As an entrepreneurial advisor, it’s easy to develop tunnel vision. After all, you started this business because you wanted the freedom to serve others, right? But you can’t effectively help your clients if you’re not also taking care of your business and ensuring its growth. But how do you know if you’re paying attention to the right things? Here are three signs that you’re not running your business like a business and that changes need to be made.
1. You Haven’t Separated Funds
I recommend that all independent advisors create a what not to-do list, and high up on that list is co-mingling funds. Separate to dominate is a mantra I often teach those advisors I work with. It basically means you need to keep your personal and business funds completely separate. Not only does this help you take advantage of tax savings (and make tax day a lot easier), but it also helps you keep track of business expenses and lets you more easily measure the profit and losses of your business. You should have different checking and savings accounts for personal and business use and keep track of receipts for your business in a place separate from your personal receipts.
2. Your Business is Running You
One of the biggest perks of being an independent advisor is the ability to create the business of your dreams. That means you get to run your business the way that works best for your lifestyle and preferences and plays on your strengths. Too many advisors, however, are letting their business run them instead of the other way around. If your business is controlling your life, it means you’re working all hours of the day and night and never get to truly enjoy life. Putting strategies, automation, and measurements in place will help you regain control of both your business and your life. If these are not enough, you may need to look into outsourcing certain tasks or hiring an assistant.
3. Cash is Not King
When it comes down to it, there is only one way to really value your business: by the amount of free cash flow. There are advisors out there who judge the success of their business by their revenues, which is a vanity measure, or by their profits, which is a sanity measure. To really get a bead on your profitability, though, you must look at the amount of free cash flow. This is calculated by taking your operating cash flow minus your capital expenditures. When you keep an eye on that number, you’ll know exactly where your business stands. It will alert you when you need to cut back on expenses or when you can spend a little more on marketing or other business growth strategies.
You are the results of your thoughts as an independent advisor. When you think of your business in the right terms, you develop a mindset that not only allows you to help your clients to the best of your ability but also helps you build a sustainable and profitable business. Have questions or comments about running your advisor business? Please leave them below.