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Financial planning, Investment and Self Managed Super Fund Article
A New Year - New or Old Ways
By Terry Bell
1st February 2007
This article may be out of date.
According to a well-used expression in our industry, the definition of insanity is:
when you continue to do the same things as you did before and expect to achieve a different result.
This begs the question: how happy were you with your overall performance and results in 2006? If you are looking for improvement this year, what are you going to do differently? Assuming you would like to increase your overall business profitability in 2007, here are a few strategies which would be useful in your 2007 Business Plan:
1. Clearly document your plan and have realistic (achievable) objectives supported by realistic strategies and actions.
How do you give yourself the best chance of getting to where you want to go without a plan? It is somewhat surprising that the analysis of our HealthCheck database (Dec. 2006) showed that 31% of practices have no satisfactory business plan in place for the year ahead. While an improvement on 2004, it shows that there is still a long way to go (see chart below).
This is even more surprising when you consider that those businesses with a plan generate a ‘profitability per principal’ figure of $2l2,107, compared to $94,189 for those businesses without a plan.
Why wouldn’t every business have a plan for 2007?
2. Review your client segmentation model.
During the previous year your clients’ circumstances will have changed. Income and expense levels will no doubt have altered for many and some will have set new goals and objectives.
The question which must be asked by every business owner is: is my value proposition as relevant today to my clients as it was last year? Am I still providing what my clients initially came to me for?
3. Contact every A class client every month.
Analysis of our HealthCheck database continues to confirm the fact that those practices who regularly contact their best clients achieve a higher level of profitability than those who don’t. Our databank reveals that those businesses who contacted their A class clients more than 10 times a year averaged a ‘profit per principal’ of $165,510, compared to those with a less than 5 times contact rate – their ‘principal profit’ figure was $92,485!
4. Proactively seek feedback from your clients.
Those practices who utilise our client survey diagnostic (CATScan) regularly achieve a 40% response rate. This result, together with the feedback clients provide to us, clearly indicates that clients are more than happy to provide constructive feedback to their adviser.
Health warning: only ask for feedback if you are prepared to not only listen, but to take appropriate action as a result.
5. Ask for referrals.
One of the other key stats to come out of the CATScan is that while the vast majority of clients are more than willing to refer others to their adviser, only one in two actually have.
If you are looking to attract new clients to your practice, then make it part of your business processes to ask your current clients for referrals.
6. Audit your IT systems.
The importance of an efficient, effective back office is accepted by all. It therefore makes sense to ensure that your IT base is working to its maximum capacity, backed up regularly, completely protected against viruses and supported by all appropriate licenses.
To have your IT platform objectively assessed by an experienced professional before you need to, will not only put your mind at rest, but could very well help you avert a potential risk.
7. Review your staff’s working environment.
21% of practices reported that it has been at least 12 months since a review of staff position descriptions had been conducted. Given the difficulty most businesses have in trying to attract and retain quality staff, surely it is prudent business practice to focus attention on regularly reviewing your staff’s performance, agreeing objectives with them and remunerating them appropriately.
8. Seek external input.
According to our HealthCheck database, those businesses who regularly met with their mentor/coach achieved a 50% higher profitability than those who didn’t. Make a quarterly diary date!
For your consideration.
Terry Bell is Managing Director of Business Health Pty Ltd. He may be contacted on 02 9818 5467 or firstname.lastname@example.org.
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