Building a winning practice by qualifying prospects and clientsArticle added by David Vick on September 21, 2009
David P. Vick, a member of the National Ethics Bureau, is the President of Vick & Associates, Inc., a financial planning firm in Wheaton, Illinois. Dave, is the author of "Bat-Socks, Vegas & Conservative Investing" and "The ABC's of Conservative Investing Workbook". After many years in the past... More
A lot of people ask me how I close a seminar to get the results I want. First, I have to tell them that I don't want to get an 80 percent to 90 percent appointment rate like all the magazine ads promise; I want to disqualify people at the seminar. So, what I tell the crowd is, "I'm looking for a few high-trust, long-term relationships with client partners. Check `yes' if you saw something tonight, heard something tonight or felt something tonight that you are 100 percent committed to change, and you're just looking for the right person to help you with that change. Check `yes' and we'll see if we're a good fit. I get an average of about 50 percent of the audience to set appointments and no one comes into my office `just for information'". They come in committed to change, looking for the right person.
Qualifying a prospect at the very beginning is incredibly important in order to make sure you are sitting in front of someone that is not just tire kicking but, in fact, very interested in you as a person -- and a professional. They are there for the "right fit." Obviously, qualifying prospects and clients effectively is a key to developing a winning practice.
I was sitting at a kitchen table with a new prospect and the wife gleefully told me, "You've been referred to us by two different people!" Needless to say, I walked out of the house 90 minutes later with a new client. The two that referred them to me had recently been to one of my focus groups. They are on my "A" list of clients that have partnered with me, and I have trained them how to refer me. So, how does one go about determining who the "A" clients are?
Relationship and profit
I think one of the best ways I've ever seen to categorize clients is according to "relationships" and "profits." We all have high relationship and low relationship clients, and high profit and low profit clients. Let me explain: High relationship clients are those who have a high-trust relationship with you. They are on your team, and appreciate all you do. They are the people that you look forward to talking to, and the conversation probably often leads to things that don't relate to business. They are high relationship because they value your time and don't wish to waste your time. The flip side, of course, is those low relationship clients who require you to go to great lengths to satisfy them because they never really trusted you in the first place. They do business with you, but it's not a satisfying relationship. They are demanding and ungrateful. You are simply a vendor in their mind. If they don't get exactly what they want, they shake you, kick you, and leave you wanting a different career.
Then there are the high profit and low profit clients that are simply defined by the fees or commissions that they bring in. Or are they? What about their repeat business and their ability to refer you? In other words, what about their endorsement value? They can be a low fee/commission client who believes in you so much that they gladly tell their friends about their relationship with you. The result is a high profit relationship. So, let's divide your clients into four categories:
Notice that the high relationship clients are in the top two categories. Why? Simple. They make your life easier, conducting your business more pleasant, and add a great value in endorsing you to others -- if you train them. You want the majority of your effort in business to be involved in serving these folks and marketing through them. They actually like referring you.
The other item to notice is that there is a high profit client that can be rated lower than a low profit client. This is true if the experience they have with you translates into negative chatter in the community. We would be fools to think that people don't talk about us. They do. It's what they say that's ultimately important. You probably have no idea how many clients you've lost because of a negative low relationship/low profit client telling others, "We worked with him because he seemed to know what he was doing, but I wish we could find someone else; he's really unorganized!"
Well, enough of the negative. How do you determine if a prospect is worth taking on as a client? Again you get a preview of the type of relationship client they will be during your interview process. You can really tell if someone trusts you and appreciates your style by how you feel when they're gone. If you feel better about yourself and that you really made a positive impact in their lives, chances are they will turn out to be a high relationship client. In order to tell if they are a high or low profit client takes a little more thought.
