Tips To Improve Profitability In Hard Times
Good profits or business values are the results and outcomes of playing a good game. If your sole focus is profit, it’s going to be hard to focus on building a genuinely great advice firm. However, making an entity with a passion for what you’re working to achieve, built on top of an environment where you have a growing reputation in your niche of expertise, will result in a great, long-lasting business.
However, we live in exciting times. As we head towards the back end of a unique year, it’s opportune to consider how your firm can improve profitability. Too many firms have too much of their revenue tied to uncontrollable valuations of their client’s assets, and they need options to get them through this turbulence.
In order of easiest to hardest, here are a few tactics to consider.
1. BENCHMARK YOUR BUSINESS
When did you last get a thorough analysis of your actual business performance? Success leaves subtle clues. Adopt a detailed analysis of your business’ performance to identify potential ‘performance gaps’ between your business and other businesses in similar situations. Performance gaps show you where to extract better returns from generating revenue, spending money, price services, or improving returns per person employed. Identify potential structural gaps, income gaps, and inefficiencies in returns from your client base that may be quickly rectified.
2. LIFT YOUR MINIMUM FEE
If your firm has done too much for too many clients for too long, now’s the time to do something about it. Lift your minimum fee. You’ll lose some clients, but you’re a business, not a charity. If your clients value your advice and relationship, chances are good they’ll want to stay. If you believe your firm ‘owes’ something to clients who fall below possible new minimums because you didn’t correctly set expectations about your proposition (i.e., you promised to beat the market?), go now and reset expectations about what you do before lifting your minimums.
3. SURVEY YOUR CLIENTS
It’s a simple but not always obvious idea to ask the people paying you what other services you might be able to provide or how you might improve the services being offered to them. They might also tell you some of the benefits you’re wasting time or resources on delivering that they don’t value. We often get so caught up in our dust storms of activity that we miss the obvious clues. Ask them.
4. CUT COSTS
It is a quick fix. But, unfortunately, unless you’re harboring a Ferrari in the company garage, this usually means cutting people. Our people are:
- Our most significant investment.
- Often our most undermanaged resource.
- Easily the most challenging part of our role as builders of advice firms.
You’ve invested in these people, they have a relationship with your clients, and they have often been loyal to you. It’s about business – but there are an increasing number of companies (big and small) putting employees first, customers second, and shareholders third. Retrenching people usually means more work for those retained and forever changes the ‘mood’ of the firm. Tread carefully but deliberately.
5. ASK FOR REFERRALS
Many firms seem to find this more complicated than retrenching people. Why? Too many of us hold illogical fundamental beliefs that real professionals don’t ask for referrals. I used to be one of those idiots – until I was overwhelmed by the evidence to the contrary. It’s not about getting your clients to do something that they don’t want to do; it’s about proper training, skilling, and unearthing some of your illogical beliefs. Once you get over your referral hang-ups, you too can successfully tap into those clients who wantto help you grow a very successful firm and enjoy the results.
6. CHANGE YOUR PROPOSITION
Take a quick snapshot of your firm today. Let’s assume that:
- You have clients who trust you.
- You’ve already proven to many of them that you’re good at what you do.
- You want to help them achieve their financial objectives.
But… you’ve never made insurances, finance applications, mortgages, debt, leasing, investments, self-managed superannuation, individually managed accounts, tax, estate planning (the list goes on) before. OK – there’s no time like the present. They trust you, now trust yourself, and don’t let your incompetence stop you. Remember when you started in this business? You didn’t let your incompetence stop you back then. What’s different now? Broaden your proposition, charge more for more services, and potentially delight your trusted clients even more.