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Hit the Ground Running

Do your business planning now before it gets real busy.

Helen Modly, 01/04/2007

Whew! The last two weeks of December are usually ugly for financial advisors. Not only do we procrastinate getting our own holiday chores done, but our clients will almost always throw a few last minute curve balls that completely destroy any illusion of time management.

The one chore that is usually the first to go out the window is the business planning session we have been promising to hold with our selves or our partners. Now that last year is over, it's time to get to it before it gets busy. January will quickly become February, and it will be time to prepare for taxes before you know it.

Schedule a Day with Yourself
Set aside a day on your calendar in the next two weeks and leave the office if you must to give yourself the time and space to develop a meaningful business plan for 2007. If you absolutely feel you can't devote an entire working day for your own planning, your priorities probably need some work.  If your only free time is evenings or weekends, then that is when you will have to do your planning. If you are already working evenings and weekends, then a planning session is even more critical for to regain control over your own business.

Collecting Your Data--Slice and Dice
Pull together the data you will need to review and analyze. You are basically going to look at clients, revenues, services and expenses.

All business owners must be familiar with the cash flows of their business. Hopefully, you run your business with one of the popular accounting software programs such as Quicken or Quickbooks. If not, then 2007 should be the year that you begin to experience the benefits these types of programs can provide to a business owner. These programs are relatively easy to learn, considering you are a financial advisor and should understand the basics of identifying sources and uses of funds. In lieu of an accounting program, you may be using customized spreadsheets to track your business, but I heartily suggest you convert to the software. 

Identify All Sources of Revenue
Go through your records for 2006 and identify all revenue sources you have received or expect to receive.

This is where you will see the edge to using accounting software. You should be able to identify all revenue by client, by product sold or service rendered, and by month billed/received. If you are a sole proprietor, review your tax return for 2005 to identify the payors for all your 1099 and W-2 income for that year. Did you add any new sources of revenue in 2006? Are there any sources that didn't pay you last year?  If you received commissions, you need to be able to separate new first-year commissions from trailing renewal commissions to accurately evaluate the year's activity. The better your records, the better you will be able to slice and dice your data so that you can focus on these questions:

  • Which clients did you start the year with?
  • What products or services did you provide to them?
  • How much did they pay you for the year?
  • How much do you expect from them for 2007?
  • Who were your new clients for the year?
  • How much did they pay you for 2006?
  • How much do you expect them to pay you in 2007?
  • What products or services do you provide to them?
  • What is your revenue per product line (i.e., life insurance or mutual funds) or service provided (i.e., financial planning or asset management)?
  • What growth do you expect to see in each product or service for 2007?
  • How many clients purchase each product line or service?
  • What were your expenses for 2006? Per client?
  • What do you expect your expenses to be for 2007? Per client?

Review Your Expenses
This is the activity that will determine if you are really running a profitable business or just generating extra cash flow for the family. Ideally, you have been tracking expenses by various categories in your accounting software. If not, then gather the records to determine your expenses for the year. If you don't have any organization to these records, use the Schedule C-Profit or loss from a business as your guide. Use the main categories from the form and add or expand any for items you want to track more closely. This will also aid in the preparation of your tax return since your categories will already match the tax form.

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