Friday mornings you’ll find me at Jack’s over in San Mateo with a small networking group called Peninsula Connections. We recently changed the structure of the group so each meeting revolves around a single discussion topic instead of a formal presentation.
I was Friday’s “speaker,” so it was my job to bring the topic. I asked two questions:
What, in your business, are you currently tracking?
What should you be?
I wanted to know. I was still riding the high from last week’s post on the labor dollar (labor efficiency), and I assumed I wasn’t the only one who likes making decisions on information instead of guessing.
Some of the answers to the first question were about marketing. One person saw returns from outreach, another from social media. And one person recently canceled their marketing and saw no change at the top of their pipeline. This only happened in the last 3-6 months so we’ll see if that continues.
That’s an assumption nobody tested, until canceling it inadvertently tested it for them. Can you imagine spending $10K to $100K or more a year on marketing, only to find out it wasn’t doing anything?
As for what they should be tracking … that ran the gamut. It’s one thing to track your revenue over time, it’s another to know exactly how much of your profit is coming from each product/service, and from each type of client.
Tracking earns its keep by turning what you believe about your firm into something you can prove and verify. Most established firms settled into how they operate years ago, and once they found a recipe that worked, they stopped experimenting. A lot has changed in the last ten years, wouldn’t you say?
So what are you assuming? Here are three I hear a lot.
The first: our marketing is working. If you spend money on it, can you trace clients and profit (not revenue) back to it? If you stopped tomorrow, how long before you’d notice? The same goes for your business development. Which referral partners actually send you work, and which rooms do you keep showing up to out of habit?
The second: our prices are right. How about the firms charging the same amount for their services as they did five or more years ago? I don’t know about you, but between salaries, rent, insurance and software, and the average lunch hitting a $15 floor, everything seems to have long since moved past “getting more expensive” and hustled right into “is just expensive now.” If you’re an advisor on an asset-based fee, your fee grows when your clients’ assets do. Hourly and flat fees don’t get that help. And frankly, are your AUM fees still where they should be given where the industry is headed or how your service has changed? When was the last time you stopped and ran some experiments on your pricing?
The third: every part of the practice pays its way. If you sell four services (or four practice areas), is your profit margin the same for each of them? Are their prices the same? Do you sell the same amount of each? Do you know who is buying one versus another? Do you enjoy delivering one more than the others? If you’ve had a coffee chat with me in the last couple years you’ve heard me talk about knowing which clients make you money. The same question applies to what you sell. What decisions could you make confidently if you had that information in front of you? (Finding out one of them loses money doesn’t mean you have to drop it. More on that next week.)
And then there’s the hire you’re sure is working out which I covered last week.
Most of these assumptions were probably right when you made them. The prices fit five years ago. The marketing worked once. That’s the trouble with settled assumptions: the firm kept moving, and they didn’t. It’s how a firm drifts away from the one you meant to build without anyone deciding it should. The numbers show you where it drifted.
And underneath all of them sit the bigger ones: who the firm is for, what it sells, and how it makes its money. When did you last check those?
None of this takes a dashboard or new software. It just takes a little data.
This week, write down one aspect of your firm you haven’t checked this year. Next to it, write down what you’re assuming about it, and what information you’d need to validate that assumption. Then go get that information before the end of the month.
What did you learn?