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What's The Plan, Stan?

Hunter McFarlin knew something was wrong. He quit his job selling life insurance at a small bank in Murfreesboro, Tenn., to start his own advisory practice back in 2004. At the time, McFarlin figured it would take a while before he made a profit. But almost three years later, the business, McFarlin Financial, still seemed to be going nowhere fast. Then he wrote a business plan. In the process, McFarlin

Hunter McFarlin knew something was wrong. He quit his job selling life insurance at a small bank in Murfreesboro, Tenn., to start his own advisory practice back in 2004. At the time, McFarlin figured it would take a while before he made a profit. But almost three years later, the business, McFarlin Financial, still seemed to be going nowhere fast.

Then he wrote a business plan. In the process, McFarlin not only discovered he was spending more than he was making, but he also forged a new long-term strategy, along with a detailed roadmap for how to achieve it. For example, instead of just running seminars on 1031 tax-free exchanges for realtors, the tack he'd been taking until then, he decided to use such occasions to highlight his overall financial-planning services. He set a timeline for meeting with his top 25 clients to get more referrals, and he laid out step-by-step instructions for office operations.

The effort paid off handsomely: In less than a year, McFarlin's revenues doubled, and his business was in the black. For 2007, he expects assets under management to reach $10 million — more than twice the assets he was managing last year. “We've turned into a well-oiled machine, and it's very exciting,” he says.

Truth be told, many — if not most — advisors never write a business plan. At best, they have an idea of the revenue they want to bring in by year-end, with little thought given to either their overall strategy for getting there, or the specific steps they'll need to take. And they seldom write any of their expectations down. Chad Coe, for example, who heads Coe Financial Group in San Diego, Calif., says he has suggested to many colleagues that they produce their own plans, but they seldom do it. “They're afraid to put stuff on paper they might not be able to follow through on,” he says. “They're afraid of failure.”

That's too bad. Creating a business plan may be one of the most useful tools out there for managing and expanding your practice. The reason: It forces you to think through every aspect of how to run your business. And it gives you a comprehensive, measurable way to chart your course — and that's likely to help your bottom line considerably. In fact, according to practice-management experts, most successful practices have a business plan. “We've spent a lot of time studying the best practices of financial-advisory businesses. And one clear commonality is that each one had a business plan,” says Keith Gregg, president and Co-CEO of First Allied Securities, a San Diego-based broker/dealer. “If you put your goals in writing, you're more likely to reach them,” agrees Stuart Silverman, president of Fusion Advisor Network in Elmsford, N.Y., who worked with McFarlin to develop his document, “The most efficient and effective firms are the ones with a written plan — period.”

It's not a simple process, however. Producing these plans takes at least one day of solid work, preferably spent out of the office — even better if you can dedicate two or three days to it. After that, there may be another month or so of additional fine-tuning to get the plan right.

Still, the task isn't nearly as onerous as it might sound. You don't need to generate the kind of bulky tome that, say, a venture capital investor or bank would generally require before offering you capital. Generating that kind of business plan, which tends to adhere to rigid guideliness, can take weeks if not months. “It's very rare for an advisor to write a classic business plan,” says Phillip Palaveev, senior manager with Moss Adams in Seattle. “That's probably not practical.” After all, your plan is meant to serve as a planning tool, a way to form business goals and strategy and make sure they stay on track. Expect the completed document to be two to 10 pages in length.

Where To Start

At the same time, there are a few things you should make sure to include in your business plan. Palaveev suggests writing two broad sections: The first would lay out your strategy for the next two to three years and define what differentiates your practice from the rest of the pack, as well as your overall goals. The other, longer section, would take a much different tack, laying out the detailed steps you'll need to take over the next year to help get you there, organized according to such segments as human resources, operations, marketing, business development and financials. “You have to describe how you're going to hit your goals,” says Silverman, “It's not enough to say you want to bring in $20 million in assets. How are you going to get them?”

Of course, you may want to devote more ink to some of these “segments” than others. Take Scott Tobe of Signature Financial Planning, a Pittsburgh firm with about $300 million in assets. He started writing a business plan for his practice in 1993, shortly after taking over the helm from his father, who had started the firm. In his plan, Tobe included such sections as his revenue goals for the next year, broken down by new and existing clients, as well as an analysis of expenses. But he devotes most of the document to his marketing plan for the year, detailing the events, mailings, and other steps he plans to take to reach his goals for each month.

