By Brett Davidson
I subscribe to Bob Veres’s excellent newsletter, Inside Information, which provides market intelligence on what is happening at conferences and events in the US (among other things). A recent edition quotes Stephanie Bogan of Quantuvis, a practice management guru who provides research data on what the top 25% of advice firms do differently to or better than the rest.
Her conclusions? The most profitable best managed firms are not doing anything different from their peers. But they are doing a lot of things incrementally better and these small differences add up to dramatic results. For example:
- Top firms are 20% more likely to use training programmes, job descriptions and compensation plans and organised models for how the firm is run.
- Top firms get 20% more referrals than the average firm.
- 68% of the top firms clients meet their target client profile. For the average firms only 50% of them do so.
Don’t ignore the small stuff
These are not dramatic differences but the cumulative effect of these small improvements can greatly increase growth, productivity and profitability.
The good news is that you don’t have to worry about becoming a marketing guru if this is not your natural skillset. Nor do you have to write rude letters to all of your long tail of legacy clients to get to elite financial performance. But doing a little more in the marketing area consistently, or writing a few more resignation letters may yield some great results.
What would your revenue be if you replaced the least profitable 18% of your clients with new ones that met your target client profile? Would the gain to your revenue be a little or a lot? Work it out and put a real number on it.
What if every year for the last 10 years you had gotten just 20% more client referrals? Not much incremental effort or cost but exponential growth for your business.
Some more surprises
- Most firms spend 60% of their time on their most unprofitable clients, although many advisers tend to deny this statistic until they do the analysis.
- What about your hourly rate? What is a fair hourly rate if you want to cost your time?
Imagine you work 2000 hours per year. What percentage of those hours are spent with clients? Let’s say 50% and that is too optimistic for most firms (research indicates the real number may be closer to 30%). If we use say £200 per hour because you decide you are worth at least as much as the accountants and lawyers in your area who charge that, and multiply that by 1000 hours you have a revenue stream for yourself of £200,000. But I know that many of you manage well in excess of that as an annual income stream from your personal client bank. (The best advisers are managing more like £500,000 – £600,000 and some as high as £1M pa). If you produce more than the £200,000 outlined above it is clear that your time should be billed out at a much higher hourly rate, possibly £500, £600 or £1,000 per hour for the higher producers. Now that’s an eye opener I’m sure.
It is the process of making small improvements that sees you look like an overnight success
An old boss at GE once said “If we had taken the long term view four years ago we’d be there by now”. Don’t fall into the trap of chasing short-term results. Focus on the long term by simply making small, incremental improvements and watch the results multiply.