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Shedding clients: one issue no business can sidestep
Like it or not, letting some clients go is an essential step for success. It’s a bit like doing a spring clean at home. Every so often I need to clear out all of the stuff that I no longer want or need. The same principle applies to your business, and your client list is one area that needs to be part of the clean up.
I find a lot of advisers fight the idea of letting clients go and I understand why; it’s an unpleasant issue to have to confront. We’re talking about real people here, not just inanimate things taking up space in your home (although some of those things can have emotional baggage too).
No one wants to have a difficult conversation with someone who has been a client for years or face the potential backlash they think might come from it.
However in their desire to avoid that discomfort, a plethora of excuses are created:
“Some of those clients got me started in this business. I feel a loyalty to them.”
“The smaller clients don’t take up that much of our time and they generate a good chunk of income each year.”
“I’m part of the local community here and it’s a small town. If I let them go, it will damage our reputation.”
While these are seemingly reasonable excuses, you have to get past them and find a way to let some clients go.
Shedding clients is a necessary step that all firms need to go through if they want to grow and achieve their potential. It’s also a vital step for any business owner that desires a great work/life balance.
Why? It’s pretty obvious when you think about it – you have limited time and resources. You and your team can only do so much in a day, so you have to be focused on the best possible clients you can lay your hands on. One adviser can effectively service between 50 and 150 clients. That’s not a huge number, so you want your client list to be as good as you can possibly get it.
Over time, if you want to earn a higher income, you’ll need to increase your client quality. The only other options are to employ more staff (including advisers), or to work longer and harder. Both of these are difficult options in their own way.
The idea that your long tail and lower level clients ‘don’t take up much time’ is a myth.
Even a 5 minute job (and there’s no such thing as a 5 minute job, I might add) is too much if your days are already full doing productive and profitable work for your best clients. If you’re not full with that type of work, then your job is to be out there finding it, not keeping yourself ‘pretend busy’ with ‘stuff’.
Another trap to watch out for is the belief you can hire a junior adviser to service some of these clients. This just shifts the problem a little further away from you, however the problems these clients are creating in your back office still exist. There are far better ways to bring new adviser talent through than by getting them to service clients that no longer fit your business.
I don’t know of one successful firm that’s been able to sidestep the issue of shedding clients. The ones that have tried, continue to underperform.
There are several ways to let clients go that won’t damage your reputation or leave clients in the lurch. One of my London clients is lining up another local adviser to take over the clients they wish to elegantly disengage from. They will also refer any new leads that don’t meet their minimum standard. This prevents new, off-target clients building up and makes sense for all parties involved.
As a business owner myself, I realise you need to be mindful of your cashflow at all times. At FP Advance we never advise people to just dump clients if there will be catastrophic financial consequences, but we do nudge people out of their comfort zone by having them sack some clients as soon as possible.
Letting clients go is a critical step for all businesses to go through if they want to grow and improve. Don’t avoid it.
FP Advance consultant, Simon Olive, weighs in on this week’s topic. He shares a case study of what happens when you let clients go and focus on quality.
Focus: the narrower the hosepipe, the more powerful the jet.
by Simon Olive
This week I began working with a new client who is going through a challenge that is typical for many start-ups. He’s trying to be all things to all people. Obviously this isn’t working for him, so the main focus of our meeting was on defining his target market and building the confidence to implement the necessary changes. This takes some bravery and a lot of discipline, but the rewards are worth it! I shared the following success story with my new client, hoping to inspire him (and you) to take the next step in building the business of his (and your) dreams.
Eight years ago I began working with a well-known advisor who was, to put it simply, floundering with hundreds of clients and a number of advisers and support staff. He was very stressed and making little money. I encouraged him to pare everything back and focus on just a handful of his higher-end clients. He did this and each year since he had raised the bar of who qualifies as a new client.
Today he has 147 clients. 120 of these clients have wealth he advises on in excess of £1m, (one has over £30m) and every month he attracts at least one new multi-million pound client.
A brave and very focused individual, he is an excellent example of how narrowing your focus can bring amazing results. This focus isn’t the only change he made, but it was the driver for all the other changes that followed.
Remember, whatever you focus on gets bigger – so focus on solutions not problems.”