The Fact: In 2001, advisors invested four percent of their total practice budgets in new business development, down from 12% in 2000.

The Implications: When markets decline there is a tendency to reduce all variable costs in a practice, including marketing. In the long-term this may erode momentum and dent future revenue growth. While advisors may legitimately choose to reduce marketing budgets to reflect a different approach to growth, they must be careful that they are not harming their practices in the long run.

The Idea: It is important for advisors to take an analytical approach to managing their practices and that includes cost control. Effective cost control is driven by good information on revenue and expenses. It is not only important to understand how much you are investing in areas like marketing, but how that relates to overall revenue. Track your expenses both in absolute terms and as a percentage of revenue and will be in a position to see if increases or decreases in specific line items are appropriate, given the return. Also pay specific attention to the cost of a new client as a means of understanding the impact of budget cuts.

The Next Step: The Business Success Kit provides you with the tips, tools and templates that you’ll need to enhance practice productivity and profitability. It’s the most practical and comprehensive guidebook available for financial advisors. For more information, visit www.AdvocisStore.com and click on the Business Success Kit.