How to determine if it’s time to staff up

Looking for the surefire indicator that it’s time to expand your staff? There’s no such thing, say business owners and consultants who have been through the process.

“There’s no one-size-fits-all formula that works for every firm,” said Joe Millott, founder and CEO of Acquatio, a company that launched last month and works with advisors to grow their businesses through mergers and acquisitions.

He said rightsizing depends on the kind of practice you want to run and the level of service you aspire to provide. And while many advisors are tempted to use assets under management (AUM) as a rule of thumb, he said that won’t work for most of them.

“We think AUM is a measure that sometimes points people in the wrong direction because it is actually quite hard to compare apples to apples,” he said. “Every firm is different.”

Millott said other metrics — like gross revenue, number of client households, or earnings before interest, tax, depreciation and amortization (known as EBITDA) — can reveal practice efficiency and productivity but are not definitive measures for rightsizing.

There are, however, a few signs that indicate whether you’re running lean or fat, and if it’s time to tweak your staffing.

Stress and strain

Shiraz Ahmed, founder and principal of Sartorial Wealth of Raymond James Financial, has been scaling up his business “as necessary” every couple of years. He currently has a CFP and an associate advisor working with him, as well as two administrative assistants.

He said the moves come when he starts to notice a strain on business operations.

“You start feeling like you’re bursting at the seams. That’s problem number one. You find you’re juggling things,” he said. “When you start to feel like things might get dropped, you have to do something.”

The first thing to get dropped are usually the special projects related to marketing or communications.

“You find yourself thinking, ‘Okay, that’s just not mission critical right now, let’s put that plan on hold until we have the capacity to take that back on again,’” he said.

That’s a dangerous mentality though, he said, because it can impact the practice for years. It’s better to anticipate a need to hire long before the situation becomes dire.

“Get it before you need it,” he said. “Because frankly, by the time you figure out that you need it, it’s often too late.”

No time for strategy

Madeline Woodhead, principal of Woodhead Wealth Management Group in St. Catharines, Ont., said her need for administrative help became clear when she found herself spending all her time working “in” the business, instead of “on” it.

“I didn’t go to any conferences. I couldn’t get out to meet any clients. And I got to a point where I could really see that I hadn’t [been] posting on LinkedIn,” she said. “All these things that sort of keep you fresh, I hadn’t done them because I was too busy doing the admin stuff.”

She enjoys working on financial plans, but recognized delegating some of that work might be better for the business. She works alongside her son, financial planner Jamie Woodhead, and also has an administrative assistant on staff.

“At a certain point, you have to ask is it the best utilization of my time, or should I be utilizing a resource within the company, she said. “That would free me up to talk to more clients, develop a broader marketing scheme, handle the big-picture stuff.”

Holes in the practice

Woodhead said bringing on a new advisor, planner or admin person could also address service gaps that leave the company vulnerable.

“You may need to hire someone very specific, like a niche player,” she said. Examples include an older advisor hiring a younger person, or an all-male team adding a woman advisor.

Ahmed said that’s a strategic move.

“It’s not like anything in the business is broken,” he said. “Yes, sometimes you’re filling a need. Other times you’re filling a need because you’re anticipating future needs, and you kind of grow into it.”

Gut feeling

Perhaps the clearest indicator is your assessment of how well the practice is running.

“You have an intuition when you’re starting to hit your stride. There’s a lot of nuances, but a good advisor will have their finger on the pulse of their business. They’ll be speaking regularly with their staff, understanding what their capacity is [and] what their workload looks like,” he said.

“If you have a well-oiled machine, the clients are well served whether the principal is there or not. The best business is the business that can operate without you.”

Woodhead said rightsizing brings peace of mind.

“You know you’ve got the right balance when you’re not waking up in the middle of the night with terror,” she said. “People are coming in on time and leaving on time. No one’s working through the weekend.”

Millott said the trend toward larger practices and industry consolidation will only accelerate in Canada, as it has in the United States recently. But growth needs to be accompanied by introspection and careful planning.

“There should be clear, written processes, systems and responsibilities throughout the practice,” he said. “I’m a big proponent of the saying when you stop growing, you start dying. When you stop looking for growth, it becomes easier for competitors to find gaps in your service proposition and pick off your best clients.”