Advisors In Scale

Finding value and growth for today’s financial services practice

by Ian Smith

Mr. Smith is CEO of The Portfolio Partnership (TPP), founded in 2010. TPP is an operational consultancy focused on scaling, or planned strategic growth, of private businesses safely. Connect with him by e-mail:

Whether you are a one-man band financial planner servicing great clients or the owner of a 100 person insurance brokerage with dozens of household name clients, you care about fulfilling your potential.
Every business is an owner’s vehicle for change, a vehicle to add value to people’s lives at a profit. The question owners need to ask themselves is: what do I want to achieve? Do I want to scale my business to a certain size? Is that size measured in personal income, number of people, practice revenue, market share, how much it is worth to a buyer?

Let’s examine a few myths including how investors and acquirers look at businesses. First, sales growth drives a business forward but it’s not scaling. There’s more to it than that. Scaling a business is not the same as growing a business. Scaling implies alignment, control, predictability, fast growth but with safety. The secret to scaling is to recognize firstly the key components of a successful business and secondly how to optimize them.

The main component parts include Positioning, Product Innovation, Marketing, Sales, Operations, Finance and Customer Support. These parts need to be connected. Think of scaling in its very basic form as a sequential set of events. If you had the chance to stop your business and restart it, you would follow these steps.

The components of scaling – fulfilling your potential

You would start with positioning – defining who you want to be drives what you want to build, and the story you want to tell, which drives the sales leads for your sales team, which drives the sales scripts they use. Customer support takes these objectives and ensures that customers achieve the success they were looking for. Simple enough. All connected. All aligned.

So why don’t all small businesses scale? As businesses grow leakage creeps in. People don’t perform, processes are not put in place, and follow-through is missing. For example let’s look at the various components and how mistakes are made:


  • Positioning: You fail to define your special space you are capable of monopolizing.
  • Product Innovation: Products and services aren’t fit for their sectors. They lack specific functionality needed by customers.
  • Marketing: Blog posts aren’t frequent enough, story isn’t compelling, lead generation is weak, web site narratives lack consistency.
  • Sales: No process in place, sales scripts are not connected to the marketing story, product knowledge is patchy.
  • Operations: Wrong stuff is measured, access to key ratios is tortuous, and analysis of financial performance is weak.
  • Compliance: Processes are not built for a bigger business early enough so owners are left living from hand to mouth.
  • Customer Support: Onboarding of new customers is not formalized; communication between sales and customer support is weak.


Practical tips to avoid failing to fulfill your potential

So what actions as an owner of a financial planning practice, a life and annuity broker, or an investment advisor can you take to minimize leakage? What can you do to ensure you work on the right stuff?

1. It’s important to realize it’s a never-ending process, NOT an event. You don’t get to $1m or $60m and tick the box. You need to put in place the appropriate playbooks and processes at the right time. These playbooks, if properly aligned, will drive your team forwards in a balanced, powerful, focused way.

2. Clearly you can go heavy on process too early in a company’s development. It’s not practical or necessary to justify a CFO at $2m of revenue in most sectors but at $20m it’s damn dangerous without one!

3. Given you have achieved say $1m or more of revenue, you’ve clearly validated that there is a market. So the issue with controlled growth or lack of it is to find the LEAKAGE. Where is the power of forward momentum leaking?

4. Take sales. It is reasonable to assume the problem with a weak sales performance rests with the sales team. It might. But it’s just as likely to be poor positioning. Poor definition of “who you are”. In financial services world this translates to the need for specialization. Why are you different? Perhaps part of your practice is dedicated to assisting young tech entrepreneurs, or successful women managers in public companies. Often advisers are weak at defining their target audience. This leads to unremarkable marketing content and anemic lead generation. The sales team might be first class.

