We’ve been privy to the inner workings of many advisory firms so you might find it helpful to see the subject from My Virtual COO’s operations point of view. Our COO top 10 list of differences has helped advisory firm owners restore their business health or more quickly realize they would rather be a practice than a business.
The truth hurts, but here it is: owners with clarity manage a more profitable, enjoyable enterprise and attract the right staff. Owners lacking clarity are losing clients and AUM, quality staff and experiencing declining profit margins.
If you need proof, reach back to Top 100 Firm listings in 2010 and 2011 and compare their ADV statistics to now. Numbers don’t lie.
COO’S Top Ten Differences Between a Business and Practice
- Practice is the repeated exercise in or performance of an activity or skill so as to acquire or maintain proficiency in it. A business is making one’s living by engaging in commerce
- A business has systems. A practice does not.
- A business treats staff and outside providers as one cohesive team. A practice does not.
- A business works to automate and eliminate work. A practice does not and may even enjoy the busy work.
- A business continuously improves the client experience to attract more clients with less effort. A practice does not.
- A business actively monitors sales, gross revenue and net profits. A practice does not.
- A business owner can take a vacation and the business continues with no slow down. A practice’s owner cannot take a vacation without slowing down business activity.
- A business has a higher valuation. A practice has a lower valuation and might not have a value at all.
- A business calibrates the staff as the business evolves. A practice does not.
- A business continually invests in systems and people. A practice does not.
Clarity Trumps Reality
While our list of differences may seem harsh or full of generalizations, the list comes from our years of experience working with many advisory firms. While we will never share specifics of any firm, we can assure you that we have seen the inner workings of firms that look grand, yet are floundering due to lack of clarity.
Don’t flounder. Don’t scorn those that give you a reality check. Instead, answer this one question with conviction and enjoy the success that clarity brings: what do you want—a business or practice?
My Virtual COO
Editor’s Note: FPA members receive a $500 member discount on a My Virtual COO consulting engagement. You can find more information here.