While study results are important, it is equally important to understand their context. Knowing the general evolution from an advisory practice to a business and identifying the stages along the way can help advisors better manage, grow and prepare their business for transition.

Advisory firms follow an evolutionary path as they grow, develop and mature. Over the years, we have come to refer to this process as the evolutionary stages of development, represented by Early Practice, Emerging Firm and Sustainable Business. While the time horizon for growth and transition through these phases is different for every firm, the process of growing and evolving through these stages is a consistent experience. Understanding the development stages and the challenges typically experienced in each phase can help to promote growth from one stage to the next.

THE EARLY PRACTICE

The Early Practice is typically a solo, though it can also be a new or early-stage ensemble. This stage is associated with practices driven by instinct and intuition rather than a more disciplined approach to managing the business. Structure is almost if not entirely lacking and operations are driven by the founder's individual work style. The practice is completely dependent on the founder and lacks the structure and scale of firms in the later stages of development.

The Early Practice's primary business driver: generating revenue and income. The style boasts several strengths: This is a lifestyle-driven practice that allows for freedom, flexibility and control and reflects the founder's personal style. It also requires minimal staff and burdens the owner with few operational headaches.

But practices at this stage have certain struggles in common. They suffer from a lack of business focus. Principals and staff are pressed by constant demands on their time. Frequently undercapitalized, they must move fast to build a steady base of clients and revenue. In addition, they have limited staff and few career paths.

Most important, at this stage revenue generation is typically dependent upon the founder, who therefore has only a limited ability to monetize the value of the practice. Early Practice advisors often note: "We need to build our revenue, but we just don't have the time to do it all ourselves, and we can't afford the help we need."

THE EMERGING FIRM

The Emerging Firm typically arrives with the development of a cooperative team of individuals. These firms rely on a multi-individual platform to better leverage advisor time, thereby increasing earning potential. In most cases, the manner in which the firm operates is still largely dependent upon the advisor's style.

The transition to this stage of development is almost always tied to a realization that there are not enough hours in the day to do all that is required to move ahead and that the practice requires others to grow.

Emerging Firms' primary business driver: servicing clients while scaling growth. They've built up several strengths by now, including an established ability at rainmaking and new client acquisition. They can leverage some time with additional staff and some growth with capital. As a result, they enjoy an emerging ability to monetize business value.

Yet emerging firms struggle to hire and retain strong team members. They rely on the founding advisors to manage operations. What's more, the founders may lack management skills-a problem made more dire because these firms typically lack formal infrastructure and systems. As a result, they may find that they can't provide consistent, reliable service. Emerging Firm advisors often note: "We are succeeding in spite of ourselves."

THE SUSTAINABLE FIRM

The Sustainable Business operates first and foremost as a business. Regardless of size or nature, these firms have a clear management structure, an institutionalized business and healthy profit margins.

The Sustainable Business' primary business driver: scaling revenue growth and profitability. It has some great strengths, such as its focus on performance and productivity, and access to professional management. The principals may, in fact, have full-time executives, management, advisors and staff with clear roles. Systems and operations are clear, structured and well-resourced. As a result, rainmakers can focus on revenue-producing activities. These are the firms most likely to monetize and grow business value.

Yet even these firms may struggle with such issues as imbuing a new crop of advisors with the rainmaking culture, and developing distinct roles for service and rainmaking advisors. They also may have trouble managing growth and maintaining personal service as the founding partners become removed from the day-to-day life of the firm.