5. So scaling is about the appropriate amount of zooming in and zooming out. Zooming in – to review and measure intensely the effectiveness of the component parts: positioning, product road maps, content marketing & lead generation, sales processes and strategies, metrics management, talent acquisition and nurturing, customer service, organ structures, internal training. These are the key components. Are they working and are they aligned? Zooming out is key as well – is the market changing? Can I see bends in the road that require agile changes in tactics? Look at your own Financial Services industry as an example. Think, Royal Bank of Scotland, AIG, Volcker Rule, Dodd Franks etc. Change comes hard and fast.

think of scaling in its very basic form as a sequential set of events. If you had the chance to stop your business and restart it, you would follow these steps

6. Scaling often requires opening up the mind to bigger plans. In a recent fund management client we were able to identify weaknesses in marketing campaigns to improve not just the volume but also the quality of lead generation. Identifying growth markets is key.

7. Scaling is often about relentless execution. Relentless because you have to set weekly agendas and drive progress. It’s not always pretty but it’s necessary. Execution needs to be the right busy work. It’s so easy to work on the wrong stuff. To work on stuff that really doesn’t build value.

8. People are always key. Are you waiting too long to hire? Are you compensating for mediocrity due to loyalty? Admirable but the opportunity cost is huge. Too much of an old skillset in your team? Are you still selling like the 80s and 90s? Selling has changed more in the last 10 years than in the last 100 years. Prospects have a massive amount of information at their fingertips. So selling can’t be about an information exchange. Selling today is about defining yourself by the quality of questions you ask. And the purpose of those questions is to get to issues worth solving.

9. As the founder are you still in your comfort zone working in the business not on it? Do you really still need to be the main portfolio manager, or the key business winner? Does change scare you? Does your leadership skillset match your scaling ambition?

10. Are you flying too low? Businesses evolve through various stages. If you have experienced strong growth in the past it’s likely you had a remarkable proposition for the market. But in the current networked world we trade, it’s so easy to become invisible, to flat line, to become ignored.
Now let’s connect scaling your business with creating value.

Valuation through an acquirer’s lens

The beauty of scaling a business is that it also covers the operational actions you should execute anyway to increase the value of the business. Let’s list the stuff that buyers looking at your business find a turn off:

  • Business is dependent on the owner.
  • The brand has no value. It’s not known for anything in the marketplace.
  • There is no specialization. It’s invisible instead of remarkable.
  • The income is mainly transactional not recurring.
  • One large client dominates revenue.
  • There are many clients but the relationship is weak and purely transactional.
  • Revenue growth is below 10%.
  • Clients don’t stay for more than 18 months.
  • The size of your operation, funds under management, number of policies in your book, number of clients etc. is too small. Probably outside the top 30 independent operators by size.
  • The management team is not ambitious and has failed to demonstrate innovative new product and service offerings.

Of course all of these weaknesses can be addressed with a strong operational plan. And it’s not about raising large amounts of capital (even if you could), no; it’s about working on the right stuff and doing lots of really important small actions really well.

Acquirer’s will have their own shorthand methods for placing a value on your business. Multiples of fee income are quite common in the one to three range. However, having bought and sold dozens of businesses in my previous life as an investment banker, don’t be naïve on what your worth. Negative issues highlighted above are deal breakers not price adjusters. So the key issue for most financial services businesses is saleability, i.e. is it saleable rather than the value.


Finally another big theme dominating the baby boom era we live in – succession. In reality, succession is the most obvious way for the current owner to transition to the next phase of their life. For me the obvious action that addresses succession and also the needs of your clients is internal training. There is little downside in building a world-class team and investing in them. Assuming that’s a given, the owner needs to consider more long term issues:

1. Do I want to sell the business to my employees?
2. Is there a younger family member that can be groomed and wants to run the business?
3. Can I transition out the business over time with an appropriate decrease in cost to the business?
4. How should I treat the equity in the business? Do I allow key members of the management team to buy my shares over time?
5. How do I prevent key staff from leaving the business with key clients?
6. Will the brand of the business I built change as I change roles?
7. What legacy do I want to achieve for the business and myself?

In summary the challenge for every financial services business is to cross the bridge of change from entrepreneurship to a professionally managed business thereby launching growth that is predictable, sustainable, aligned, safe and fun. That’s the only way I know how to fulfill the potential of your business.