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 www.bachrachvbs.com.