Why successful businesses shed clients
Letting clients go is one issue no business can avoid, argues Brett Davidson, managing director of FP Advance
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 its 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.
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 five-minute job (and there’s no such thing as a five-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’.
The junior adviser trap
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 cash flow 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. This gives them space to move on and move up.
Letting clients go is a critical step for all businesses to go through if they want to grow and improve. Don’t avoid it.
Visit the FP Advance website