Make Your Practice More Profitable in 2018
No matter how much revenue you generate, it’s the size of your profit margin that makes the biggest difference between growing a thriving practice and struggling to improve mediocre results. That’s why great practitioners put profit at the top of their priority list as they plan for the coming year.
Here are two simple ways to reliably improve your profit margin and the health of your practice.
Create systems to reduce costs
One of the best ways to reduce costs in your business is to create systems that drive your key marketing, sales and operations processes. Systems are the consistent and repeatable set of steps you and your staff will follow each time you perform an operation in your business.
Historically, many advisors have approached the running of their business as if each task they undertake is a one-off operation. The reality is you don’t need to reinvent the wheel each time you implement a direct mail campaign or on-board a new client. Those types of activities have a defined set of steps that don’t change very much from one iteration to the next. They require the same set of actions, in the same order each time.
The best way to optimize your practice is to define the steps and their order. Then take advantage of technology to eliminate paper and reduce the number of human touches required in the process. Create templates and alerts in your CRM, and automate as much of each process as possible to reduce the need for staff involvement.
When you optimize your systems in this way you reduce costs, and free up time for you and your staff to focus on clients instead of admin. It will also enable you to produce consistent results, deliver more uniformly excellent customer experiences and stay compliant.
Look within your client base to increase revenue
Most low cost ways to build revenue have one thing in common: the fact that it’s far easier and less expensive to sell to a current client than to a prospect who doesn’t know you. All things being equal, current clients will buy from you as much as 50% of the time, compared with only 15% for prospects. And the cost to acquire a new client vs selling to an existing one is roughly six times as high.
Yet, even though advisors understand those realities, the average number of products sold to each client is barely above one. Why do so many advisors not take advantage of the potential in their current book of business?
The thing that most often holds advisors back from effectively harvesting the potential in their book of business is the lack of a coherent strategy for making cross-selling an everyday activity. That means devoting the time and resources necessary to getting in front of the right clients with the right approach. Without a good strategy, cross-selling initiatives tend to peter out as initial enthusiasm wanes over time.
The basics of implementing a good cross-selling strategy include:
- Identify the product that will be the focus of your campaign.
- Segment your client base using your CRM’s segmentation tools, filters and tags features to find the clients who have needs matching the product.
- Further segment those clients into ‘A’, ‘B’, and ‘C’ groups.
- For each group define how you will add value for them in ways which will also enable you to educate them about the product.
- Sample ways to do this include:
- Annual reviews with all ‘A’ clients
- Lunch and learn events for ‘A’ clients
- Seminars for ‘B’ clients
- Targeted direct mail piece for all groups
Each of those strategies gives you the opportunity to get in front of clients who would benefit from your featured product. In each case you are offering them real benefits, both in terms of the value they get from the event or literature, and in terms of the exposure to a product for which they have a need.
Working a defined cross-selling strategy such as this—one that is supported and largely automated by your CRM—will result in significant top line growth with little expense, and can dramatically increase your profit margin.
The profitability of your practice depends on your ability to lower your costs and increase your revenue. The best ways to do that are to build systems in your practice and to focus your sales efforts on current clients. Look to optimize your marketing, sales and operations processes. Segment your client base and utilize targeted cross-selling strategies. Doing these simple things consistently over the next twelve months will improve your practice’s margins dramatically.