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  2. Is Your Practice a Stock or a Bond?

Is Your Practice a Stock or a Bond?

Apr 5, 2019

This episode comes from a recent Horizon Advisor Network coaching call with Pete Bush, who addresses the difference in whether your practice is a stock or a bond? Learn the characteristics of stocks and bonds as they apply to a business, how the estimated value of your business effects you whether you are buying selling, or in a holding pattern, and how you should be balancing your total revenue between labor and expenses. 

 

Show Notes:

 

  • 0:43--- Whether your practice is a stock or bond effects your strategy
  • 0:56--- Think of your business as a long-term investment
  • 2:17--- Like any investment, your business should have a capital value
  • 3:58— What are some of the characteristics of a bond
  • 5:56--- What is the credit quality of the business’s clients that are producing the income
  • 7:44--- What are the characteristics of a stock
  • 8:23--- Quality stocks mature companies that create earning pay dividends

9:45--- How do stocks and bonds differ

  • 10:28--- How much should your total revenue go to labor and expenses
  • 11:36--- Stocks should have a greater multiple of its liquidation value than bonds
  • 13:50--- Wealth accumulation comes from owning not lending
  • 15:28--- How can you get an initial value estimated for your practice
  • 17:19--- Should you take clients based on your overall average client revenue
  • 19:28--- How do evaluations metrics matter if you are in the holding pattern
  • 20:45--- What should you do if your business is a bond and you want it to be a stock
  • 22:34--- Where would you go to find good information on the Truelytics software

 

 

3 Key Points:

 

  1. Are you building your business, liquidating your business, or looking to buy and absorb other companies?
  2. Bonds typically mature at a fixed known rate, pay yields, and normally are less volatile than stocks. 
  3. Stocks are often valued as a multiple of their earnings.

 

Tweetable Quotes:

-        We started off as actually thinking about our business in terms of an investment, versus a job or a career.” – Pete Bush

-     “We certainly expect stocks to grow over time. We expect them to grow above and beyond any income they might produce.” – Pete Bush

-     “Your compensation for labor, that’s your compensation as an advisor, should be about 40% of your total revenue.”

 

Resources Mentioned: