Sales


Many of the financial publications today tell the tale of advisors selling their business for two and a half times what their revenue is worth. But what is not being discussed in many of these reports is what the buyer should expect. Early on in my career as an investment banker, I was trying to sell a retail organization that specialized in kitchen and bathroom tiles. The organization had 23 locations throughout Colorado, New Mexico and Arizona. It was a well-run business for sure. The owners had their mind set on selling the business for $10 million. The annual income received was $1 million on revenues of $8.8 million a year. However, we kept running into the same conversation with potential buyers: “I am only going to pay six times the earnings or $6 million for the business.” After seven buyers passed on the deal, the owners finally took it off the market. Several years later, I heard one of the seven prospects came back and bought the business. Unfortunately, the sellers never got their asking price. Outweighing the Risk So what does a buyer of a financial advisor practice want? Recently, I was writing about investment options in a series I call FLOW. I determined I was looking for a 10% return and was willing to take on some risk. It is likely that the price of the investments could swing by more than 20% in a six-month period, but I believed the investment’s cash flow stream would remain consistent. To begin, a financial advisor should seek at least a return of 10% on the purchase price of a business. Ensuring this; however, can be difficult as there tends to be risk involved. First, there is risk with stock market uncertainty. Second, there is a level of client anxiety associated with the fear of a trusted advisor leaving. Third, you may encounter an employee risk which occurs when an advisor leaves the firm or has not received proper training. Lastly, you must be prepared for systemic risk, which is the risk of an entire financial system collapsing. To outweigh such risks, I would look to achieve at least a 15% return on the initial investment. This means that the annual cash flow should be 15% of the price paid to the financial advisor. Let’s say that a financial advisor has $300,000 in revenue. Using the often-heard “two and a half times’ revenue” equation, the selling advisor may expect a return of $750,000. However, the amount received ultimately depends on how much cash the firm brings in as profit. If the expenses are $200,000, leaving $100,000 in cash flow...

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Running a successful business can offer opportunities of freedom. Not only can effective business management provide an ample income, but can also allow you time to enjoy what you want to be doing, rather than continuously trying to keep your head above water. However, you cannot enjoy the freedoms that accompany a successful operation without a strong sales process in place. In our previous post, we touched on the importance of understanding your business processes and how implementing the nurturing process can help your company increase and develop a strong clientele base. In part two, we will cover the additional steps in the sales process that are necessary to grow your business and strengthen relationships for maximum lead conversion. Step Three: Close Deals with an Effective Sales Process A compelling sales process is made up of multiple key elements that work together to strengthen existing client relationships and increase efficiency in company procedures. In part 1 of our email series on sales processes, we briefly touched base on how incorporating lead nurturing into your process can effectively convert prospective leads to committed clients. Strong client relationships are essentially the foundation of your practice; therefore, your process should be designed to allow a significant amount of time to be spent with each potential client to better understand his or her needs, goals and how your service can be valuable to the client and beneficial to your company. At AUM in a Box, we make seven attempts to connect with each lead, but we don’t end our relations there. In order to understand what we are doing well and what we could be doing better, it is essential that we track our progress. We have found Salesforce.com to be a great tool in tracking where our leads are in the prospecting process. By having numbers behind everything we do, we are able to become more efficient and productive, thus making our sales even better. Step Four: Map out Your Client Relations Route Now that you’ve gathered the data necessary to understand your client’s goals and expected outcomes, it’s time to draft your map. To begin, think about what you needed when you were just starting up your business. From there, take some time to think about the kind of experience you want to give to your ideal client. Below is a process map that contains 18 macro steps. Your personal map may have more or less, but these are the ideas I believe you need to have in order to provide holistic planning to your clients: Become a stable advisor – How you plan to run your business Branding, marketing and lead...

