Have you ever heard these two expressions?
“China Egg”
“Elephant Hunting”
A person in financial services has “China eggs” in the CRM when the names of wealthy people are maintained on the prospect list even though no sale has yet been made, or where no relationship actually exists.
Someone in financial services can aptly be described as an “elephant hunter” who follows a strategy of only going after very large customers.
At various times in my career, I have been accused of both these behaviors. I began researching how to build your reputation at work and how to better my business techniques. I just wanted to be good at my job. I remember as a young agent keeping a man’s name on my prospect list who I was too intimidated to call, but who I believed would buy a large policy if I ever found a good reason to call him. My district manager finally sat me down and said, “Do you know what a ‘China egg’ is? One that never hatches. Move on!”
Years later I closed several large cases and began thinking that I would focus only on writing business of a certain size. Trouble is, I lost sight of how long it took me to close the earlier large cases. Income flow dwindled as I stalked big game.
Gilbert K. Chesterton wrote, “One sees great things from the valley; only small things from the peak.”
When in a sales valley, while no cases are being written, it is easy to look up from the slump and fixate on large potential cases that could, with the sweep of a pen, wipe out the deficit of many smaller sales.
On the other hand, after a period of sustained success, it is possible to look back and see a series of sales that are indistinguishable from each other and in their smallness, seem less than impressive. We tend to remember the larger cases, the wealthier clients and the more impressive earnings.
Maybe that is why you rarely hear independent financial professionals ask the question: “How can I find some more very small clients to work with?”
Perhaps a better perspective to cultivate, as opposed to comparing potential revenue from the spectrum of prospects, is to see every moment as an opportunity to change the world by serving your purpose.
Three Reasons to Work with Smaller Clients
Here are three reasons for all independent financial professionals to consider including smaller prospects in their client mix:
- Smaller clients often grow.
- Everybody knows somebody.
- They can strengthen your unique selling proposition.
Let’s look at each of these in turn.
Smaller Clients Grow
Most millennials fall into the smaller client category. Assuming they are beginning a career, and starting to find their way in the world, these very same people will, in the relatively near future, be hitting their strides. Fewer financial advisors are prospecting for them, which means less competition. Additionally, they have a unique way of viewing the world, such that the impact they will have on the advisor working with them exceeds the immediate financial success.
Prospects of modest means in other demographics (Generation Xers, Boomers, etc.) are in no less need of our industry’s products than the wealthier prospects. Remember, the products we represent have the wondrous ability to create growth in the clients’ savings, investments and security. Accumulation attracts accumulation. Success begets success.
Everybody Knows Somebody
An MGA I know is personal friends with Harrison Ford.
I have a dear friend who is a Lutheran Pastor in a small town in North Carolina. He is the uncle of the actress Emma Stone.
My widowed mother, living on Social Security, was close friends with the President and CEO of a major American steel company.
I personally know Charlie Gipple!
See the trend? Nearly everyone you know has a connection with someone very successful. (Note: The only way to ever capitalize on these connections is to exceptionally serve the smaller client first.)
Smaller Clients Can Strengthen Your Unique Selling Proposition
The secret to a successful financial services practice is to treat everyone the same and provide everyone with consistent and exceptional customer service, no matter the size of the prospect. Working at your best with smaller clients prepares you to be at your best with larger clients.
Every relationship is important, and even your smallest clients can be helpful in amazing ways. They make you more efficient, because you cannot spend too much time on a small sale. You cannot lose sight of the opportunity cost associated with your time and your team’s time. Smaller clients must be informed of your services that are unavailable to them because of the value of your time. All this focus on matching cost with revenue makes you more attentive to how your profit grows.
Lastly, remember that smaller clients still deserve your A-game. The best that you can offer is what you should always be refining. Alvin Toffler wrote, “You’ve got to think about big things while you’re doing small things, so that all the small things go in the right direction.” If you commit to bringing to smaller clients the excellence upon which you are building your reputation, your reputation will expand.
One-size-fits-all should apply to what you are as a professional. Your integrity, competence, ardor, preparation, follow-through and delivery ought never to fluctuate. These factors define your character. Your character bears fruit through your labor. That fruit creates your reputation.
As we are all keenly aware, our industry has failed to keep up with the need that exists for our products. If every independent financial professional made a commitment to serve both small and large clients, we would reduce the exposure that too many people bear and perpetuate the industry’s great history of making lives better.
I encourage you to have a zeal for the difference that you can make in people’s lives and to not restrict your expertise to people who are already on someone else’s prospect list. In other words, I urge you to match your great skills with the great need that is all around you.
Stop Running Uphill
“All ballplayers should quit when it starts to feel as if
all the baselines run uphill.”—Babe Ruth
I am a simple man. My exercise program for over forty years has consisted of jumping rope, doing push-ups, pull-ups, dips and stretches. I always jump rope outside, wherever I am. I throw the rope in the bag, get on a plane and go.
I do not encounter much of anything that prevents me from exercising. Snow, cold, rain, heat, wind, traffic noise, people staring, smokers using the same space outside the hotel…nothing changes what I do or how long it takes.
Now…if I was a runner, that would be another blister altogether.
