Cutting clients loose might seem counterproductive to building a business, says Jennifer Black, an advisor with Dedicated Financial Solutions in Mississauga, Ont. But sometimes, ending the relationship with certain clients is the best move for your practice.
“Letting clients go is probably one of the hardest things advisors can do,” Black says.
An unprofitable client who is taking up too much of your time can prevent you from prospecting and seeing to the needs of your other clients.
“You need to have time to prospect” she says, “and find clients who will generate high revenue.”
Over the past two years, Black has scaled back the number of her clients while increasing her AUM and, more important, her revenue.
“There were some clients who we felt weren’t a good fit,” Black says. “So, we disengaged them.”
Black offers some tips on how “less” can sometimes mean “more” when it comes to the number of clients in your book:
> Ask whether each client fits your ideal profile
One important consideration in assessing your client roster is to identify which of your clients you consider to be “ideal.”
Black, for example, has in her book many small-business owners, which she considers to be her ideal type of client. Other characteristics, such as age, asset level and type of business can narrow your definition further.
Identifying an ideal client profile can help you find a sector on which to concentrate. Specializing in one sector can help you eventually become acquainted with other “ideal” prospects within that market.
For more on identifying your ideal client, visit: Want ideal clients? Start with ideal prospects
> Think long term
As part of building an “ideal” base of clients, understand where you hope to take your practice in the future.
While “Client X,” who has just launched a tech startup, might not be bringing in major revenues now, he might display the potential to grow into a profitable ideal client.
> Consider referrals
Referrals are one of the most successful (and simple) ways to increase your business, Black says.
You might have invited your clients to pass your name along to friends or associates. If, however, your clients are not generating referrals and showing apathy, you might consider going in a different direction. That could mean focusing on a different market niche.
It’s a tough choice to make, Black says, but it is important to give your practice room to grow.
This is the second instalment in an occasional series on improving profitability.
Next week: Letting a client go — gently.