June 19, 2012
How do you value your business? We all know the obvious candidates: assets, income, recurring revenue, client loyalty or the extent to which you’ve built a strong team. But a recent discussion with some top-performing advisors illuminated one metric that is absolutely critical – and typically overlooked.
It’s a variable that won’t necessarily drive value in the short term, but is essential over the mid- and long-term: the number of qualified prospects with whom you’re effectively communicating on a regular basis – your “pipeline.” While those prospects aren’t generating revenue today, they are the key predictor of revenue down the road.
Two advisory practices could look alike in every respect, but if one advisor is communicating on an ongoing basis to a large number of prospects and the other with few or none, the first practice is much more valuable.
Predicting future success for advisors
The reason that the number of prospects in your pipeline is so important arises from lengthy decision-making cycles by investors. This wasn’t always the case – in the 1980s and 1990s, prospective clients often made up their minds fairly quickly after initial conversations. At that time, a pipeline of prospects was much less important; when you met with prospects back then, they might not sign on, but at least you typically got a yes or a no, so you knew where you stood.
In essence, client development was an event.
While that’s still sometimes the case, more and more prospective clients are taking longer to decide whether to work with an advisor, in large measure because building trust takes time and can’t be rushed. That’s especially true when you connect with prospective clients through broad-based marketing activity, but it’s increasingly the case even when someone is referred to you by an existing client.
In a world where it takes prospective clients much longer to decide, business development has become a process. And that shift has fundamental implications for how you follow up with prospects.
First, you are going to have to be more patient in communicating with prospective clients than was the case historically.
Second, the number of qualified prospects in your pipeline is a key measure of your future success – and just like any other key variable, you need to set goals for the number of prospects in your pipeline, and put processes in place to achieve those objectives and track your progress against those goals.
Finally, you need a way to build trust and to stay in front of prospective clients. Calling to say “Just checking to see if you’re ready to buy yet” may be better than no call at all, but certainly won’t maximize the chances of those prospects becoming clients.
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