In January, 1999 I received an excited phone call from one of my associates. The reason for his excitement was that he had just met Ken Blanchard, the co-author of “The One-Minute Manager.
Two of my associates had gone into a bookstore on their lunch hour looking for a book that had been highly recommended to them. As they were looking through the stacks they glanced over and recognized Mr. Blanchard standing next to them. Seizing the moment they asked for his autograph. He, in turn, asked them what they did for a living.
As they were describing the Clients Forever process, Blanchard became quite interested in the concept and invited them to meet with him at his office to pursue the conversation. They suggested that I be included and he agreed.
Four days later we drove over to the Blanchard Training Center and were shown into Blanchard’s office. A few minutes later Blanchard came in and we began our conversation. We talked about several subjects involving how to build business relationships that truly work and how to measure the effectiveness of your client development process.
As part of that conversation I expressed my concern about the lack of understanding that trainers and managers have in applying the Pareto Principle. You’re probably familiar with the principle, but know it as the 80/20 principle. The premise is quite simple. As it’s usually described, eighty percent of your results come from twenty percent of your effort.
My observation, however, is that most people generalize the principle to combine the effort and results percentages to always add up to 100%. As an example, they’ll say 75% of your results come from 25% of your efforts, or 60% of your results come from 40% of your efforts. The truth is there is 100% of effort and 100% of results.
Blanchard agreed and added, “Doug, it’s worse than you think!” “The number is actually 50/5.”
When I asked him what he meant he told us that his company had just done an analysis on their previous year’s total production. They discovered that just over 50% of their gross sales had come from only 5% of their client base. When they did a follow-up study with several of their clients they found the percentages to be accurate in all cases. In one case 92% of the Client’s income had come from only 2% of their client base.
What an intriguing bit of information!
With this insight as inspiration I have kept a rolling average for Financial Advisors ever since our conversation. The current number is that 50% of the average Financial Advisor’s income comes from 8.77% of their client base.
Let’s apply this to your situation. Let’s assume you’re a Financial Advisor who has spent your entire career building and shrinking your practice to 200 clients. If I told you that we could increase your income by 50% in less than 6 months while possibly even decreasing the number of clients you have…you’d have every right to be cynical. After all, it certainly appears that a 50% increase in production requires a 50% increase in total Clients.
But, if your numbers are consistent with the National average it doesn’t take an increase of 50% of your current client base to increase your production by 50%. It only takes 8.77% or 18 new clients to have a 50% increase in volume. 8.77% times 200 clients equals 17.54 or 18 Clients.
Let’s see how this applies in real life. One of my coaching Clients has 526 Financial Advisors who he works with over the year. In 2002, he followed my suggestion to determine how few Clients it took for him to reach 50% of his volume. He discovered that 50% of his total production came from 13 people. THIRTEEN! And, if he added only 18 more Advisors he was well over 80% of his production. If he can find 13 people who are just like his best 13 Advisors he would have a 50% increase in volume. Or, he could actually match his previous year’s production with only 26 Advisors rather than 526 Advisors.
You probably already have a pretty good sense of who your best clients are. But, let’s make sure you’re correct. My suggestion is that you actually “run the numbers.” In the past year, how many Clients did it take to equal 50% of YOUR production?
By identifying how few Clients it took and who those Clients are you’re in a position to focus on finding more Clients just like them. Granted, you still need a sure-fired method to generate introductions to people just like your top Clients…but this IS the first step to maximizing your results without having to dramatically increase your activity.
Doug Carter, with Jenni Green, is the author of Clients Forever: How Your Clients Can Build Your Business (McGraw-Hill). A sales professional and trainer for more than twenty-five years, he is the founder and CEO of Carter International Training and Development Company. Learn more at www.dougcarter.com or [email protected].