Only just over half of all advice practices in Australia maintain a properly documented business plan and even less actually implement those plans, according to practice management group, Business Health.
Based on data contained in Business Health’s Future Ready IV Report, released late last year, 57% of advice practices say they have a properly documented business plan. This figure is up from 53% the previous year, but the firm says it is somewhat surprised by the fact that still only 57% now have a proper plan, given the upheavals in the Australian economy and the financial services industry over the last two years.
According to Business Health, :
- 57% of practices hold a properly-documented plan to develop and grow their business
- 29% of practices have only a partially developed business plan
- An alarming 14% of all advice practices in Australia have no documented business plan
… there is a direct link between the quality of a practice’s business plan and its profitability
Further details provided by Business Health indicate there is a direct link between the quality of a practice’s business plan and its profitability.
The firm reveals the average annual profit per principal in a practice that maintains and implements a documented business plan is $437,728. There is a stark comparison between this number and the average annual profit per principal in those practices where a documented business plan is only partially implemented ($279,966) or does not exist at all ($189,743).
The clear message from Business Health is that all advice practices need a properly documented and implemented business plan in order to optimise its profitability.
Business Health Director, Ray Henderson, told riskinfo that the financial ‘health’ of an advice practice is reflected in how well the practice implements its key value drivers, such as the documented business plan.
Other key value drivers within the Business Health approach to operating successful advice practices include:
- Quality of the practice’s client management systems
- Use of the office – proportion of client meetings held on-site
- Effectiveness of client segmentation
- Review processes
- Ability to receive ‘honest’ client feedback
- Frequency of contact with ‘A’ class clients
- Succession planning
- Accessing external advice
- Media management
- People management
Mr Henderson said that unlike many other consulting firms, the approach from Business Health is one that addresses the qualitative elements of advice practices rather than the quantitative factors.
In all, Business Health consults on 32 specific areas of an advice practice’s operations, adding value by assisting the practice understand what issues need to be addressed, and how to address them.
While it may sometimes be daunting to the practice principal to identify where or how to commence a review of their business, Mr Henderson told riskinfo that “We’ve spent years making the complicated simple.”
