Are you running your business like a slot machine?
After looking at these ratios, the obvious question is this: Why wouldn't everyone run a 100 percent referral-based business?
Of the hundreds of coaching calls I've had with financial advisors over the years, there is one problem I’ve noticed that comes up time and time again: not knowing your numbers. It’s like running your business by pulling the crank on a slot machine and hoping to hit a jackpot. You may win every once in a blue moon, but wins will be few and far between — if you don't go broke in the meantime.
If you’ve never tracked your numbers before, let’s talk about where to start. I'll continue with my example of Joe Advisor that I used in my article, The craziest number you don't know about your business. Let’s calculate Joe's return on investment (ROI) for just his seminars based on his numbers from last year:
- Joe markets via public seminars/workshops
- He spent $7,500 per event and ran one every month ($7,500 x 12 = $90,000)
- He generated $6 million of business off of his seminars at an average commission of 6 percent ($6,000,000 X 6 percent = $360,000)
- Joe's return on investment = $1 spent turned into $4 of gross revenue ($360,000 / $90,000 = $4)
- Public seminars: $1 spent = $3 to $4 revenue
- Radio: $1 spent = $6 to $8 revenue
- Referral/client events: $1 spent = $12 to $20 revenue
How do you know which marketing funnel to dump your money into if you don't know which one is producing the best ROI for your business? Secondly, how scalable are each of your marketing funnels? How easy is it to fill those same three blanks on your calendar next week by saying, "We need three more referrals next week"? This answers the obvious question as to why many advisors cannot run a 100 percent referral-based business.
Direct response marketing is better scaled to fit on next week's calendar. The good news with direct response methods (like seminars) is that they are much easier to control from a frequency standpoint than other marketing methods, like referrals. In the long run, based on the data I’ve tracked from some of the most successful financial advisors in the country, creating a business model that works towards driving more referrals from your client base is the most profitable way to build a business. For the short term, however, it's not going to fill the open appointment slots you are frustrated with for next week.
I've heard many reasons for not doing seminars: "I'm tired of buying meals," or "Seminars just don't pull like they used to," or "Seminars don't work where I am located." Personally, when trying to grow a business, I have no bias towards any particular marketing method. I have a bias towards math.
To revisit the slot machine analogy, who out there is going to pass up a slot machine that pays $400 for every $100 you put into it? Unless you have a better "slot machine," my guess is that you would gladly pull that handle all day long. If you're a financial advisor that aspires to grow your practice, please don't settle for empty spots on the calendar any longer.
Do the math; analyze the results; invest accordingly.
It's time to start running your business like a business. You can do it. Question: What marketing methods have you used to produce the highest return with the least amount of money? Leave a comment below.