How to measure the success of your financial consulting business

As a financial consultant, you may spend a lot of time researching companies to determine their degree of success. In other words, are they worth your customers’ money? But don’t forget to pay close attention to the success of your company. Measure and evaluate it like any business. Track it over time. Know what is effective and what needs to be adjusted. This is the key to measuring success.

In terms of business management, there are multiple ways to measure success to help ensure that the business is on track. Check out some of the best metrics for measuring financial consulting practice and some techniques for interpreting numbers.

Manage assets

Assets under management (AUM) has long been the favorite indicator of the financial industry because it is directly related to the company’s overall revenue. Business owners look at the trend of AUM over time to understand if the company is growing. Potential customers will also pay attention to it. A healthy AUM indicates a trustworthy and experienced consultant.

This indicator can also be used to set goals for next month or next year. In addition, the revenue estimates derived from AUM will help formulate the annual budget.

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The problem with the traditional AUM indicator for financial advisors is that as practice grows, the company’s growth rate is likely to become smaller and smaller. Conversely, the financial adviser may want to view the net new AUM (that is, the new assets under management) for the period, minus any lost accounts.

Business owners can use this indicator to create consistent growth targets for each period without having to adjust over time. It also provides a clearer real-time view of asset growth.

Average revenue per customer

Assets under management cannot be used as a single indicator to measure the success of a financial consulting business, because it only measures the highest income.

For example, even if rapidly rising costs are reducing profitability, practice may show that AUM is increasing over time. Some practices may find many unprofitable customers. These may be worth letting go, rather than continuing to provide services for them and causing losses to the business.

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Average revenue per customer (ARPC), or average revenue per user in many companies, is an important indicator for measuring and improving profitability. In some cases, low APC numbers indicate that the target customer base of financial advisors is too small.

If so, the consultant may increase ARPC by providing additional products and services. Alternatively, the company can target higher net worth customers to increase profitability by reducing marketing and retention costs.

Net profit rate

The average revenue per customer provides a true insight into the gross margin before fixed costs. The problem is that financial consulting practice may still be unprofitable on a net level.

For example, high fixed costs (such as an office located in an expensive location) can make net profit difficult, even if the company looks profitable when looking at gross margin and APC metrics.

The net profit margin can be calculated by dividing the net income by the total sales and multiplying the result by 100. This is an equation familiar to any financial advisor.

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Generally speaking, financial consulting practice should try to optimize to obtain a higher net profit margin, but it is important to realize that some capital expenditures may be necessary for long-term growth. Technical solutions are particularly easy to pay off, providing a competitive advantage in exchange for high initial costs.

Bottom line

Financial advisors can use many key indicators to measure their operational and financial progress, thereby achieving greater success. Although consultants may be accustomed to analyzing public companies, they may wish to use some indicators to measure the success of their company.

Consultants should ensure that they use the right indicators and continue to track them over time.

In addition to these indicators, financial advisors may also want to consider looking at non-financial indicators, such as customer contact, in order to optimize the company’s reputation and other intangible assets over time. These improvements will ultimately bring more tangible benefits, such as reducing customer churn, lowering marketing costs and increasing profitability.


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