Business Building Mistakes to Avoid

By Don Schreiber, Jr. – WBI Founder and CEO

Many financial advisors struggle to convert their practices into valuable businesses. My  book Building a World-Class Financial Services Business offers advice to financial advisors for creating sustainable, salable businesses. Don’t be the guy who can sell anything but your own business. Here are several mistakes business owners tend to make:

1. They’re the only point of advice and service your clients have. In this case, your clients may identify all the value of your practice to come from you and you alone. What happens when you retire? Your clients will need to find a new trusted contact and it may not be one within your business. It is extremely important to institutionalize the relationship that you have between your clients and your business.

2. Totally focus on generating the highest current gross revenue by using commission-based products to implement planning recommendations. Over the last 10 years, many businesses and advisors have shifted their operations from commission-type practices to fee or fee-and-commission businesses. Business owners tend to spend most of these commissions supporting their comfortable lifestyle and are reluctant to build any infrastructure. Because they are the primary service provider, they want to keep expenses low by doing all the work. Every new business owner starts out wearing all the hats, but once you get established it’s important to focus on what you can do to bring the most value to your clients and source the other tasks to employees.

3. Their idea of what the business is worth is different from its actual value. It’s important not to undermine the objective of building equity. If business owners want a business that has value, it has to keep the clients and the revenue on a long-term basis. So the higher persistence of the revenue that you have, the better off. Commission revenue needs to be produced every year.

4. They don’t make cash flow king. As a business owner you have to have recurring revenue. Typically, that is fee-based revenue, the more recurring revenue you have, the better off you’re going to be in terms of building infrastructure and a quality business. 

5. They don’t develop a business plan. You shouldn’t be the gal who is too busy focusing on sales to neglect building a plan for the future. It is important that you take the time to get away from the business and focus on a plan. If you’re not sure where to start, I suggest finding a mentor who can guide you. I believe formulating a business plan is the most important thing business owners can do. 

6. They haven’t formalized their management practices. When a business owner personally handles most aspects of the businesses and doesn’t write down their practices, this could pose a risk to their business. It’s important that your employees know how to perform the tasks and steps it takes to successfully handle client relations.

All-in-all, these mistakes are crucial and can greatly hinder a business from high success. When a business owner makes even a few of these mistakes, there are a several dire outcomes. The business owner won’t set themselves up for success in retirement, their business will not have generated revenue, and they will be very disappointed when they go to sell their business.

Important Information

Past performance does not guarantee future results. The views presented are those of Don Schreiber, Jr. and should not be construed as investment advice. Don Schreiber, or clients of WBI may own stock/sectors discussed in this article. All economic and performance information is historical and not indicative of future results. This is not an offer to buy or sell any security.No security or strategy, including those referred to directly or indirectly in this document, is suitable for all accounts or profitable all of the time and there is always the possibility of loss. Moreover, you should not assume that any discussion or information provided here serves as the receipt of, or as a substitute for, personalized investment advice from WBI or from any other investment professional. To the extent that you have any questions regarding the applicability of any specific issue discussed to your individual situation, please consult with WBI or the professional advisor of your choosing. This information is compiled from sources believed to be reliable, accuracy cannot be guaranteed. Information pertaining to WBI’s advisory operations, services, and fees is set forth in WBI’s disclosure statement in Part 2A of Form ADV, a copy of which is available upon request.

You are not permitted to publish, transmit, or otherwise reproduce this information, in whole or in part, in any format to any third party without the express written consent of WBI Investments, Inc.

1 Schreiber, Jr., Don “Building a World-Class Financial Services Business”. McGraw-Hill , 2011

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