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Practice Management > Building Your Business

Don't Forget This Important Planning Task for the New Year

By Roger Wohlner

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What You Need to Know

  • Having a business plan in place is critical in helping advisors focus on company goals.
  • Working on the business also benefits clients, as it enhances the ability to direct attention to their needs.
  • If an exit is coming, getting a firm ready for sale or a successor also merits consideration.

While advisors’ focus right now is likely on changes affecting clients as we move into 2024, be sure to take some time to look at your own business planning issues for the year ahead and beyond.

While we might feel that focusing on our professional needs is taking time away from helping clients, in reality, ensuring that business priorities are taken care of can help you better serve your clients.

Just as with planning for clients, your own business planning will vary with a firm’s circumstances. These might include the size of the firm, your age, ownership structure and other factors. Even if you are a sole practitioner, planning the direction of your career path is still important.

Here are some business planning issues for advisors and firms to consider for 2024.

How Did You Do in 2023?

A good place to start is by taking a look at how things went financially in 2023. Review your revenue and expenses for the year. Did you experience growth in revenue, and did this growth lead to higher profits?

Drill down to the client level. Does profitability vary by client? If so, what type of clients are the most and least profitable for you to serve? If you serve several types of clients, this is a good time to review how much you are charging and the services provided to each type of client. Do their fees need to be adjusted? Does this influence the type of clients you want to pursue in 2024 and beyond?

Who Are Your Ideal Customers?

A key element of your plan will be to look at who your ideal customers are and what services you offer them. Do you serve niche clients like doctors, attorneys, technology executives or others? Do you focus on serving high-level employees at one or two companies?

What types of services do you offer these clients?

  • Investment advice
  • Financial planning
  • Tax and estate planning
  • Comprehensive wealth management
  • Specific help related to their employer or profession

Perhaps more importantly, are you primarily serving your ideal clients or is your client base scattered among different types of clients acquired over the years with differing needs and situations?

How Is the Business Structured?

Are you a solo practitioner? Does your firm have a number of employees including other advisors and support staff? Do you own the firm outright or do you have business partners?

As part of the planning process, this aspect should be reviewed and assessed to determine if any changes are needed. If you are in business by yourself, is it time to take on a partner(s)? Would you, your employees and most importantly your clients benefit from joining forces with another firm or even being acquired?

Formulating a Business Plan

In formulating a business plan, keep in mind that this plan is not just for you, but also for other members of your team, prospective business partners and perhaps investors. Also, preparing the plan with the idea that others will likely be reading it will help you to prepare it in a fashion that is clear and defines goals and objectives. Even if you do end up as the only one using the plan, this approach helps to ensure the plan is well thought out.

Here is how your plan might be structured, although the sections may vary a bit from firm to firm:

The Executive Summary provides an introduction to your firm and to the objectives of the plan. This is the place to discuss your firm’s mission and your vision for the future. This section might include a financial summary as well as your expectations for growth over the next few years.

The Company Overview should discuss your firm including when it was founded and the structure of the business.  

A Competitor Analysis is the place to discuss who your main competitors are in terms of your current market and in any markets you want to expand into. This may be other firms like yours, major brokers or others who are marketing to the same prospective clients you are looking at or possibly even robo-advisors. Knowing your competitors is critical to formulating a solid marketing plan. 

The Marketing Plan section is an important piece, especially if your goal is to attract new clients and to grow the firm. This may involve a number of strategies including adding to your firm’s online presence, networking with other professionals who work with the types of clients you may be seeking or other approaches to increase visibility and get in front of your firm’s desired clients. How will you differentiate your firm in the eyes of prospective clients or referral sources?

The Operating Plan section should cover the steps you may be taking to streamline operations. This could include new internal systems, ensuring that the firm has the best support staff in place as well as working with top external vendors such as custodians and others.

The Management Team section should discuss the senior management of the firm, including their experience and achievements. It should also discuss your goals for the management team and what you hope to accomplish for the firm through their efforts. Are any new hires needed or anticipated here?

The Financial Plan section is where you will want to outline your financial goals for the firm in terms of growth. You should also discuss the expenses of running the firm and your projections for revenue growth for the coming years. If the purpose of the plan is to attract investors, sell the firm or to partner with a new broker-dealer or another advisory firm, this section should be quite detailed.

Developing the Plan

The outline above is a basic, standard format for a business plan, and that might be fine for your purposes. Additional sections or a greater focus on specific sections may be appropriate depending on your firm’s goals and your situation. 

While you want the plan to reflect your thoughts and goals, you probably should have someone else assist in writing the plan. This could be a member of your staff or an outside consultant who specializes in developing business plans. An experienced consultant can serve as an excellent sounding board during this process. You should be the one reviewing the plan at various stages and providing input throughout the process. As the saying goes, sometimes it is easier to critique than to create. 

Depending upon your specific circumstances, there may be some other sections to include in the planning process, although these sections might be separate from the basic plan.

Note that a business plan is not a one-time effort. Over time this plan should be revisited and revised as appropriate. Your firm’s situation may evolve, and your goals for the firm may change as well. Think of this in much the same way you think about planning for your clients. 

An Exit Strategy

One key section might include your exit strategy, especially if you are planning to exit the firm in the next few years. If you have partners in the business, is there a mechanism in place to sell your interest in the firm to them? Do you have a buy-sell arrangement or something similar in place? Note that this portion might be kept separate from the main plan, but this type of planning is important for you and any fellow owners of the firm.

If you are considering selling to a larger firm or combining with a competitor, you should cover this in your planning efforts. What type of firm(s) would be interested? Have you identified any potential buyers or merger partners? Are there internal senior managers or other key personnel who might be good candidates to buy the firm? 

Summary

As a financial advisor, you help clients plan for their financial future and advise them in a variety of areas. Having a plan in place is not only important for the future of your financial advisory firm, but it also helps to keep you focused on what is needed to make your firm a success going forward. This allows you to focus on your firm’s main goal: helping your clients succeed.

Roger Wohlner

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