Determining your cost per client
To begin, determine your cost per client (CPC). Why? It's simple. If you don't know what it costs you per client to do business, you will elect to take on anyone. If you take on anyone just because they can fog a mirror, you will soon be out of business. Let me explain. Let's divide your business costs into two simple categories: first, how much it costs for general office expenses, and second, marketing expenses. I know that this is oversimplified, but it works for illustration purposes. So, here's a hypothetical (and very basic) view:
Now, if you were to take on 60 new clients in the course of a year, your cost per client would be $2,360. Most sales organizations are well aware of their CPC. For instance, a car dealership has their invoice plus an amount it takes to pay the administrative staff, turn the lights on, etc. They put that last amount right on the invoice they show you and the commission that what the salesman is paid doesn't include that amount. That's why there are deals that dealerships just can't afford to make and they will let a prospect walk.
CPC and endorsement value
What's wrong with that idea? Absolutely nothing. It's just plain good business to know your CPC and determine that there are some clients you can't afford to take on. If you look at your practice in this format, you'll also have to consider the endorsement value of your prospect before determining whether they are a good fit for you. By endorsement value, I mean any referrals that they will bring, the positive chatter in their circle of friends they might create, any networking opportunities that they provide, and finally, any repeat sales. In essence, are they a high relationship client?
For example, you might have a prospect couple that is just fantastic to work with. They come in positive and really appreciate your approach to planning. They only have $6,000 in IRAs that are available now to work with because they are still working and have their savings in 401(k)s. Would you work with this client if all they provided was about $400 in commissions to rollover the IRA? It depends. If that is truly all they had, then you might very well pass. Yet, what if they were retiring next year with about $350,000 that they will be wanting roll out of that 401(k)? What if they are part of a retirement group that meets monthly and would be excited about you coming to speak about financial issues in retirement. What if they have 10 friends who are in the same position they are in and need an advisor? What if one of their mothers is ill, 95 years old, and they are the only living heir? Now, that is a different story. It makes the choice an easy one.
It also makes how you evaluate prospects absolutely crucial to your business. An agent really benefits from asking a lot of questions that not only pertain to the specific financial needs of the client, but also about their connections with others, their family relationships, interests, hobbies and passions. It also brings into light the necessity of building high-trust, long-term relationships with your clients. You can't just slap somebody into an annuity, get a commission and never see or talk to the client again. It's professional suicide.
If a prospect has a positive experience in not only becoming your client, but afterward are impressed by your excellent service, organization, and personal touches, they will be highly likely to refer you, if asked. Of course, it's a bonus if they are a high-profit client initially, but that is not the only factor, nor is it the most important factor in choosing your clients.
Positive and negative yardage
Think for a moment about how the positives (high relationship clients) and negatives (low relationship clients) affect your business on an ongoing basis. Using a football illustration, let's see how positive yardage and negative yardage affect a game. If the goal is to score more touchdowns than your opponent, then moving the ball down the field and avoiding any negative yardage is a must. Sure, every now and then you throw a bomb for a touchdown, but that won't win championships. So, a steady, positive move forward is the key to winning.
Let's just say that you bring on a new client and they've doubled your CPC in commissions. So, we are at our own 40 yard line. Next you make them a part of a small group of your high relationship clients, called a focus group. You have lunch with this focus group once a quarter, mail a short note to them regularly, and occasionally have lunch individually. It enhances your relationship so much that they refer you to five of their friends and four become new clients. Now, we're at the 20 yard line. The next year, they rollover that $350,000 401(k) and you are at the five yard line. And, finally, they inherit $5,000,000 and place the whole account with you. Touchdown! (Actually, that's about 10 TDs.) We win, they win.
Next, consider the negative impact of any bad experiences they have in working with you. Some are of your own doing and some fault belongs to the company that you represent. We might have started at the 40 yard line, but the company took forever in getting the annuity to your office because they sent it to your old address. Now, we're on the 30 yard line. Next, they call your office on Monday for a simple question, and you don't return the call until the following Monday -- 20 yard line. You then don't have any contact with them until their annual statement, and by that time, they've been to another seminar and someone else got the rollover and the inheritance. You fumbled!
Have you ever heard someone say, "Well, our broker got the job done for us eventually, but boy was it tough working with him"? Fumble.
