Planning strategies for the solo practitioner: 2020 and beyond

Have you outlined your business plan for 2020? Some firms started the business planning process months ago and have already ratified their game plan for the new year and beyond.

It’s a more formal process, typically, for larger ensemble firms, as they need to get many people aligned and moving in the same direction. Other organizations may take the week between Christmas and New Year’s to do all their planning. And still others skip the process altogether, deeming it unnecessary.

But remember the mantra: Failing to plan is planning to fail. With all the change occurring in our industry, even the solo practitioner should have a plan for the road ahead.

The solo strategy

As more advisers in the industry become part of multi-adviser organizations and ensembles, the solo practitioner seems to be going the way of the dinosaur. Whether that's true or not, there are a lot of larger firms that view these solos as a way for them to become even larger.

So it might be wise for solo advisers to take steps to maximize the value of their firms. Here are a few strategies to consider adding to your 2020 plan.  

Update your contingency plan. Do you have one? When was it last reviewed? Remember, if it isn’t documented and signed by all parties involved, you don’t have an agreement. Does your plan identify the correct beneficiaries? Has anything changed since you created the document? Is the valuation methodology articulated, current and clear? Whether you are a 30-, 50-, or 70-year-old solo adviser, a continuity plan is a must.

Document your processes. Solo advisers are different: They don’t have to coordinate how they get things done with anyone else. Still, critical processes, such as prepping for a meeting and following up afterward, are useful to document should a triggering event kick your continuity plan into gear. Documentation is just the beginning. You and your staff need to consistently follow the processes you establish.

Categorize clients and align categories with appropriate service levels. Firms should know their clients individually but also as a whole. In solo practices, there may be a tendency to give time and energy to clients who ask for it, rather than to those who pay for it. Undertaking a scale and capacity exercise can help you assess each client household using quantifiable criteria. You can then attach service levels to the client categories you create, including everything from the number of meetings and proactive calls you offer, to event invitations, holiday gifts and more. Advisers who do this often find they are losing money on some clients and identify others who aren’t getting their fair share of service. How does this look to an outsider who may want to buy your practice?

Understand your financials. It is surprising that advisers evaluate their business only on assets under management or top-line revenue without heeding the expense side of the ledger. The growth of the business, including taking on new ideal clients, and financial margins are equally critical.

A long-term game plan

Solo advisers are often in business by themselves for a reason. They love running things their way and not having to compromise with others. Still, it’s impossible to miss what’s happening in the industry. So, for many, their long-term strategy is to prepare their practice for future acquisition — when the time is right. And when it is time to sell, doesn’t it make sense to enter the marketplace prepared with a stellar book of clients and a well-run practice?

[More: How to end a client relationship gracefully]

Joni Youngwirth is managing principal of practice management at Commonwealth Financial Network.