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Business planning: Helping to build sustainable revenues


Advice businesses that prepared well for the RDR recognised it was all about good business practice. The same is true of TCF as both initiatives concentrate on service, transparency of price and effectiveness of delivery.

There is a tangible financial prize for well-managed advice businesses that have dealt with the RDR, survived the recession and are looking ahead to the next five years.

While the number of advisers is fairly stable, the number of advice firms is falling. In a market where demand is strong, profits should rise in the short-term (as evidenced by the recent Apfa survey) followed by value in the longer term.

Why is this? The RDR is forcing firms to have a clear, no- nonsense relationship with their clients and, like most other businesses, a single service structure and price list. Firms control their revenues and have left behind the artificial world of commission, where a third party decides on income.

The advice market is moving into a world of retailing and running businesses in a more competitive and dynamic market.

At the same time, when the FCA has finalised the capital adequacy requirements, firms will be more robust and, when ongoing adviser charging has settled, be far more attractive to acquirers from inside and outside the sector.

There is little argument that in the long-term values can only go one way for modern advice businesses which have embraced the changes.

With the RDR dealt with there is a clear opportunity to build value into the business. If there are a few years with no major regulatory initiatives, the circumstances will be favourable for profitable growth.

How can firms take advantage of this? Planning and concentrating on the key issues will provide a structure and some clarity. Confirming the drivers of value is a good starting point and these are summarised in the chart below.

The starting point is a detailed value audit to identify exactly where the business stands and thereby determining succession planning and the options available to owners. This is like an advanced strengths and weaknesses analysis but more forensic and closer to due diligence. Identifying value destroyers is equally important because they must be dealt with to maximise value.

This analysis will provide a list of essential issues to deal with. The more difficult stage is confirming what to do, who will do it and by when. This is straightforward business planning.

There is one more consideration that is vital to good value planning. Partners need to share their personal ambitions to enable the changes to be managed and planned for, particularly the financial issues.

In many ways, this determines what the business must achieve in terms of growth, turnover, recurring income, productivity and scale. Clearly, personal ambitions will only be realised if there is a clear value based business plan that leads to the required business outcomes. 

The process for this is relatively straightforward. Following the value analysis, the key value issues must be confirmed and agreed upon by all principals. The business vision must deal with financial issues but it is essential to include people, clients, infrastructure and management to deliver an outcome that is both realistic and achievable.

Implementing any changes needs to be planned to make sure that the opportunity is realised and that there is a tangible outcome. There are no short cuts to this but it does not have to be a burden if it concentrates on the right issues and is managed within a structured framework.

David Shelton is the author of “The Business of Advice” book and website



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