Run Your Practice Like a Business: The 35/35/30 Profit Model

I’ve seen it over and over again. An advisor might make great money, but they’re running their practice more like a personal income stream than a business.

Money in. Money out. Lifestyle expands to match income.

And before they know it, they’re working harder than ever, but not actually building anything of transferable value.

Early in my career, I was guilty of this too. It wasn’t until I started diving into my Profit & Loss (P&L) that I truly understood what it meant to run my business like a business.

Because your P&L tells a story. It’s not just a spreadsheet for your accountant; it’s a snapshot of how your firm really operates.

When I review this with clients, it’s often a turning point. A clear, disciplined P&L helps you:

- Manage cash flow with confidence
- Plan for future hires and investments
- And most importantly, build enterprise value

Whether you plan to bring in a G2 advisor or one day sell your firm, your P&L is the foundation.

As Mark Tibergien, one of the most respected voices in our industry, puts it:

“A well-managed firm is intentional about budgeting and P&L management, ensuring healthy margins and transferable business value.”

In fact, Tibergien suggests that best-run firms typically allocate about one-third of revenue to advisor pay, another third to overhead, and target 25–30% profit for owners. That’s the core of what I call the 35/35/30 Model.

The 35/35/30 Model Explained

Here’s the model I use with clients:

35% – Sales & Advice Delivery (Advisor compensation, associate advisors, licensed client-facing staff.)
35% – Operating Expenses (Staff salaries, office, technology, marketing, benefits, travel, everything it takes to run the firm.)
30% – Profit (Real profit. The part that stays in the business and builds long-term value.)

Why 30% Profit Matters

Most advisors I meet run at 15–20% profit, and that feels fine until markets dip, costs rise, or someone leaves the team. Then suddenly, you’re forced to cut expenses or take home less.

A 30% profit isn’t about greed, it’s about stability and strategic freedom.

As Michael Kitces writes,

“A firm that is only marginally profitable has no flexibility to deal with the vicissitudes of business.”

Healthy margins let you invest in staff, training, and technology, and survive market downturns without layoffs or panic.

They also make your business buyable. As Kitces notes,

“An unprofitable practice is simply unaffordable to the next generation at any price.”

If your margins are thin, G2 advisors can’t buy in. But when you run with consistent 30% profit, your business becomes both sustainable and attractive to successors or acquirers.

Setting Up for G2 and Succession

Profitability and structure aren’t just for now, they’re for what’s next.

Industry expert Philip Palaveev, author of G2: Building the Next Generation, warns that the biggest threat to advisory firms today isn’t competition, it’s a lack of leadership succession. Nearly half of all advisors are expected to retire by 2035, and yet over 40% have no formal plan in place.

Palaveev’s solution? Treat leadership development like a core business strategy, not an afterthought. He teaches that future equity transfers should be based on profitability, not goodwill. That’s what allows G2 advisors to buy in gradually through real, earned value, and keeps the firm thriving through transition.

The 35/35/30 structure sets you up perfectly for that. It ensures there’s actual profit available to fund buy-ins, performance tranches, and growth opportunities for next-generation leaders.

Proof in the Numbers

The model isn’t theory, it’s reality for top-performing firms. According to InvestmentNews benchmarking data, the typical advisory firm today runs at 25–30% operating profit, with elite firms exceeding 40%. That means your 35/35/30 target isn’t just possible, it’s what the best firms already achieve.

The difference? They treat the business like a business. They know their numbers. And they lead with intention.

The Bottom Line

If you want to scale, attract next-gen talent, or sell one day, it starts here. Run your business like a business, not a paycheque.

Because real freedom doesn’t come from working harder, it comes from building a business that’s profitable, sustainable, and transferable.

Take Action

Pull up your last 12 months of P&L. Categorize your expenses into three buckets — Sales, Operations, Profit. Then ask yourself:
“Am I building a business I can sell, or just one I have to keep running?”

Sometimes the fastest way forward is a focused conversation. Book a private strategic session with Stacy to design your next stage of success: https://eastcoastcoaching.com/one-on-one?utm_source=blog&utm_medium=post&utm_campaign=ECC2025

References:
- Mark C. Tibergien & Rebecca Pomering, Practice Made (More) Perfect (2016)
- Philip Palaveev, G2: Building the Next Generation (2017)
- Michael Kitces, Why Profit Margins Should Matter to Any Financial Planning Firm (2013)
- InvestmentNews Advisor Benchmarking Study (2022)