRT annual meeting, in which Youngwirth looks into nine additional areas that measure a practice vs. a business. For more information, go to www.mdrt.org.
Used with permission from MDRT. All rights reserved.
Joni Youngwirth has served as the vice president of practice management for Commonwealth Financial Network since 1998. She is a recognized practice management expert in the financial services industry and has had a 31-year career focused on consulting and coaching. Contact her at jyoungwirth@commonwealth.com.
March 2008
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