Adviser Ratings research has found that advice practices with up-to-date business plans are twice as likely to achieve high profitability.
In its survey of 1,312 practices, over three-quarters said they have a business plan and 44 per cent said these plans are up to date.
Adviser Ratings found there is a “clear correlation” between the quality and timeliness of a business plan and the profitability achieved by that practice.
“Practices with up-to-date business plans are twice as likely to achieve high profitability (above 30 per cent) compared to those still developing plans. Conversely, practices without current plans or still in development phases face twice the risk of low or no profitability,” it said.
While practices should spend time developing their plans before dedicating time and money into new activities, taking too long can cause them to become in development mode. These practices with only a half-finished plan had the lowest average profitability, even lower than those without a plan in any form.
This was an average profitability of 15.3 per cent compared to 19.4 per cent for firms with an outdated plan and 20 per cent for those without a plan. Some 42.7 per cent of those still developing their plans reported low or no profitability.
“This finding challenges conventional wisdom about business planning. Even practices with outdated plans that need refreshing significantly outperform those still developing their initial strategies. The message is clear: execution with an imperfect plan often beats perfect planning without execution.
“The development trap manifests when practices become paralysed by the desire to create the perfect strategic document. During this extended planning phase, they’re neither benefiting from the clarity of having a plan nor the agility of operating without one. Meanwhile, competitors with working plans – even imperfect ones – are making strategic decisions and improving their operations.”
To avoid this occurring, Adviser Ratings recommended a “progression not perfection” approach where a basic document is set up with the key processes and client relationships then built out over time with further information.
“They recognise that a working succession plan implemented over five years beats a perfect plan that never gets started.”
The research firm also shared a range of questions for practices to consider as part of their business plan:
- What additional services do our ideal clients need?
- How can we deliver these efficiently?
- Should we build capabilities internally or partner with specialists?
- How will technology help us better serve our target clients or improve our operational efficiency?
- How does this align with our client value proposition?
- What are the implementation requirements?
- How will we measure success?
