A CASE STUDY ON “RIGHT SIZING” YOUR BUSINESS
I was invited to speak at a dealer conference to discuss the importance of having the right people around you and how to create a great team. All of the attendees at the conference received a complimentary copy of The Personal Coach booklet, The Right Fit, which is a guide to help advisors make great hires.
At the end of the presentation, “George,” one of the attendees, approached me and asked if I could help him with a hiring project. We booked a conference call for the following week so I could learn more about why he felt that he needed to make a hire for his team, which already consisted of four support staff.
During our call, George shared with me that because of his large clientele and significant asset book, his current team could not handle all of the transactions and client requests. George had concluded that he needed to hire another team member.
I asked George one of my favourite questions, “Do you have too many clients or do you have too many non-ideal clients?” George had never heard this question before and asked what I meant. I shared with him that, as coaches, we see many advisors like him building a large clientele. However, as they evolve and mature as a financial advisor, many of the clients do not fit their ideal client profile. I suggested to George that before we move forward with a new hire, we complete an exercise called Best Case Scenario from Cotton Systems. This exercise examines the 10 best sales that an advisor has made over the last 6 to 12 months. George agreed to complete this exercise with the help of his team.
At our next meeting, I could tell that George, having completed the Best Case Scenario exercise, had experienced an epiphany. He was happy to have spent time reflecting and better understanding who his top clients are and more importantly, was excited to see how we could apply this information to his business model. We used the information from the exercise and completed an Ideal Client Profile (ICP), which we committed to paper. We referred to this for the next exercise by starting to use this ICP as part of our referral/introduction process.
I asked George, “Tell me about how you’ve built your contact management system and when it was last updated?” George said that he has a program called Act! and has been using the system for 8 years. I shared with George that a contact management system is not just a technology tool. It needs to be viewed as a business process encompassing 4 steps:
Building a relationship management strategy for each segment
Identifying a champion to manage the system
Using technology to manage the process – in this case,
it was Act!
George said, “This is all fine but I really need your help in making a hire.” I said to George that I understood this but before we made a hire, we needed to “right size” his practice. I shared with him a number of stories where we had completed this exercise with advisors with large clienteles and in many cases, the advisor decided to right size the practice and by doing so, decided that he/she did not need to make an additional hire. I asked George to go along with me on this one and work on his contact management system before we discuss hiring. George begrudgingly agreed to take this step. I then showed him some sample customized segmentation scorecards that we had created for other clients and I suggested that we build a customized segmentation scorecard for him. He agreed and we built this scorecard with a particular focus on the following items:
Size of assets
How clients value the services
The client history of providing referrals
One of our support team members at TPC created a scorecard with the above items and a rating system to grade each client from 1 to 5. We had 7 items with the maximum score on each item being 5, which meant that the best client score could be 35. We then created a rating system using the numbers so that we could create 5 different segments – platinum, gold, silver, bronze and lead. I left this exercise for George and his team to complete and within a month, George sent me an email outlining that he had the following clients in each segment:
Platinum clients – 21
Gold clients – 147
Silver clients – 101
Bronze clients – 174
Lead clients – 57
With this exercise behind us, I arranged to book my next face-to-face coaching meeting with George and asked him to have his employee responsible for booking appointments to join the meeting. This employee, “Kathy,“ is very engaged in the business and was quite intrigued with what we were going to achieve during this meeting.
Next, we built a relationship management strategy with each segment. I showed Kathy and George some sample relationship management strategies. We spent the balance of the morning outlining a relationship management strategy that Kathy thought she could implement for each of the segments. Our most concentrated relationship management strategy would be focused on Platinum clients and minimal for Bronze and Lead clients. As part of this exercise, I asked for names of clients that fit in each of these categories so George and Kathy could think about these clients when delivering their strategy. Putting client names to the categories helped us immensely in creating strategies for each segment.
The third step in building the contact management system is identifying a champion. Kathy was up for the challenge and she was excited that she had clarity around managing clients going forward.
The next step after completing this project was to focus on helping with a new hire. George was no longer as eager to work on this project because he discovered what so many advisors discover after this exercise – he felt that a number of clients should be sold off because they did not fit the ideal client profile and decided he wanted to focus on “right sizing” his business.
After having a thorough review of the business, not surprisingly, George and Kathy determined they could sell off 25% of their clientele. This would only reduce their revenue by 10% and then they could focus on bringing in more Platinum and Gold clients. We helped identify advisors that would be interested in buying these clients.
At the next meeting, we shared with the full team what we had been doing. After announcing that we had right sized the business, the other team members were in total agreement with selling off 25% of the clientele. Guess what happened next? They decided that adding a new team member was no longer necessary if they pulled the trigger on the sale!
I suggested to George that we take a coaching break and give the team time to implement what we agreed upon. I followed up in six months and George shared with me that he had almost replaced the 10% of lost revenue because he was now focused on his best clients. Additionally, those best clients are providing him with introductions to people just like them. His team is now more energized, has less stress and everyone is feeling like they are running the business whereas previously, they felt like the business was running them.
Good advisors do an excellent job of building their clientele but quite often, they do not take the time to review their clientele and see if these clients are a good fit for their current practice. Also, some advisors have “FOMO” - a fear of missing out. In other words, they think that they will miss opportunities if they release some of their non-ideal clients when in fact they will find more opportunities when adding Platinum clients in their place.
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