Why are we in business?

Many 'old style' businesses still base their functional model on the following equation:

Revenue = Capacity x Efficiency x Cost-Plus Price

If one was to transpose this to the (historic?  current?) professional intermediary market it might look like:

Turnover = No. Competent Advisers x Sales Volume x Commission Margins

It is difficult, however, to precisely identify the equation which might identify a 'new model' IFA, or at least one which plans to be ready in advance for 2012, operating an 'RDR-friendly' business model.  Ronald Baker, in his helpful 2006 book, 'Pricing on Purpose' suggests an alternative -

Profitability = Intellectual Capital x Price x Effectiveness

This has a better feel about it.  It rightly emphasises the IC embedded in an intentional financial-planning or wealth-management business, it focuses on the price we attach to our advice (there is a value inherent in everything I do for my client) and it focuses us on effectiveness rather than efficiency.  It is, after all, possible to demonstrate great efficiency in offering an irrelevant and unhelpful product or service to the public.  Effectiveness is the thing.

The equation is a useful tool, but still it encourages us to focus on inside of our business, and ask "what do we want and need?" rather than on the outside of our business and ask the rather more challenging question, "what do you desire and value?".

Peter Drucker, who by popular opinion was probably one of the most insightful and influential management thinkers of modern times, taught that a business exists to create wealth for its customers.  In fact, he went even further than that.  He pointed out that, "there is only one valid definition of business purpose: to create a customer."

For those of us re-evaluating our business models, and generally seeking to implement step-change with our eyes fixed firmly on 2012, these issues are far from theoretical.  What are you doing to create and retain loyal customers?