So many advisory firms do not realise their potential, and the top mistakes which hold them back are more often than not nothing to with their ability to be great advisers. They tend to fall into the category of being basic commercial mistakes.
So the main mistakes that advice businesses keep making is to “not run it like a business”.
A bold assertion perhaps, however what I continually observe in a variety of practices – including financial planners, risk advisers, accountants, and lawyers – is a lack of attention in some business fundamentals. I’ve listed them in roughly descending order of priority beginning with the biggest of the problems and working down to the “least biggest” below. While these are the most common mistakes they are also probably the areas of greatest opportunity for creating far stronger businesses, and improving business value for their owners:
1. Strategic Clarity. As odd as it may sound, a remarkably high proportion of advice businesses have little (if any) clarity around what their own end game is, or how they are going to get there. There is often a lack of understanding or thought about the chosen strategy for differentiation or growth as a firm, and what the owners ultimate objectives are. Achieving that clarity provides focus for the owners, and assists in allocating resources and creating plans which will achieve the owners purpose.
2. Business Model & Plan. It follows that without strategic clarity it will be difficult to define and then build the right business structure, let alone plan in advance how to build it. Clearly that will be an inhibitor for business growth….but perhaps even more dangerous for many businesses is the adoption of a business model which will deter the business from achieving the owners objectives. Incredibly it seems that many business owners try and simply build the same business model as the rest of their competitors because that is the norm…that is what is known….and little innovation or imagination is shown. Most importantly, there is a real risk that the business model which is adopted is not the right model for achieving the owners objectives, particularly in times of great market disruption as we are witnessing now.
3. Marketing Plan. Many service firms have a marketing plan which is effectively “let’s stay busy doing stuff”. Marketing activity is usually ad hoc, reactive, and often under-resourced. An effective marketing plan is tactical in nature, and will be built to support and execute the business strategy and the business plan. It follows that there must be some budget and time allocation given to it…
4. Marketing Resources. Too many professional services firms simply do not allocate the required resources to implement marketing objectives. Too little budget….too few people….and not sufficient time allocated to the development and execution of the marketing plan. That will kill even good and well thought out plans.
5. Target Market. Who do you best serve? Who best fits with what you know and can provide? What do those customers look like and what are the key needs, wants and aspirations? Working primarily with those you should be working with, and want to work with builds a far stronger business. The most common complaint from advisers who have been around a while is that they spend too much of their time working with the wrong sort of clients…which is because they took on anyone who was willing to work with them rather than focus their marketing on building the majority of the practice to serve their ideal clientele.
6. Research. Perhaps as business has become a little tougher, or busier, there is an increasing tendency to simply outsource all research, whether that is market research, product synopsis, assessing individual clients or new staff hires. There is merit in getting good objective external opinion in any of these areas, and it adds to quality decision-making. Outsourcing it all is not a substitute for good decision-making or managing the business well however, and the danger has become an over-reliance on out-sourced research. Professionals need to exercise their own judgement, form their own opinions and back their own instincts – supported by research – however, it is your brand and regulatory risk and financial resources which are going on the line.
7. Mis-Assigning your values. Most professionals are honest and caring individuals, with high levels of personal integrity. A common mistake that undermines many of their businesses though is making the assumption that all other human beings are the same as them. Suppliers, staff, customers…not everyone shares the same values that you do, and it is usually a stressful (if not downright expensive) mistake to assume that everyone else thinks and acts the same way you would.
8. Promoting To Incompetence. In a hierarchal business there is a tendency to promote people to their level of incompetence (“The Peter Principle”). It is a killer in many professional firms, as a good adviser or salesperson is given managerial responsibility that they are not equipped for or suited to. Or a great staff member is made a Practice Manager, yet they have little ability to manage other people…and so on and so on. There is a strong tendency in advice businesses to take a good person and put them into the practice’s area of immediate difficulty, with the corresponding effect that the previous problem still largely exists and you’ve just wasted a good person.
9. Rewarding the wrong stuff. You get the behaviour that you reward in the main. Often advice firms find themselves in a position at some stage of not being happy with staff performance, or customer loyalty, and it is more often than not a simple equation: you are rewarding the behaviours you did not want.
10. Good Governance. It is a wonderful feeling running a benevolent dictatorship, and having minions and total domination of your own universe. However it doesn’t build a strong business that maximises value for customers, staff or the owners ultimately. Quality business decisions which are most likely achieve the objectives of all legitimate stakeholders tend to be made when there are good decision-making frameworks, and good internal controls. Good governance makes a significant difference to the growth and health of a business, and is generally undervalued and under-utilised by professional services firms.
These are the BIG mistakes, and the ones which are also the biggest opportunity to strengthen a professional services business in terms of minimising liabilities, enhancing customer service and satisfaction levels, and creating greater value for owners.