Four Life Stages of an Advice Business
When I was much younger, I used to sail boats up in Gosford. They were called Sabots, small, snub-nosed craft which at first I sailed with another kid, then later on my own.
One of the first lessons I learned in sailing was around equipment. You see, these little boats ended more complicated than I realized.
Certain types of equipment were right for heavy weather, other types for light winds and a whole bunch in between.
If I’m honest I was a bit of a one-trick pony when it came to sailing, and it wasn’t a good trick. I soon gave up.
It wasn’t later the right equipment lesson dawned on me fully.
Businesses are the same. Different challenges demand different growth strategies. The issues comes when the owners of those businesses are like twelve-year-old me in the Sabot, wondering why what worked before doesn’t anymore.
I’ve found that the key to unlocking this problem – the wind selection of growing your business – lies in knowing what stage at.
The diagram below should explain it all, but let me go through it.
The life of an advice business generally goes through four stages. This isn’t exclusive to advice firms; it’s just that I’m talking about the model in terms of advisors.
The bottom level is startup.
These are the initial thralls of a new venture.
Often this is about survival. It may be tough to get clients, hard to build momentum and it’s usually about one or two people with a vision to create something.
At times it might seem like the business is never going to kick start but here’s the thing; consistent efforts directed in the right way means this kind of business kind of kicks in earlier than most people realize, though unfortunately sometimes later then many people’s persistence allows.
Where should the focus be in a startup?
It’s mostly about revenue. That’s what matters. Get enough revenue in to pay the bills. Like air when you’re exercising hard, you just need to get enough in so you can catch breath and move onto the second phase.
The second phase is stability.
This is where your business gets its’ head above water. There’s still not huge amounts of profit, but there’s enough that the pressure’s off and, in most cases, the clarity of thinking starts to develop once the financial pressure eases.
Here’s the important thing; at this phase the focus (if you want to progress up the pyramid) has to stop being about just revenue. It’s got to become about the profit.
That means the right kind of clients. The kind of clients who are going to buy into your offer, agree to engage the way you designed them to, and pay a fee at least30 percent higher than your cost to deliver.
If you get this right, this is the point at which you start looking back at some of the pricing decisions you made at the earlier phase and realizing you may have undercharged.
A word of warning here, although many mature businesses no longer consider themselves to be startups, the reality is, often they still behave as if they’re starting out. It’s still about the revenue.
The bottom line is this; if you continue to focus just on revenue and nothing more, it’s inevitable you’ll yourself with a capacity issue. I see this so often, so it’s a point worth making.
If you manage to get past stability, you’re at the next phase. This is what I call leading.
Leading is where you have stepped above most other advice firms. In many ways you’ve become an actual business. You’ve got systems & processes, a team underneath you and your focus has changed.
If you’re an advisor in this kind of business, you’re focused has likely become time. More specifically, maximizing the amount of time you have to coach your team, work on the business or do the stuff you love.
That means removing the dependence on you, being even more selective about the clients you want to take on board, hiring the right people and spending time building the infrastructure.
Advisers who nail this usually shift into a different mindset. It’s no longer just about the right kind of client. It’s about the personal time required to manage this situation?
Again, failing to make this switch, even if you’re still taking on board profitable clients, you’re going to get dragged back.
The final phase is rare, hallowed turf when it comes to advice firms, because so few get there. This is what I call leveraged.
What’s leveraged? Well it’s the point at which your business has become almost like a franchise, by another name.
Your systems and processes are so well developed that you could pick them up, drop them into another business (whether it’s acquired or started from scratch) and repeat the success you previously had with minor, maybe even no tweaks.
It’s the point at which, maybe you as an advisor are no longer actively involved in training staff. In actual fact, the quality of your staff at below a certain level is less important than the quality of their training.
This is the end game, because if you can create this you’ve got a business that represents the future of advice.
That’s it! If you know where you are, it should make it easier to work out what you should be doing.
If you don’t know where you are, then it’s entirely possible you could unknowingly be the barrier to your business making the step up.
Get a Handle on Your Marketing
Yes, you’re a financial advisor. But you’re also the payroll supervisor, and the HR director, and the property overseer.
When are you supposed to get to marketing to grow your business?
Do this to get a handle on your marketing.
Click on image above to watch the video.
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