“What a business needs most for its decisions – especially its strategic ones – is data about what goes on outside it. Only outside a business are there results, opportunities, and threats.” – Peter Drucker.
Australian advice practices & benchmarks
Australian advice practices are, on average, ‘small’ businesses employing six people and currently facing significant industry changes and challenges.* It’s our view that many practices are working in relative isolation. Without a collaborative and supportive network around them, many advice practices simply don’t know their potential, let alone what is ‘best practice’ in this industry.
Appropriate benchmarks can show you what is possible for a business just like yours. Benchmarks can be used to identify specific areas in your business that have the potential to make a greater profit, improve resource/time efficiency, or even enrich workplace culture etc. Benchmarks give you the opportunity to decide if you are happy with what you have, or if you need to add a specific action/goal to your business plan and make something happen!
Whenever we present our benchmarking data at conferences and workshops etc, initial response to the actual industry benchmarks and ‘best practice’ standards is naturally one of interest and ‘good to know’ etc. Commonly overlooked is the hugely significant value inherent in benchmark data when used in the context of a strategic process that includes: establishing which benchmarks are useful to you, collection and analysis of the numbers, identifying your key learnings from the data, creating/clarifying business goals and aligning your business strategies to your goals. Utilizing benchmarks should be a serious consideration for any practice.
The benefits far outweigh the effort
In a survey conducted by the US publication, WealthManagement.com*, financial professionals were effusive in their support of benchmarking and how it had paid off for their firm, often in more ways than one.
- 67% percent of respondents said that their benchmarking had led to increased revenue, while 63% cited better time management as a benefit of those efforts.
- Roughly 40% of financial professionals said benchmarking helped increase client acquisition and retention.
Benchmarks will help you to compare key indicators against similarly placed firms in the industry and;
- gain insight into the full potential of your business,
- learn which operational strategies the top-performing practices utilize,
- ascertain from the poorer-performing businesses which pitfalls to avoid,
- get ahead of any issues before profits start to fall, and
- be prepared for a potential buyer or merger partner (or bank manager!) – will invariably demand a comparative analysis against industry norms.
When to benchmark
While there is probably no wrong time to benchmark your business, there is a really good time to do it, and that time is when you are putting together your business plans for the year ahead.
As you move into your 2023 planning, consider the big picture; what are the top performing advice firms achieving? What is industry ‘best practice’? How does your business compare and what could be possible for you and your practice?
How to benchmark
There are a number of tools readily available from groups like us, but before you begin, we recommend that you spend a little time on background research to check out the latest industry articles, whitepapers and research. Ask your licensee or industry association for hard data and guidance and talk to your peers.
What to benchmark
“If you don’t know where you are going, every road will get you nowhere.” – Henry Kissinger.
Your business model, target markets and goals will lead you to the most relevant benchmarks for your business. For example, if your practice is planning to grow quickly over the next few years, and you intend to do this organically, then best practice benchmarks around lead generation, referral rates, conversion ratios and marketing spend will be of interest and relevance to you. For a practice looking to consolidate after a recent acquisition, benchmarks relating to perhaps technology spend, staff productivity, skills and support ratios will be more relevant.
A few tips
- It is important to measure performance in a ‘like for like’ manner. If you have built your practice, for example, to attract and retain high net worth investors and you operate a deep relationship/high touch model, ensure you are comparing yourself against similar firms in this space or, better still, ‘best in class’ providers in this market.
- As your business evolves, consider developing your own, customized set of benchmarks, against which you can compare your performance over time.
- Finally, a precautionary word of warning: there is a lot of choice in this area and for most small businesses new to benchmarking, there is a danger of ‘paralysis by analysis’. So, in the spirit of ‘more is less’, we think it wise to begin by focusing on a few of the constants; Clients (satisfaction levels, retention rates, referral rates), Staff (productivity levels, retention rates, compensation), and Practice performance (growth, profitability).
For your consideration.
*Future Ready IX: Insights into the Australian Financia Advice Profession by Business Health Pty Ltd, Jan 20202.
**Measures of Growth: Goals, Transitions and Benchmarking.” August 2017
Please feel free to contact Business Health should you wish to discuss benchmarking needs for your business. We offer services to all financial advice businesses, from small advice practices through to licensees.