Increase your profitability today: Turning 80/20 into 20/200
By Matt Neuman
Everyone knows about the 80/20 rule, right? The Pareto Principle (also known as the Law of the Vital Few and the Principle of Factor Sparsity) states that, for many events, roughly 80 percent of effects come from 20 percent of causes. It is a common rule of thumb in business; e.g., "80 percent of your sales come from 20 percent of your clients."
Every million-dollar plus advisor not only understands this principle, but retains it at the top of their mind in their daily practice. I’m making an assumption that you already know this principle, practice it and believe in its importance. I start here as a point of reference because, although that topic alone could catapult your business, today’s thoughts will go further.
How much have you read, heard and studied about referrals?
Many million-dollar plus earning advisors are consistently focused on acquiring more quality referrals and fiding the best manner in which to acquire them. In a recent survey of million-dollar plus earning advisors, 83 percent indicated that a majority of new clients come from client referrals. In your current referral acquisition strategy, you probably already considered the approach of asking directly versus indirectly, timing of the conversation, scripts to use, specific questions to ask and ultimately, how to leverage your best clients. Today’s thoughts could be about that, but they aren’t.
Today I am discussing ideas about combining those two large picture ideas, and then taking a giant leap towards maximizing the 20 percent of your clients that comprise 80 percent of your income. Duplication of those clients would mean huge successes for your practice. So step-by-step, we’re going to multiply clients that make you the most money, who you enjoy working with, the ones who trust and value your guidance, and those who've become raving fans of your business. Welcome to your 200 percent revenue growth plan.
How do we turn the 80/20 rule into the 20/200 rule? How do we take the top 20 percent of your client base and allow them to create 200 percent more revenue? With these three proven steps:
1. Know your 20 percent: Segment which clients you’re going to duplicate
2. Know who they know: Research top client connections and those to whom you want to be introduced
3. Know how to ask: Once a target list is compiled, know exactly what to say for success
If you don’t know where your current revenue flows from, how are you going to increase future revenue? It takes a simple first step: Find out where the majority of your revenue is derived from. If this is your first time segmenting A Clients (20 percent in number, 80 percent in revenue), B Clients (30 percent in number, 15 percent in revenue) and C Clients (50 percent in number, 5 percent in revenue), you’ll be amazed!
If you’ve already completed this process, take a couple minutes to review it. What adjustments need to be made? Additions? Subtractions? Group shifts? Before moving on, let one more question rattle around in your head. How many additional A Clients would you need to acquire to replace all the revenue generated from all of your C Clients? The number may shock you.
Step No. 2: Know who they know
The second step determines whether you’re serious about “client cloning” or not. Now that you’ve compiled a list of clients to duplicate, begin researching who they know. Chances are, you’re already aware of a few connections. You already have a good idea about two or three of your clients and who they know. But what about the other 20, 30 or 40 clients you need to know more about? As you complete this part of the process, think about: workplace interactions, general professional dealings, their home and community, leisure activities, hobbies, clubs and association memberships, family ties, children, sports, music, dance, etc. for them and family members, leadership roles or board positions, charities, philanthropic passions and other professionals they consult.
If you’re still searching, try two other methods. Do you currently maintain a profile on LinkedIn? If not, begin today. Via LinkedIn, search for your top clients and extend an invitation to connect. Once linked, view their other connections to identify others they stay engaged with. Lastly, if all else fails, visit with your client and ask! Spend time with one of your A Clients over a meal and tell them you feel a desire to know them better. Ask a lot of open-ended questions about the aforementioned potential introduction sources and become a better advisor to them in the process.
Step No. 3: Know how to ask
When I mention the word “referral”, what’s your reaction? If you’re like most people, you cringe a bit. “Who else do you know…” or “I get paid two ways…” have been around for decades, and work less often than ever before. Do everyone a favor and never again start a sentence with either of those phrases. In comparison, what is your reaction to the words “advice” or “introduction”? Most agree find that those terms have significantly more positive connotations. When employed correctly, “advice” and “introduction” are powerful; they make an impact.
The best financial advisors in the country develop scripts to ask for their clients’ advice and for their help in introductions. I posses a number of these scripts, and you probably do too. If you don’t already have an “asking for advice” and “asking for introductions” script, contact me. A report titled "The 20/200 Rule" is produced with all scripts, plans and instructions in a reproducible format. Use mine or write your own scrip instead. These words are your final key to success in this plan.
Turning the 80/20 rule into the 20/200 rule is proven to work. Execution is relatively simple, and I’ve seen it dramatically change marketing plans and results for a number of advisors around the country. Bottom line: To turn 80/20 into 20/200, you need to average one introduction from each top client. It won’t always be a static equation of one referral from each person. Some top clients will introduce you to five, 10 or 20 like-minded people; others won’t develop for various reasons.
In conclusion, I’m asking for one week of your dedicated time. One week to implement the segmentation, introduction connection, scripting process and getting all necessary parties in your practice involved. Will this be more profitable to you than reading the daily newspaper? Will it be more profitable than watching nightly television? Is this a better use of time than many of your other daily activities? I’d respectfully submit that yes, it is. Dedicating one week of time to this process should be the best marketing time spent all year. Clients — and their introductions — need your guidance now more than ever.
Implement and thrive.