You can also involve your staff in the effort. Every year, for example, Tobe asks his office manager to write a separate plan for his support staff, focusing on training and continuing education. He then adds that to the larger business plan. Kathy Fish, who runs Fish and Associates, a Memphis firm with $75 million in assets, discusses her goals for the year with her staff, and asks them for suggestions about such matters as how to improve service. They've come up with everything from ideas for customer relationship-management software, to a new policy through which the office manager buys handpicked birthday cards for the firm's top clients.

You'll also need to include a budget. That, according to Palaveev, should flow logically from the rest of the plan. For example, if you've done your homework, you'll have an idea of such issues as how much you want to increase revenues, how many people you'll need to accomplish that, and the operational improvement required to support their activities. “If you can answer those questions, creating a budget should be simple,” he says.

Planning In Stages

Once you've completed your document, don't expect to stuff it away in a drawer. You'll need to go back to it every quarter or so to see if you're on track, or make changes as circumstances evolve. “I'm constantly tweaking it, adding or taking things out,” says Coe, who manages about $75 million in assets.

That's particularly true for detailed marketing plans. For example, during Coe's first five years in business, one important element in his marketing plan was a get-together he ran for as many as 300 unemployed executives. For the guests, it was an opportunity to network; for Coe, it provided a chance to win their business, handling their rollover accounts. Then, a few years ago, during one of his quarterly business-plan evaluations, Coe realized that the tactic wasn't working anymore. With unemployment down, the number of participants had declined drastically. So, he decided to stop hosting the get-togethers.

Similarly, Fish includes in her marketing section a detailed list of events for the year. But, she often doesn't end up doing all of them. Or, she may find that she needs to adjust the schedule to react to unexpected client response. In early 2007, for example, she put on a seminar with an attorney and CPA about current issues in the stock market. The feedback was so positive, Fish decided to cancel another workshop she'd planned, and replace it with a second jointly run market discussion.

At other times, your tweaking may be more substantial. When he wrote his original business plan, for example, Coe was working alone, so he didn't write anything about personnel issues. After he made his first hire six years ago, he added a new section devoted to staffing matters, laying out everything from recruiting methods to the payout his reps get. For his part, Tobe used to include three- and five-year projections, but stopped doing that several years ago. “I realized this business is so fast-moving, it would be more efficient to just focus on one year,” he says.

Adapting Your Plan To Your Business

Also expect your approach to evolve as your practice becomes more established. The business plan for a mature firm might not require the same level of detail as the plan for a start-up would, for example. When Stuart Horowitz and Andrew Rosenberg started their practice, Andrew Stuart Asset Management, eight years ago, they produced a five- to six-page document filled with details. Now, according to Horowitz, they write a one-page summary. “Many things are now done automatically,” says Horowitz, whose firm has about $300 million in assets under management.

Take the matter of staffing. Originally, the partners would include a range of projections for how many employees they'd need to hire, depending on the number of clients they brought in that year. But, about two-and-a-half years ago, they introduced a new operational structure with two advisory teams that split clients between them, making more detailed planning unnecessary.

Ultimately, perhaps the most useful benefit of business planning is in the area of accountability. It ensures that people will be responsible for specific actions. “If three partners agree they're going to grow revenues by 15 percent, and they decide who's going to do what, then they can go back six months later and see if it's been done,” says Palaveev. “Without some system of accountability, you'd never know what really happened.”

To increase accountability, you can also include third parties in the process. Horowitz and his partner, for example, spend three days building their plan every year. During one of those days, they meet with several people, including practice management and technology experts from their broker/dealer. “Now, I have someone who can ask whether we hit our goals, and if not, then why not,” he says. In 2007, for example, the partners had planned to insist on a new minimum account size. But, during a recent review, they realized they'd been allowing exceptions all year. “Next year, we've said we're truly keeping to a certain account number and not going below it,” he says. “It's a commitment we'll have to keep.”


While there is no cookie-cutter blueprint for you to follow, the best business plans generally include the following sections:

  • Overall strategy: Lay out your goals, such as your target customer, and how to differentiate yourself from the competition. You don't need a lot of detail for this part.

  • Staffing: That should include salaries, benefits, and other expenses for existing personnel and future hires for the next year, as well as training and recruiting plans.

  • Business development: You should cover such issues as how much new business you expect to garner, and a general explanation of how you're going to get it.

  • Operations: Plans for back-office technology and other expenses.

  • Marketing: You'll need to include a detailed schedule of specific steps you're going to take, from seminars to client-appreciation dinners and meetings with attorneys, CPAs and other centers-of-influence. For many advisors, this is the longest section of their plan.

  • Financials: That means a budget, as well as projected income and expense statements.

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