One of the biggest challenges for any thriving advisory firm is finding time (beyond day-to-day operations) to plan and execute on the activities which will most positively impact the business’ enterprise value.
We’re not talking about the “market cap plus debt, minority interest, and preferred shares, minus total cash and cash equivalents” financial definition of enterprise value. Instead, we’re talking about the ability of your business to not only survive but thrive without you. It’s a harsh but essential reality – the less dependent on you personally, the more valuable your business. So the question is, what actions can you undertake and what steps can you implement to help achieve that aim?
At ClientWise, we group these value drivers into three main categories: sustainability drivers; operational drivers; and financial drivers. They’re the levers at your disposal – the tools with which you can directly impact the future value of your business today.
And the long-term success of your enterprise just may depend on your willingness and commitment to carve out time to focus on them:
- (People) Build an Interdependent Team – you may think you’re in the wealth management business, but you’re not. You’re in the human capital business that happens to deliver wealth management. Founder-focused firms aren’t sustainable businesses. You need to build a true interdependent team-driven business.
- (Clients) Institutionalize Your Client Engagement Model – rather than the old approach of each individual advisor running his or her own siloed business with dedicated or shared support staff, institutionalizing the client engagement structure with Senior Lead Advisors, Lead Advisors, Associate Lead Advisors, and Service Advisors will help enhance profitability.
- (Brand) Frame Your Future Firm – your brand is your business. Make sure your clients are perceiving your value in a way that aligns with your vision, value, and unique strengths.
- (Product Diversity) Redefine Wealth Management – whether you’re an investment-focused firm or one that’s driven by planning, the broader you can make your wealth management offering, the greater the perceived value of the firm. Along with investing and planning, seek to build broader capabilities that encompass risk management, family continuity, philanthropy, etc.
- (Process) Develop Your Firm’s Practice Management Model – strive to develop a culture of continued growth around your firm’s practice management model including client acquisition and engagement, marketing, business and operations management, and human capital management.
- (Compliance) No Material Regulatory Infractions – nothing will subvert the value of your enterprise faster than the perception (right or wrong) of questionable business practices. At all costs, avoid any temptation to cut corners in pursuit of growth and profitability.
- (Efficiency) Solid Business Management, Operations, and Technology – do you have a strong practice management model, a demonstrated history of improving operational efficiencies, and a commitment to keeping up-to-date with technological enhancements in all areas of the business – from sales and client service to planning, portfolio management, and reporting?
- (Momentum) Institutionalize the Business Development Approach – a clear, systematized and repeatable lead generation, opportunity management, and client conversion and on-boarding process can recharge and streamline your acquisition efforts.
- (Metrics) Drive Financial Strength and Profitability – what’s the ROI of your human capital? How well are you tracking towards your profitability targets? Is your current rate of growth sustainable based on your hiring plan? The clearer your insights into the financial metrics of your business, the better able you’ll be to drive future value.
- (Strategy) Strategically Reinvest in the Business – the more you’re able to put back into the business – when invested smartly – can return exponentially more down the road in future enterprise value.
As your business continues to scale and grow over the coming year(s), an enhanced focus on these value drivers will help you accelerate the development of your firm, motivate and lead your teams, and enjoy the resulting financial and personal rewards.
Coaching Questions from this article:
- What actions can you take to better anchor your vision for the firm’s future, and begin to institutionalize strategy, policies, processes, and decision-making?
- What profitability goals do you have for your firm over the next 3 years? What key client, team, and leadership results will be required to achieve those goals?
- Do you currently have both the capacity and working capital necessary to support those objectives? If not, what steps can you undertake to address any gaps?
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