Fumble enough and you really will never have the practice you want. You will never get to that proverbial "next level." So, what do you do to make sure your "business ball" keeps "matriculating down the field?" The answer is simple but not easy. You have to commit yourself to qualifying and disqualifying prospects by their ability to provide a positive movement in your practice. Each client counts. That's why you need to adopt a philosophy where you are looking for a few, high-trust, long-term relationships with client-partners. If you are committed to that philosophy, you will do the things it takes on an ongoing basis to make sure your clients will move the ball for you, instead of you doing all the work.
You might ask, "How is this done?" It happens by committing to a business plan where brokers and agents develop high-trust, long-term relationships in their practice. If you want a practice where your clients actually partner with you and provide your momentum, you need to commit to building consistent relationships with those whom you do business. Here's a comment from an agent friend of mine who followed through with this commitment: "I haven't done a seminar in over four months and I have more prospects coming through the door than I can handle. We're averaging $500,000 a week in production, and our biggest struggle is handling all the referrals!"
Now, that's a nice struggle to have. If you want to develop your business to its greatest potential, then commit to qualifying and disqualifying prospects by their ability to provide a positive movement in your practice. Or, you can keep shelling out all those dollars for seminars with no way of knowing how it really impacts the bottom line. The choice is yours.
*For further information, or to contact this author, please leave a comment and your e-mail address in the forum below.
Qualifying a prospect at the very beginning is incredibly important in order to make sure you are sitting in front of someone that is not just tire kicking but, in fact, very interested in you as a person -- and a professional. They are there for the "right fit." Obviously, qualifying prospects and clients effectively is a key to developing a winning practice.
I was sitting at a kitchen table with a new prospect and the wife gleefully told me, "You've been referred to us by two different people!" Needless to say, I walked out of the house 90 minutes later with a new client. The two that referred them to me had recently been to one of my focus groups. They are on my "A" list of clients that have partnered with me, and I have trained them how to refer me. So, how does one go about determining who the "A" clients are?
Relationship and profit
I think one of the best ways I've ever seen to categorize clients is according to "relationships" and "profits." We all have high relationship and low relationship clients, and high profit and low profit clients. Let me explain: High relationship clients are those who have a high-trust relationship with you. They are on your team, and appreciate all you do. They are the people that you look forward to talking to, and the conversation probably often leads to things that don't relate to business. They are high relationship because they value your time and don't wish to waste your time. The flip side, of course, is those low relationship clients who require you to go to great lengths to satisfy them because they never really trusted you in the first place. They do business with you, but it's not a satisfying relationship. They are demanding and ungrateful. You are simply a vendor in their mind. If they don't get exactly what they want, they shake you, kick you, and leave you wanting a different career.
Then there are the high profit and low profit clients that are simply defined by the fees or commissions that they bring in. Or are they? What about their repeat business and their ability to refer you? In other words, what about their endorsement value? They can be a low fee/commission client who believes in you so much that they gladly tell their friends about their relationship with you. The result is a high profit relationship. So, let's divide your clients into four categories:
| Client type | Description |
| A | High relationship/high profit |
| B | High relationship/low profit |
| C | Low relationship/high profit |
| D | Low relationship/low profit |
Notice that the high relationship clients are in the top two categories. Why? Simple. They make your life easier, conducting your business more pleasant, and add a great value in endorsing you to others -- if you train them. You want the majority of your effort in business to be involved in serving these folks and marketing through them. They actually like referring you.
The other item to notice is that there is a high profit client that can be rated lower than a low profit client. This is true if the experience they have with you translates into negative chatter in the community. We would be fools to think that people don't talk about us. They do. It's what they say that's ultimately important. You probably have no idea how many clients you've lost because of a negative low relationship/low profit client telling others, "We worked with him because he seemed to know what he was doing, but I wish we could find someone else; he's really unorganized!"
Well, enough of the negative. How do you determine if a prospect is worth taking on as a client? Again you get a preview of the type of relationship client they will be during your interview process. You can really tell if someone trusts you and appreciates your style by how you feel when they're gone. If you feel better about yourself and that you really made a positive impact in their lives, chances are they will turn out to be a high relationship client. In order to tell if they are a high or low profit client takes a little more thought.
