Three ways to tell if you're running a smart business.

    Basically, there are three ways to build a business in the financial services industry.
    Option number one: You can build it smart from the beginning. This means starting out with the right kind and number of clients, and becoming a full-service advisor to a smaller clientele right from the start. Building a smart business from the beginning means being selective from day one.
Of course, you can always choose option number two and build a dumb business, then rebuild it at some point during your career. That's what most advisors do, and those are the people we typically work with. Advisors seem to find us at a time in their life where they realize they have a dumb business-too many clients and not enough time to serve them, or even the ones who are ideal, well. In reality, you can't take care of more than 100 to     125 clients and do a good job. You might be able to raise that number to 200 at most, if you've got a really great team.
    Unfortunately, far too many advisors go with option number three: build a dumb business and live with it your whole career. If you have too many clients and feel like your business is running you instead of you running it, you've got a dumb business. Sadly, that's the reality for the vast majority. They're more trapped by the business than freed by it, but they either don't know how to change it or they think it's too late. "I don't have the time or the energy," they complain. "If I can just ride it out for another four years, I'll retire."
    One of our favorite clients was serving 1,243 customers when we met him. His business generated $388,382 in gross production, which sounds pretty good. It took him about two and a half years, and he now has 91 ideal clients and they generate approximately $1.6 million in recurring gross revenue. Let me repeat that. His $1.6 million is not commission oriented; it recurs every year. He works three days a week and has a smaller staff than before (he went from 11 to four staffers). His life is simpler, his income is higher, his clients are better served and they're happier.
    What kind of business are you running? Here's a three-step litmus test to help you find out.
    1. How full is your appointment calendar? Are you spending your time prospecting and marketing because you're not earning the referrals you'd like? Are you meeting with people three or four times before they hire you? Are you sitting down with clients to discuss irrelevant, superfluous topics that waste your time and theirs? If you answered yes to any of these questions, you're running a dumb business.
    Don't allow your clients to pull you into discussions about what I call financial pornography. If I was your financial advisor and you wanted to have a discussion about how the war on Iraq was going to impact the market, I would not even entertain that conversation with you. Instead, I would explain to you why that's a waste of your time and mine, and remind you that we have an investment philosophy where we focus on what we can control. I would also remind you that we have a long-term financial strategy, so regardless of what happens in the economy, the market or the world, my job is to help you achieve your goals for the reasons that are important to you, not time the market.
    Although this flies in the face of conventional wisdom, educating clients is a waste of your time and theirs. Discussing the war in Iraq as it relates to investments is academic. It's not practical and it doesn't alter the outcome of your clients' investments. At most, it provides nothing but a false sense of security. "But it makes the clients feel comfortable," you might argue. Well, do you want to be in the business of giving your clients a false sense of comfort, or telling your clients the truth?
    Telling the truth is actually an interesting and surprisingly effective marketing strategy. When you take a rational approach-when you have rational discussions with rational people-they respond rationally. If you've got an irrational approach to try to move irrational people to buy investments and insurance from you, you'll end up with a high-maintenance clientele and your primary function will be to accommodate their baggage.
 There's a whole group of advisors who say, "Yeah, that's what it's like to be an advisor. You have to accommodate people's ineffective and false beliefs." If you want to run a smart business, don't focus on educating clients and having these kinds of conversations. Instead, fill your appointment calendar with meaningful, rewarding engagements.
    2. Are you comfortable asking for referrals? If you're great at what you do, you won't be uncomfortable asking people to introduce you to others. You'd never hear someone say, "I'm a great pilot, but I wouldn't want to ask anybody to fly with me." When I was single, I noticed that my most attractive friends were always comfortable approaching someone they wanted to meet, and they always got a great response. In the most extreme cases, they didn't even have to do the approaching-people would just find them.
    If nobody's finding you, maybe you're not as attractive as you think you are. Do your clients make excuses when you ask them for referrals? Do you they tell you, "I don't know anybody who's looking right now, but if I come across someone, I'll let you know. Why don't you give me a couple of your cards?"
    3. Do your clients give you all of their financial business? In other words, do you have all the money? In a smart business, you want your clients to give you all of their money and do whatever you tell them to do with it. You want clients who want more from you than state-of-the-art schmoozing; they want you to be a Trusted Advisor, and they expect you to handle their financial affairs. Most people want to work with one person that they trust. If you aren't getting that level of trust and all the money, you're running a dumb business.
    The smartest and most successful people aren't the ones who question authority and try to do everything themselves. The smartest, most successful people outsource. They defer to someone with greater expertise.   
    Yes, it's true-in a smart business, you get to work with clients who tell the whole truth about where all the money is, do what you tell them to do, do all your prospecting and marketing for you, are more influenced by you than anything else, and don't let events you cannot control diminish your working relationship. They sincerely value your advice and their relationship with you. That's the proof of great client relationships, and the sign of a very smart business.
    Given the choice, which type of business will you pick? Which kind of business do you think your clients would want you to pick?

© 2005 by Bill Bachrach, Bachrach & Associates Inc. All rights reserved. For more information about his services or to order his books, call (800) 347-3707 or visit the Web site