I
N THE MOV IE City Slickers, the character played by Jack Palance asks Billy Crystal’s character, “Do you know the secret to life?”Bewildered, Crystal’s character says, “No. What?” Palance replies,
“One thing, just one thing; you stick to that, and nothing else don’t mean s**t.”
“That’s great,” Crystal replies, “but what’s the one thing?”
“That’s what you’ve got to figure out,” Palance says.
For advisers, that is your quest as well: What is that one thing that is the secret to the life of your business?
At the core of every decision you make in your business, every dollar you spend, every client you accept, every person you hire, is your strategic plan. It’s the single most important tool you have in your business; indeed, developing a strategy and maintaining it are the most important responsibilities for anyone leading or managing a business. For most financial advisers, however, strategic planning is such an overwhelming process that it’s frequently ignored. Many work harder to achieve their goals than they ever would have to if they had committed the time needed to plan.
gaps and obstacles that prevent you from achieving your goals? What steps must you take to close those gaps? Ironically, though, even advisers who are adamant believers in helping clients plan for their futures often do not apply the same discipline to their own business, typically their largest investment.
Strategic planning is not just about marketing. Nor is it just about the process of defining vision and mission. These are soft concepts that many small-business owners have difficulty translating into action. Rather, a strategic business plan uses vision and mission as frameworks to identify the resources needed to achieve business and personal goals. A strategic plan gives you focus so that you do not waste your resources but allocate them where they can have the greatest impact.
Financial advisers usually preach diversification as the key to managing risk while building value in their clients’ investments.
For a small business, however, diversification is usually less effec- tive. You have finite resources—time, money, management, and energy—to dedicate to building your business. If these resources are spread too thin, you dilute your ability to create momentum in the business.
Imagine if we came to you with $1,000 and asked you to invest the money in a diversified stock portfolio. How would you respond?
You could not achieve enough breadth and depth with that amount, and you would likely tell us we did not have enough resources to diversify in a meaningful way. The same dilemma exists for most advisory practices. Considering your finite resources, how can you effectively spread yourself over so many strategic choices and still make an impact with your business?
Under those circumstances, is there any point in doing strategic planning? Ask yourself these questions: How old will I be five years from now? Where would I like my business to be by then? What will my role in it look like five years from now? What obstacles exist between the practice I have now and the one I hope to have then?
Chances are high you’ll see a substantial gap between the way things are and the way you want them to be. That tells you it’s time to develop both a strategic plan and an operational plan. What’s the difference between the two?
A strategic plan focuses on strategy—what differentiates your firm from others—and on vision—where you want your business to be. The operational plan focuses on the steps required to imple- ment the strategy and achieve the vision. Many firms jump to implementation before they’ve defined their strategy and vision, and this leads to a lot of wasted motion. You don’t hesitate to tell your financial-planning clients, “Investments out of context are accidents waiting to happen.” The same principle applies to your business. Your time, money, management, and energy are finite resources. How will you concentrate them to create the greatest momentum in your business?
We recommend that you take a clean slate to identify all of the possibilities for your practice, without regard to whether you have the money, time, people, or management to achieve them. What makes this process so dynamic is that once you begin to dream—
and design a plan to achieve that dream—you can also identify the resources you need and how you’ll get them. For example, if you say, “I can never get to be a $10 million business because I don’t have enough clients (or enough advisers),” you’re confining yourself to conditions as they exist today. What if you say instead,
“I want to be a $10 million firm in five years”? Now the question becomes a matter of what process you’ll go through to get clients and staff to achieve this goal.
This kind of thinking gives you the context within which to answer the tactical build, buy, or merge questions related to how you’re going to get from where you are to where you want to be.
For some firms, the gap may lead to the decision to merge with or acquire another advisory firm in order to get access to the right staff, technology, market presence, or capacity. Mark Balasa and Armond Dinverno merged their Chicago-area firms with exactly this goal in mind. Independently, they each had excellent practices, with Dinverno’s business being particularly strong in estate planning and Balasa’s being strong in financial planning and investment man- agement. Their merger not only added depth and breadth to their service offerings, it also gave them a critical mass that allowed each to focus on different elements of practice management and project an even bigger, more dynamic image in the market. Most important,
their decision to merge was not based on economics alone but was rooted in their common strategic desire to be known in their market as a premier wealth-management firm.