Determining your cost per client
To begin, determine your cost per client (CPC). Why? It's simple. If you don't know what it costs you per client to do business, you will elect to take on anyone. If you take on anyone just because they can fog a mirror, you will soon be out of business. Let me explain. Let's divide your business costs into two simple categories: first, how much it costs for general office expenses, and second, marketing expenses. I know that this is oversimplified, but it works for illustration purposes. So, here's a hypothetical (and very basic) view:
| Monthly expenses | |
| Office lease: | $1,000 |
| Phones: | $400 |
| Staff: | $4,000 |
| Miscellaneous: | $500 |
| $5,900 | |
| Monthly marketing expenses | |
| Seminars | $5,000 |
| Entertainment | $400 |
| Mailings | $500 |
| $5,900 | |
| Total monthly expenses: | $11,800 |
| Total annual expenses: | $141,600 |
Now, if you were to take on 60 new clients in the course of a year, your cost per client would be $2,360. Most sales organizations are well aware of their CPC. For instance, a car dealership has their invoice plus an amount it takes to pay the administrative staff, turn the lights on, etc. They put that last amount right on the invoice they show you and the commission that what the salesman is paid doesn't include that amount. That's why there are deals that dealerships just can't afford to make and they will let a prospect walk.
CPC and endorsement value
What's wrong with that idea? Absolutely nothing. It's just plain good business to know your CPC and determine that there are some clients you can't afford to take on. If you look at your practice in this format, you'll also have to consider the endorsement value of your prospect before determining whether they are a good fit for you. By endorsement value, I mean any referrals that they will bring, the positive chatter in their circle of friends they might create, any networking opportunities that they provide, and finally, any repeat sales. In essence, are they a high relationship client?
For example, you might have a prospect couple that is just fantastic to work with. They come in positive and really appreciate your approach to planning. They only have $6,000 in IRAs that are available now to work with because they are still working and have their savings in 401(k)s. Would you work with this client if all they provided was about $400 in commissions to rollover the IRA? It depends. If that is truly all they had, then you might very well pass. Yet, what if they were retiring next year with about $350,000 that they will be wanting roll out of that 401(k)? What if they are part of a retirement group that meets monthly and would be excited about you coming to speak about financial issues in retirement. What if they have 10 friends who are in the same position they are in and need an advisor? What if one of their mothers is ill, 95 years old, and they are the only living heir? Now, that is a different story. It makes the choice an easy one.
It also makes how you evaluate prospects absolutely crucial to your business. An agent really benefits from asking a lot of questions that not only pertain to the specific financial needs of the client, but also about their connections with others, their family relationships, interests, hobbies and passions. It also brings into light the necessity of building high-trust, long-term relationships with your clients. You can't just slap somebody into an annuity, get a commission and never see or talk to the client again. It's professional suicide.
If a prospect has a positive experience in not only becoming your client, but afterward are impressed by your excellent service, organization, and personal touches, they will be highly likely to refer you, if asked. Of course, it's a bonus if they are a high-profit client initially, but that is not the only factor, nor is it the most important factor in choosing your clients.
Positive and negative yardage
Think for a moment about how the positives (high relationship clients) and negatives (low relationship clients) affect your business on an ongoing basis. Using a football illustration, let's see how positive yardage and negative yardage affect a game. If the goal is to score more touchdowns than your opponent, then moving the ball down the field and avoiding any negative yardage is a must. Sure, every now and then you throw a bomb for a touchdown, but that won't win championships. So, a steady, positive move forward is the key to winning.
Let's just say that you bring on a new client and they've doubled your CPC in commissions. So, we are at our own 40 yard line. Next you make them a part of a small group of your high relationship clients, called a focus group. You have lunch with this focus group once a quarter, mail a short note to them regularly, and occasionally have lunch individually. It enhances your relationship so much that they refer you to five of their friends and four become new clients. Now, we're at the 20 yard line. The next year, they rollover that $350,000 401(k) and you are at the five yard line. And, finally, they inherit $5,000,000 and place the whole account with you. Touchdown! (Actually, that's about 10 TDs.) We win, they win.
