Many firms will keep an eye on one or more metrics to measure success.
Profit is the most obvious metric to use when measuring the financial rewards of running a business, and has a clear connection to the capital value of the business on sale as well as the immediate returns to shareholders.
However, it is the result of what has already happened in the past, rather than an indicator of the future direction of the business. Monthly management accounts are a great business tool, but still a discussion about last month and year to date. Financial planning revenues are reliant on a combination of new business income and recurring revenue. Almost all income is paid via a platform or provider and there is typically a six-week delay in receiving it. Some DFMs and SIPP providers pay quarterly. You will also have client withdrawals and departures to deal with. As the majority of firms work on an ad valorem basis, there’s also market movements to factor in.
To put this into context, when the market crashed at the end of March 2020 many firms reported their best ever month in April after that happened. The typical lag in revenue is around six weeks for recurring revenue and even longer for new business which has been signed up.
A growth dashboard will give you an idea about what’s coming and whether you can take action now to influence future performance.
The most obvious key metrics you might consider for your growth dashboard are:
- Funds under Management (or advice)
- Total income (initial and ongoing)
- Initial or ongoing income only
- Average case size (by fund size or fees earned)
- Total number of clients won or lost
There are other metrics which may give you a longer-term picture of the health of your business as it grows, and highlight areas where you might need to make improvements or adjust to cope with greater future demand:
- Source of leads
- Performance of professional introduced
- Client satisfaction and likelihood to refer e.g. Net Promoter Score
- Sales velocity and conversion ratios
Whatever your key metrics are, we want to make them readily available to you and the decision makers in your business. We don’t think you should be relying on out of date spreadsheets, or gut-feel opinion. We believe your MI should be always up to date, always available online, and presented in a way that’s easy to understand and enables you to take action.
That’s the purpose of Hatch. Great information to enable great decisions. Whilst the metrics might change from firm to firm, that singular purpose remains the same.
Want to find out more about how Hatch can help your business?
Book a demo today and lets talk.