Rookies: Run your practice like a business

Therefore, you should set expectations for yourself, just as you would for your clients. The following tips can help you run your practice as a successful business:

> Start with a plan
All new financial advisors must have a plan that allocates sufficient funds to cover start-up costs for items such as registration, staff, rent, computers, equipment, insurance and other operational expenses, Dally says.

You can create a pro-forma financial statement that projects potential revenue and expenses over defined periods. This step give can you a sense of how much revenue you would need to break even.

“Make sure that you have enough money in the bank to run your practice” until you begin to make money, says Konrad Kopacz, financial advisor with Chippingham Financial Group in Burlington, Ont.

> Be realistic about profitability
“Not a lot of advisors recognize that it takes time to become profitable when they start up their practice,” Kopacz says. “Their most important goal is to hit the pavement running, trying to generate revenue. Everything else is secondary.”

But, as Dally cautions, it takes time to build a client base — and some clients might not be ideal or profitable. Therefore, you must not assume that acquiring clients and generating revenue will automatically lead to immediate profitability.

> Aim for consistent revenue
A consistent revenue stream is ideal, but not always achievable, given varying market and business conditions.

One strategy is to design a fee structure with the aim of achieving a consistent flow of revenue. Kopacz suggests streamlining the process by creating a model that meets varying client objectives and allows clients to choose their fee structures. This provides a greater degree of certainty regarding revenue generation.

> Maintain a viable service model
Consider what services you will offer, Dally says, and the cost of such services relative to their profitability.

Some add-on services, such as tax preparation, might be necessary to provide some clients with the services they want. But you must ask yourself whether a sufficient number of clients need those add-on services before you invest the time and money to offer them.

“You may wish to engage in collaborative arrangements with third parties,” Dally says, “to provide such services in a seamless manner to your clients, while retaining the ability to tell clients that you offer them.”

> Understand the intangibles
The time you have to manage and grow your business is limited. This means “picking your battles” and “setting your priorities,” Dally says.

“Motivate yourself,” Kopacz says, “as no one else is going to do it for you.” He also recommends mentoring your staff to align their values with yours.

And managing your time is essential. “You must recognize that time is money,” Dally says. “[Time management] is directly correlated to the profitability of your practice.”