Next, consider the negative impact of any bad experiences they have in working with you. Some are of your own doing and some fault belongs to the company that you represent. We might have started at the 40 yard line, but the company took forever in getting the annuity to your office because they sent it to your old address. Now, we're on the 30 yard line. Next, they call your office on Monday for a simple question, and you don't return the call until the following Monday -- 20 yard line. You then don't have any contact with them until their annual statement, and by that time, they've been to another seminar and someone else got the rollover and the inheritance. You fumbled!
Have you ever heard someone say, "Well, our broker got the job done for us eventually, but boy was it tough working with him"? Fumble.
Fumble enough and you really will never have the practice you want. You will never get to that proverbial "next level." So, what do you do to make sure your "business ball" keeps "matriculating down the field?" The answer is simple but not easy. You have to commit yourself to qualifying and disqualifying prospects by their ability to provide a positive movement in your practice. Each client counts. That's why you need to adopt a philosophy where you are looking for a few, high-trust, long-term relationships with client-partners. If you are committed to that philosophy, you will do the things it takes on an ongoing basis to make sure your clients will move the ball for you, instead of you doing all the work.
You might ask, "How is this done?" It happens by committing to a business plan where brokers and agents develop high-trust, long-term relationships in their practice. If you want a practice where your clients actually partner with you and provide your momentum, you need to commit to building consistent relationships with those whom you do business. Here's a comment from an agent friend of mine who followed through with this commitment: "I haven't done a seminar in over four months and I have more prospects coming through the door than I can handle. We're averaging $500,000 a week in production, and our biggest struggle is handling all the referrals!"
Now, that's a nice struggle to have. If you want to develop your business to its greatest potential, then commit to qualifying and disqualifying prospects by their ability to provide a positive movement in your practice. Or, you can keep shelling out all those dollars for seminars with no way of knowing how it really impacts the bottom line. The choice is yours.
*For further information, or to contact this author, please leave a comment and your e-mail address in the forum below.
The views expressed here are those of the author and not necessarily those of ProducersWEB.
Reprinting or reposting this article without prior consent of Producersweb.com is strictly prohibited.
If you have questions, please visit our terms and conditions
Post Article
If you have questions, please visit our terms and conditions
About the Author
Message Me
David P. Vick, a member of the National Ethics Bureau, is the President of Vick & Associates, Inc., a financial planning firm in Wheaton, Illinois. Dave, is the author of "Bat-Socks, Vegas & Conservative Investing" and "The ABC's of Conservative Investing Workbook". After many years in the past... More
Click 
to be notified of NEW content from David Vick
More from David Vick
Related Articles
Is your practice anchored by in the past? By Kathran J. Martin
Are you running your business like a slot machine? By BradJohnson
Create an impactful practice By Jules Gaudreau
9 cognitive biases that impede your sales — and how to overcome them By Vanessa De La Rosa
Four things top producers do to sell cash value life insurance By Lew Nason
Related Terms
Most Commented On
Stay Connected
Recent Activity
Anthony Smith recently commented on How much life insurance do I need? 6 steps that will help your clients decide By Sheryl J. Moore
2013-05-24 16:13:22
Dan McGrath recently contributed a new Article, Physician shortages and Medicare: A one-two punch for your clients
2013-05-24 14:09:00
Related Editor's Picks
May 13, 2013
4 life lessons from "The Great Gatsby"
May 9, 2013
8 secrets financial advisors can learn from Phyllis Diller's career
May 8, 2013
Advisor headcount to decline through 2016
May 7, 2013
Catch the cloud computing wave
May 3, 2013
7 habits of effective insurance agents
May 3, 2013
Most insurers eyeing adoption of e-apps
May 1, 2013
The Boston Marathon: One advisor's story
Welcome, GuestSign In or Join ProducersWEB Today
MEMBERS
COMPANIES
Stay connected with ProducersWEB!
Copyright 2013, ProducersWEB, Summit Business Media