According to what I have read, a person’s running performance is impacted greatly by such things as dew point, temperature, altitude, incline and even posture. Take temperature for instance. At 60 degrees, a person’s running pace suffers a two to three percent increase, meaning that someone who averages an eight-minute mile pace experiences an increase of about twelve seconds per mile. At 80 degrees, the runner’s pace slows by 12 to 15 percent, so that a mile pace becomes more like 9:06. (There is actually a temperature calculator at Runners Connect, found here: https://runnersconnect.net/training/tools/temperature-calculator/)
Or consider altitude. High altitudes decrease the amount of oxygen getting to the muscles, and for runners there is the added risk of dehydration. Table 1 is helpful.1
Point: Runners are impacted by the physics of the environment, but they can make adjustments based on measurements and calculations.
Independent financial services professionals face an ever-more challenging environment. What should they measure in order to stay on pace, or even achieve improved performance?
Critical Success Factors
It is critical that independent financial services professionals measure the right things. The reason? They only have so much time.
“Time is the scarcest resource and unless it is managed, nothing else can be managed.”2—Peter F. Drucker
To improve time efficiency and business success, begin measuring these Critical Success Factors (CSFs):
The remainder of this article will address each of these CSFs.
CSF #1 Time Invested by You per Client
Like running the baselines in baseball, the progression from prospect to client is divisible into clear phases. There are at least these seven:
According to H. James Harrington, “Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.”
Measure » Understanding » Control » Improvement
Most independent financial services professionals I have met do not measure how much time is invested in each phase of the sales cycle. Here is a tool that I hope proves helpful. (Exhibit A)
What can be learned from analyzing the results in Exhibit A?
CSF #2: Revenue per Client
Even for the independent financial services professionals who work specific markets and have well-honed client profiles, there is always a disparity in revenue earned per client. It is important to measure revenue per client—not because it makes one client more important than another, but because it provides insight into how efficient the sales process is. First, we will look at Exhibit B.
These five clients returned an average of $4,870 in revenue. How does the revenue earned per client compare with the amount of time invested in each phase leading up to product placement?
Allocating revenue to each phase in proportion (Exhibit A) to the total time spent per client is found in Exhibit C.1.
A quick look at the chart reveals that the two most revenue-intensive activities are prospecting and closing.
Revenue per client is best measured against time spent resolving the financial concerns of the client. To truly understand efficiency in the process, it is important to measure revenue in terms of income per hour. Only then can controls be applied to generate efficiency improvements.
Observations and questions:
Example: If the only activities involved in serving Client B were fact-finding and closing, then the revenue per hour would be $375, a respectable rate according to the chart.
CSF #3: 20 Percent of Clients Generate 80 Percent of Revenue
I meet with many people in our industry who feel much like the aging Babe Ruth. Every step in the process seems to be uphill. I remind them that exertion is minimized through efficiency.
Efficiency is achieved in any business by innovating to the point where the process generates a maximum return. The most important innovation is to identify the ideal prospect and design the process to best serve that type of prospect.
In our example, Client C returned the highest revenue in the measured period. However, Clients C, D and E combined for 84 percent of the total revenue in our sample of five clients. Not quite the 80/20 Rule; however, the point can be made that by knowing the commonalities and similarities of the top three revenue-producing clients we could establish the profile of the ideal prospect.
Shared Threads to Discover:
Armed with an understanding of the kind of client that returns the highest revenue per hour invested, the independent financial professional can begin to control the referral process and improve the kind of prospect generated. For instance, instead of asking, “Who do you know that may need my kind of services?” ask, “Do you know any computer software and systems software engineers, between 35 and 45 years old, married with children, who enjoy the outdoors, especially golfing?”
CSF #4: Clients Providing Referrals
This leads naturally to something many independent financial professionals fail to measure. Not all clients provide good referrals. The ones who do should be rewarded. In addition, there was a reason that they were willing to make introductions to new prospects. It is important to understand their motivation and learn how to control the process of asking for referrals in order to improve overall results.
The fact is, most independent financial professionals simply lack good tools and processes to ask for and collect referrals. The best tool in my experience is a simple survey presented to new clients at product placement.
Have you heard the phrase, “Happy customers make happy customers?” Clients who are satisfied with the process and the acquired products will refer more people. Therefore, whenever independent financial professionals meet or exceed the expectations of the client, and receive affirmation to that effect (perhaps through a survey), that is the exact moment when the request for referrals should be made.
CSF #5: Clients Providing Repeat Sales
F.J. Raymond said, “Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund.” Similarly, better than receiving referrals from existing clients is getting repeat sales from them. Yet many independent financial professionals do not measure the frequency of this occurrence, nor the circumstances.
Repeat sales can be measured by calculating a repeat purchase rate, which is the percentage of clients who make another purchase. There is never a better time than right now to begin calculating a repeat purchase rate.
It’s equally important to measure and understand how receptive existing clients are to subsequent appointments to discuss additional financial needs. The most important factor is time between purchases.
Time between purchases shows how long a typical client goes before making a repeat purchase. This is a good metric to know because it aids in tailoring the optimal client review process to their behaviors.
Time between purchases and the repeat purchase rate are critical metrics for increasing purchase frequency among existing clients.
Practical Tips:
Summary:
Every independent financial professional requires a defined process to turn prospects into clients. For those experiencing “uphill” climbs along each phase of the process, the answer is not to quit or slow down. The answer is to measure in order to understand, and in understanding eventually to control and improve the process.
References:
1. https://www.runtothefinish.com/sea-level-to-high-altitude-running-how-it-impacts-running/
2. “The Effective Executive,” New York: Harper Business, 2006, p 51.