There is value in doing a business audit once a year. No, you don’t need to go out and hire a CPA for this job. This annual review of the inner workings of your firm is something you can do on your own with the help of a colleague. You want someone you trust to help you talk through a thorough business assessment—someone who will help you stay honest as you audit where your firm needs to put its attention. The outcome will affirm whether your firm is set up for future success—or whether you need to make some changes.
It’s best to do the business audit with some formality. Use a checklist, take notes, and write a summary of the three biggest areas of opportunity for the firm. If you’re not willing to take the time to put any of your findings in writing, then don’t bother with the exercise—but I hope you do see the value and take it seriously. If you are willing to put in the effort to do it right, you’ll end up with a written set of goals you can act upon.
Putting the Firm Under Your Scrutiny
Here are a few starter ideas for an audit that will uncover problem areas in your financial planning firm as well as opportunities that you may have been missing. The process of creating the list of what to audit is as valuable as doing the audit itself:
Do you complete an annual business planning process with SWOT (strengths, weaknesses, opportunities, and threats) analysis, vision, strategy, and goals?
Are human resource documents—such as your employee handbook, job descriptions, and performance reviews—up to date?
Are operating policies and procedures in writing and current?
Are your technology systems integrated and serving the firm’s needs, or have workarounds proliferated because of outdated technology?
Are you proud of your brand and how you hold yourself out to the public?
Is your firm growing in profitability?
Have you addressed the obvious risks to the firm? For example, have you protected your firm with the right insurance? Are your plans for business continuity and succession practical?
Is the firm culture defined and nurtured?
The Audit List, Updated
When you commit to doing an annual audit, you’ll find new issues need to be addressed every year. Here are a few additional robust areas that built-to-last firms need to keep in mind:
Is your firm taking advantage of automation and machine learning to any extent? Robo-advisers are here to stay, and they could become a valuable tool in your toolbox, in terms of efficiency and understanding your clients’ needs.
Are your fees 100 percent transparent? Clear compensation is the trend, and clients will continue to expect it.
Is the firm growing both revenue and profit? Evaluate what could be holding back growth and whether your firm is facing a downward trend.
Are you continuing to attract “sweet spot” clients to your firm? These are the clients who make your work worthwhile, whether it’s the level of assets they bring into your firm or the issues that match your particular expertise.
Are your social media approaches yielding results? Algorithms are always changing, and so are social media trends—revamping your social media strategy is a constant need.
Is your organizational structure designed with the future in mind?
Are you a financial planner or an investment manager? The former is gaining traction in the industry.
Do you have the best affiliation model for your firm: IAR, RIA, hybrid, something else?
How is your mental acuity and your attitude toward the business? Check in to see if your heart is still in this and what would need to change to keep it that way.
Sometimes I find that financial advisers view their practice as good enough. And while that assessment may get you through today, it certainly won’t carry your business into the future. But then, what do you want for the future? The process of going through the audit and reviewing the state of your business should help you find the answer.
Joni Youngwirth is managing principal of practice management at Commonwealth Financial Network in Waltham, Mass. She is a regular contributor to the Journal’s Practice Management blog, where this article originally appeared. Read more at OneFPABlog.org.