Advisers should consider the benefits, but also the disadvantages that may be associated with increasing the size of their practice, according to an industry consultant.
In the June 2010 edition of Advice Centre Consulting’s Growth Focus Monthly publication, the firm’s Principal, David Fox, says he has regular discussions with business owners that revolve around the optimum size their practice should be targeting.
While there may be obvious benefits that go with increased size, such as higher revenue and growing profits, Mr Fox cautions advisers to carefully consider the ‘trade offs’.
According to Mr Fox, the positive aspects of maintaining a smaller practice include:
- Retention of control over the operation of the practice
- Less ‘people’ issues
- Less stress and better lifestyle
- Maintaining a personal service culture
On the other hand, Mr Fox outlines the downsides potentially associated with maintaining a smaller practice, which include:
- Difficulty in attracting and retaining talented people
- More demanding clients
- Rising costs of operating an advice practice
- Business valuation not as attractive to potential buyers
- Difficulty with implementing a premium pricing structure
- Harder to effectively form and maintain professional alliances
Mr Fox believes there is no optimum size for an advice practice, rather that a growth or consolidation strategy will be determined by whichever strategy best aligns with the personal, lifestyle and business objectives of the business owners.
Mr Fox expands on each of these issues, which can be accessed by clicking: The Trade Offs for Large and Small Business Models.
