Advisers are facing a critical junction and need to adapt their mentality from adviser to business owner, Business Health’s Terry Bell has cautioned.
A recent study conducted by Business Health in conjunction with technology firm, Rubik found that the average Australian advice businesses has over 800 clients, the majority of whom are aged over 60. Combined with the fact that 81% of revenue is generated from existing clients, this presents a risk to advice practices, said Mr Bell.
“They will, like all other Australian small business owners, need to come to grips with a volatile economy in which cash flow has to be maintained,” he said, noting advisers also have to contend with factors like working in relative isolation, being time poor, battling new/different competitors, finding good quality staff, and achieving a work/life balance.
“And all under the microscope of an ever-scrutinising public and demanding regulator. Yes, it’s a tough gig!” acknowledged Mr Bell.
In order to overcome these challenges, Mr Bell believes advisers need to shift their mentality towards that of a business owner.
…one of the biggest opportunities surely lies in the capital value of their practice
“In the case of practice owners, one of the biggest opportunities surely lies in the capital value of their practice – the asset they are working so hard to preserve and grow,” Mr Bell said.
According to statistics from Business Health’s Future Ready VI study, the average practice has an average annual revenue of over $1 million, with a notional profit of $330,000. Taking into account today’s market valuation multiples this sets the average advice business market value at around $2 million.
Mr Bell had the following tips for advisers looking to change their mindset to that of a business owner:
- Always treat clients as your number one asset
- Have a clearly thought-out, actionable and achievable plan for the next 12 months, and the next five years
- View expenditure as an investment by attaching ROI targets
- Surround yourself with quality professionals (staff, licensee, service providers, referrers)
- Seek external input, listen and take appropriate action
- Protect your reputation/profile at all times
- Know and measure your key lead, and lag, metrics
Mr Bell concluded: “For those who adopt a business owner’s mentality (as opposed to continuing to wear the principal/adviser ‘hat’) their reward will be an enhanced asset value.”
Thanks Terry. Thought provoking!
For anyone reading this, I have done the Business Health workshops – they are worth every second!
The mindset shift form adviser to business owner was one which became very apparent back in the late 80’s when licensors stopped paying for or subsidising benefits such as rent, telephone, superannuation, income protection and other such benefits.
If this shift is necessary in 2015 then not much has changed in the mentality of the industry as to who is in control of whom!
Comments are closed.