REP.: Do business plans work?

Michael Kitces: Yes, [they need to be] short-term enough to allow room to grow, but with a longer-term vision in mind. Also, advisors need to clearly articulate their goals; it’s too generalized just to say, “We’ll do financial planning for clients.”

REP.: What is the first thing advisors should think about?

MK: Advisors need to think about how they are going to get paid. What are you going to charge, how much money are you going to make on each client, how many clients do you need with that revenue per client to make your business work for you? You also need to have some idea of how you’re going to market and get your name out there, and really be thinking about how you’re actually going to get clients in the door.

REP.: What is one thing that advisors often overlook when planning a new business?

MK: Understanding the software and hardware they’re going to need to start up their business, as well as what they will need down the road. You should have a plan for what you’re going to need in two to three years and what you need to get there. You might not need some technology today, but if you’ll need it in a year as you add clients, it should be part of the plan now.

REP.: If you were starting over from scratch today, what would you do differently this time around?

MK: I’d be entirely cloud-based, I would not have a server and would not have any paper. For established practices, it’s hard to convert, but starting out is easier.