Do you want your business to outlast you? Some advisers set this goal when they design a firm. For others, the focus comes as they anticipate transitioning their business to a new generation of ownership when they approach the end of their career.
There are no universals when it comes to timing for the business life cycle. The life cycle is the pace at which a practice evolves from inception to growth, maturity and eventually a final stage of decline. If there is no intervention to reinvent the firm, the natural life cycle of the business will rule. The length of each phase is unpredictable. For example, growth can come in a year or develop over many years. But is there a universal requirement for creating success that will endure? Yes. It’s the willingness to reinvent your business.
What Does Reinvention Require?
Reinvention requires a magnitude of change that ushers in an entirely new approach to doing business. For example, the introduction of the robo-adviser created a radically different way to work with clients. No matter what you think of this technology, it was radical enough to disrupt the industry. Since “robo-advice” was introduced, it has been continually improved. Today, the digital approach has morphed to add human service components. In turn, advice given by human advisers has shifted to include digital components. Another client-centric reinvention is the growing interest in responsible investing, as advisers respond to client demand by integrating environmental, social and governance factors into investment decision-making. These are only two examples of reinvention, but they demonstrate its essence: major transformation in response to market forces and industry changes.
Beyond Continual Improvement
Reinvention differs from the concept of continual improvement. Many advisers rightfully believe their business is improving all the time. Improvements may include streamlining the way data is collected from clients, implementing enhancements to customer relationship management, adopting new technology, updating forms for greater efficiency and enhancing internal communication. Although continual improvement is needed to run a solid business, it’s not as radical as reinvention.
Timing Is Everything
Every business is different, but one thing is clear: reinvention is essential long before a practice reaches the decline stage. If one waits that long, it will be too late to save the business. The faster the pace of industry change, the greater the need for reinvention. As such, an adviser needs to be prepared to reinvent his or her practice. In fact, it is likely that radical change will need to happen multiple times to keep a firm in the growth stage. The greatest danger is waiting too long to begin the reinvention process. Maturity can be a long or short phase. This means that strategic shifts should be part of every firm’s business planning process.
Is Age a Factor?
It isn’t a factor for everyone, of course. But as advisers age, some understandably do not embrace change with the same enthusiasm of their younger years. Many advisers keep all their energy focused on their next client meeting. Why stir the pot with worries of reinvention when business is good or when an adviser is moving to a lifestyle practice? Most advisers love meeting with their clients. The responsibilities of being the CEO and running a business pale in comparison. But if advisers lose passion for leading their business, it’s not likely that they will be leading the reinvention process. To guard against unforeseen problems, advisers entering the home stretch of their careers need to incorporate additional focus on strategic direction as part of the business planning process.
Nurturing the Life Cycle of Your Business
Some advisers might think that reinvention—a change of magnitude—is not possible due to the constraints of industry providers and government regulations. I believe that, despite these limitations, every adviser is empowered to adapt to change and adopt new tools, technology and practice models at every stage of a career and the life cycle of a business. The key is to embrace reinvention to keep the firm in the growth stage.
Joni Youngwirth is managing principal of practice management at Commonwealth Financial Network in Waltham, Mass.