If you want to embark on your next growth spurt, you’ll need to reinvent yourself.
By the time podcast guest Scott Hanson got to $1 billion in AUM, he wasn’t working much and his CFO came to him and said, “Hey, I can arrange it so that you and Pat only have to be in the office every other week. And you don’t even have to have email over that time. We’ll make sure everything’s taken care of.”
How nice, being the co-owner of a billion-dollar AUM firm and only needing to work two days a month.
I’ve known Scott since 1993. We joined Securities America that year, he as an advisor with his partner, Pat McClain, me working in the home office in Omaha. Scott and Pat moved to SAI with about $10 million in assets from Lincoln National. Today, they have $15 billion in AUM.
How they grew from $10 million to $15 billion in AUM is a remarkable story and you can catch it here.
What I want to highlight today from my convo with Scott is one key insight that every advisory firm owner faces at least once—and the largest financial advisors face it multiple times.
It’s the realization that what got you here won’t get you there.
Every firm owner reaches a point where the business starts to get complicated and you must decide if you want to “hang out” at your current size or if you want to reconfigure and prepare yourself for another growth spurt.
Rule of 3 and 10
Let me digress for a minute. If you’ve built a multimillion-dollar revenue business like I have, you may have noticed a pattern called “The Rule of 3 and 10.” It’s the idea that things break in a business at roughly every 3x and 10x in growth.
For example, at $350,000 in revenue, it’s just you and it’s simple. At $1 million in revenue, you need a couple employees, and it gets a little complicated. At $3 million, you need a new tech stack. At $10 million, you need a leadership team, and so on.
This $3 million to $10 million revenue range is a very tricky spot. Why? Because you have two competing tensions.
First, you’re likely pulling down a million or more in personal income so that’s quite comfortable and tempting you to “hang out.”
And second, you’re at a major inflection point and must decide if you want to turn your business into a company that can run without you.
You have three options here.
1. Milk it.
Continue as is and milk the business for a few more years until you decide on your succession plan. (Note, many advisors who do this have a nagging sense that they’re not living up to their potential and it eats away at them.)
Recommit to the business and make the changes/investments necessary for the next growth spurt.
Sell the company and let the next phase of growth be somebody else’s problem.
In Scott’s case, he realized that if he wanted to bust through $1 billion in AUM (roughly $10 million in revenue), he needed a new growth spurt strategy. Notice I said “if.” He didn’t have to grow past $1 billion because he was already quite wealthy and hardly working.
But one day, Scott had an epiphany as he was riding his bike. He thought, “I think God created me for more than just riding my bike.” That, combined with his “CFO moment” from above, made Scott decide to “see how fast we can grow this thing.”
So, he got reenergized about the business and set a new strategy to grow beyond $1 billion. The new strategy was to open offices outside of their office in Sacramento, CA. Over the next few years, they opened offices in the Bay Area and Denver, and the expansion strategy took them to about $2.5 billion in AUM by mid-2017.
At this point, Scott realized that opening new offices from scratch was an okay strategy, but it was an expensive, time-consuming grind. It was becoming clear that he needed a new strategy if he wanted to start the next leg of accelerated growth.
Once again, Scott realized that what got him to $2.5 billion in AUM would not get him to the next big growth curve.
This time, his new strategy was to sell a piece of his company and get some growth capital to fuel an acquisition spree. Flash forward to today and he’s now at $15 billion in AUM and says he sees a clear path to $50 billion.
Growth Spurt Questions
As you think about where your next big growth spurt will come from, here are three questions to ask yourself.
1. What new strategy could we implement that would give us the possibility of achieving 3x to 5x growth in revenue over the next few years?
2. What are we currently doing that we need to jettison so we can create capacity for our new strategy?
3. Whom on our team do we need to gracefully replace so we have the talent that can propel us to the 3x to 5x growth?
Working a little harder and a little smarter can only take you so far. When you really want to make a leap forward, you need a new strategy and new talent. What’s yours?
The roadmaps are there. If you want help customizing your growth roadmap and the accountability to follow through on it, take a look here.
To listen to the full episode with Scott, click here.