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Scale Remains Key Factor in Advice Business Profitability

Scale continues to be a critical benchmark in determining the ongoing profitability of Australian advice practices, according to Business Health.

Business Health Co-Principal, Terry Bell

Notwithstanding the significant focus being placed by advice businesses on changing industry metrics to be brought about by FASEA and the Banking Royal Commission, Business Health Principal, Terry Bell, has suggested advisers and business owners take a step back to help them determine whether they are achieving a fair return on their investment in their business.

In Business Health’s February newsletter, the consulting firm outlined five key benchmarks shared by advice practices and compared the relative performance against those benchmarks for businesses generating less then $1 million pa with those generating more then $1 million pa.

The following table, taken from Business Health’s newsletter, summarises the results, which appear to make a compelling argument that scale in Australian advice businesses is a critical ingredient for greater profitability:

Do you have a business or a job…?

On the strength of these statistics, Business Health asks advice businesses principals this tough question:

Do you have a business or a job per se?

In the same newsletter, Business Health also documented five profit drivers common to all advice businesses, based on its 2017 data, and the impact they can make. The firm says it hopes to see improvement in these areas during 2019 – at a time when advice businesses are diligently seeking to maximise all metrics within their control which can drive greater profitability:

Business Health advises it will be releasing its latest analysis on the ‘health’ of Australian advice practices shortly.