Judging the progress your firm is making is difficult in isolation. Owners and advisors need to know what others in the business are experiencing.

Are you growing fast enough or are you taking on more than you can handle?

Are you spending the right amount on technology, salaries, and other resources?

Is the firm as profitable as it should be?

Those are the questions that need to be answered periodically by looking at industry benchmarks.

“Benchmarks are like a dashboard in a car,” says Philip Palaveev, CEO of The Ensemble Practice, a support and service organization for financial advisory firms based in Seattle, Wash. “Benchmarks showing what other firms are experiencing can tell you if you are growing too fast or too slowly and if things are working properly.

“The owners of a firm may think, ‘We’re only spending 45 percent of revenue on overhead, so we are doing well.’ But then when they make comparisons to other firms, they find out others are spending 35 percent on overhead, so that is a revelation to them,” he says.

Palaveev urges firm owners to talk with other CEOs and to participate in benchmarking surveys so that more firms can have good, comparative information.

“An advisory business is a living organization that changes constantly from inception, through growth, maturity and succession,” says The Ensemble Practice.

However every practice is different, notes Mark Schoenbeck, senior vice president, business consulting and managing director of Kestra Financial Inc., which uses The Ensemble Practice services.

“A benchmark creates a baseline to see where a business is and helps a firm plan where it wants to grow,” says Schoenbeck. “In addition, benchmarks can help internally. For instance, if a firm starts a new marketing campaign, the benchmark can show the impact of the campaign over time.”

ActiFi Inc., a consulting and assessment firm based in Plymouth, Minn., says financial firms need to see where they stack up in comparison to firms of similar size providing similar services.

“We help firms identify where they are not as strong as they thought they were and plan ways to make improvements,” says Spenser Segal, CEO of ActiFi. “We had one client where 60 percent of the clients were taking up 60 percent of the firm’s time, but were only generating 5 percent of revenue. The firm needed to know how to segment their clients and focus on their ideal clients.”

If a firm is not serving clients efficiently, changes may be needed, he added. In some cases, more staff is needed to support the revenue generators.

The big question for any firm is deciding what it wants to be and who it wants to serve, and plan an efficient growth rate from there, says Alan Dole, wealth manager at Equity Concepts, a wealth management firm in Richmond, Va. The firm was started by a sole practitioner 25 years ago and has grown since then.

It now manages $875 million in client assets and has set its goal at growing 10 percent to 20 percent a year. “You have to decide who you want to compete against,” he said.