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Speaking on the most recent Business Accelerator podcast, hosts Jason Back and Alex Whitlock highlighted the crucial need for brokers at all levels – from sole traders to large brokerages – to adopt a strategic approach to their business.
Delving into various aspects of profitability and challenging common industry practices and offering practical advice, Back stated that while the past decade has been prosperous for the industry, competition is now fierce, with brokers competing against each other for a significant market share.
“Profitability is something that probably doesn’t get discussed enough in the industry,” Back said, stressing the importance of looking beyond gross revenues and focusing on net profit.
This applies to everyone, whether a sole trader, a boutique brokerage, or a corporatised firm, Back said.
While some may be content with a stable income and work/life balance, others aspire to build large, scalable businesses with future sale potential and regardless of the goal, setting clear targets and understanding the journey is vital.
Whitlock, sharing his experience in establishing profitable businesses, said that “discipline is critical” from day one and advocated structured guidelines around earnings and expenses, particularly when scaling a business.
He further advised brokers to build a “business fund” from profits to reinvest in growth, rather than relying heavily on debt.
Back further suggested that brokers should strategically use income streams for reinvestment, personal finances, and/or building the business’s asset value, saying that many brokers only consider the business’s value towards the end of their careers, which may be too late.
“I think one of the challenges is that when brokers start their businesses, we know that the vast majority start as solo practitioners and there’s no real pathway to profitability,” Back said.
“… What do they really do with their upfront versus how do they treat their trail? How do they use those particular things to either fund further investment into additional resources versus is it then funnelled into something else?
“It’s not really thought about in those first formative years. It’s generally thought about at the end of careers and that sometimes is a little bit too late. So, as part of your business plan on an annual basis, that pathway to profitability they really do need to have or formulate a concept around.”
Listen to the latest Business Accelerator podcast for more insights:
