We have all heard this advice: "If you want to make more money, you must learn to manage your time."
After many years in the marketplace, I have come to the conclusion that this is another business myth. The truth? It is impossible to manage time.
A wrongheaded approach
Recently, I saw the kind of trouble this myth begets in action at a large broker/dealer. The company was trying to get production up -- a common enough goal.
The broker/dealer's senior management had a fairly common solution -- the bigwigs pulled up each branch for discussion, and they slapped a production growth figure on it for the next year. No consultation with the branch manager. No scientific methodology. They just pointed at a branch and decreed it would increase production by 25 percent, 30 percent, or in some cases, even more. I call this the "magic wand" approach. (And unless you have a magic wand, I guarantee it won't work.)
It was all I could do to keep from laughing. After all, if the managers of these branches had any idea how to increase production by 25 percent, they would have already done it. Giving them a timeframe was not going to change anything. It's a lot like looking at a bald head and telling it to grow hair by next week. It would if it could, but it does not know how.
Getting it right
So, we can't control our hair growth, that's agreed. But we also cannot control time or control our production because we do not know who will come to us to purchase products. What we can control
is our activities.
This business is a numbers game, plain and simple. If you know your numbers, you can project, just the way the actuaries do, what your income will be for the year. You may not know exactly who
will buy, but if you have a big enough sample, you will be able to predict your income.
Here's what you need to know:
1. How many meetings does it take to close the sale? Depending on your market, it may be two, three or even more.
2. How much time do you spend in your average meeting? This figure lets you know how many meetings you can handle in any one week.
3. What is your average commission per case? Surprisingly, many people do not know this basic number.
4. What is your closing ratio? We know not everyone will buy from you. The question is, what percentage of the time do they follow your recommendations?
Here's how this formula would play out if you wanted to be a million-dollar advisor: Let's say you have a closing ratio of 80 percent, your average commission per case is $4,500, and it takes two meetings to close the sale. If you had eight first-meeting appointments per week and seven closing appointments, that would come out to 15 face-to-face meetings per week. If you did this for 40 weeks out of the year, you would have 280 closing meetings. Assuming your closing ratio is 80 percent of 280, then 224 clients would buy investments that would average $4,500 in fees and commissions -- totaling $1,008,000.
Obviously, if you see yourself as a $500,000 advisor, just cut the numbers in half. If your commissions are more per case, then adjust the formula accordingly. My point here is that when you control your activities, your production will naturally follow.
Back to the case in point
The best thing my broker/dealer client could have done to increase production was not to wave the magic wand at its branch offices, but to set up a program that reinforced activities
. This particular firm was known for using the telephone -- a strategy known as dialing for dollars. We suggested that instead of selling a stock over the phone, advisors should "sell" an appointment for a face-to-face meeting.
Once they learned it took three phone calls to get an appointment, they just needed to run through the math: If they wanted each advisor to have eight new appointments next week, then they would have to make 24 phone calls this week to set them up.
That was all they had to focus on: 24 phone calls this week, or about five phone calls per day. If the advisor made five phone calls per day, that led to eight first meetings, which then led to seven closing meetings, which ultimately led to 80 percent of those people buying investments yielding $4,500 in commissions and fees. Then, that advisor would automatically get to $1 million in annual income.
Instead of keeping the branch accountable to some falsely created production goals, we suggested keeping the advisors accountable for something they could control: their activities.
The advisors' weekly meeting with the branch manager went like this: "Did you make your five phone calls per day?" If they had done that, they knew they had a million-dollar advisor on their hands. If the advisor had not made five calls per day, the branch manager simply needed to ask why. Any advisor who did not make the phone calls and get the necessary appointments would be asked to leave unless his or her production could be brought up to a certain level.
Parting recap: Only try to control what you can control -- your activities. If you do that successfully, your production will follow.
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