The profitability of a financial planning firm is a sensitive issue for many advisors. For some, the income of the business is a primary focus, and the balance between the financial success of the firm and its owners, and the services it provides to clients, is carefully balanced. For others, however, there is far less focus on the profitability of the firm, and more on the depth of service delivered to clients (even at the cost of profitability), especially if total income is "comfortable" to support the advisor's lifestyle.
Yet the reality is that whether the goal is to maximize income or not, the profitability of an advisory firm matters, in far more ways than "just" the income paid out to the owner. The profit margins of a firm are also crucial to its value; in the case of a sale to a third-party, it may be the difference between selling or not finding a buyer at all, and even for an internal succession plan, a business that isn't profitable is simply unaffordable to the next generation at any price. And of course, if the owner's exit from the business is unexpected - for instance due to disability or death - the profitability of the firm has a direct impact on whether the surviving family members receive any value at all.
But beyond the financials of the advisory firm owner, family members, and successor owners, the profitability of an advisor firm matters for another reason as well: the stability of the practice helps it to retain its staff. After all, a firm that is only marginally profitable simply has no flexibility to deal with the vicissitudes of business; like living from paycheck to paycheck, it creates an environment where even a small disruption can have major ramifications, as many firms discovered when the 2008-2009 financial crisis forced them to fire staff and reduce services to clients at the exact time clients needed them the most.
And perhaps, ultimately, that's the real reason why running a firm with healthy profit margins matter: a firm that doesn't have a healthy profit margin as a cushion to deal with inevitable difficult times that can occur may be unable to sustain the quality of its services to clients... or at worst, may have to cease serving them entirely.