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For many advisors and business owners in general, the thought of creating a successful, longstanding business that the owner can grow old with and eventually sell is a dream come true. Unfortunately, most advisors merely create a job and not an actual business. Consequently, the prospect of selling a job to another advisor is difficult and having a business you’re tolling away can be nothing short of frustrating. This is why having a sales process “manual” can not only help you run a better financial planning firm, but turn your job into a thriving business. Step One: Understand Your Processes to Effectively Build Sales The first question you need to answer before proceeding in developing a strategy to increase sales is why you want to build your firm and what the impact of the ‘why’ really is. You cannot effectively navigate a plan if you’re unsure of the course ahead. When it comes to developing a process, there are three elements to consider. The first is making sure you have a definite purpose. Perhaps you want to increase efficiency or you are looking to create a consistent client experience. Whatever your reason, be sure to understand your purpose moving forward. Second, you should carefully envision the potential outcomes. Questions you may ask yourself are: How can we complete this with as little work as possible? How does this plan help us to fulfill our purpose? Is our finished product is usable? Understanding your potential outcomes helps your business steer clear of issues along the way and maximizes efficiency so more of your time is spent with clients. Lastly, take time to review your process for any areas that may need revision.  Helpful ways to organize information may include using templates to create the policy, procedure & checklists. Categorizing each topic into a table of contents may also allow for easy navigation in the future. Step Two: Implement the Nurturing Process to Increase Clientele  In order to earn the sales you want to see, your process should focus on building the number of contacts you have on a list. By following this process, you will see your warm leads move to hot leads. To convert potential clients to loyal followers, you need to incorporate lead nurturing into your sales process. Lead nurturing allows you to create something of value to your prospective clients. By educating clients over time, you are building the value proposition that clients can latch onto. One of the many benefits of having a sound process in place is that you are initially creating a business for yourself. Developing a firm process enables you to create a...

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As a financial advisor, working off a fact finder may seem like a comfortable choice, but it is not an effective method of getting to a client’s goal. Instead, focusing on questions about your client’s personal life, his or her job and how he or she feels about relationship objectives, interest and disappointments is a much more effective way of creating a discussion centered on the client. You still need to get the quantitative data including questions, such as, “What is the value of your 401k?”, but these types of questions will not seal the deal nor will they help you keep the client. As a coach to financial advisors, I have found that there is the way to create a niche and set you apart from the competition. Ultimately, you want to build a lasting client-advisor relationship. Questions to Ask When building a relationship, it is essential to have a few go-to questions that you start with to get the conversation going. Your go-to questions might include the following: What will money enable you to do? If you had all the money you needed, what would you do in the next 10 years? If you had three years to live, how would you spend your time? Once you have reached a point in the conversation where your client is comfortable, begin to dig down by asking: What are you uncertain about? What is troubling you? I think of the discovery as a six-part process which consists of client values, goals, hobbies, understanding people who are important to him or her, current advisors and the process he or she likes to work under. Your selling ability and analytical ability are not required.  You simply need to LISTEN. You want to listen for key elements, such as where the client is now and where he or she has been in the past. You also need to listen to find out what has impacted the client emotionally and what will propel him or her to his/her goals. You may start out with a sheet of paper, but the sooner you become natural about asking these questions, the better off you will be. You want this conversation to go naturally in order to put the client at ease. Artful Discovery I have observed that most financial planning is based on a certain number each client wants to achieve. Artful discovery looks at the emotions and the underlying cause of why the client wants to get there. The artful discovery will form the basis of the plan.  Understanding why will help you provide real value towards reaching your clients goals rather than focusing...

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The model for financial planning is well-established. Most advisors rely on a fee that is based on assets under management. For this, some may receive a financial plan while others settle for a service fee based on the financial plan itself. But could there be another way? The Affordable Care Act is creating many changes beyond affecting how health insurance is sold to individuals. Part of the law is intended to reduce the rapidly increasing healthcare costs. In order to reduce such costs, the government is changing how they pay hospitals for services. With Medicare, one lump sum is paid, rather than paying the hospital and the doctor for medical services each time a procedure is done. In other words, if you go to a hospital for carotid artery disease that results in a potential stroke because the operation unleashed clots in your system, Medicare only pays the hospital once, despite how many operations or services are needed to resolve the issue. Before Medicare was implemented, doctors and hospitals would have each been paid twice: once for the carotid artery disease exam/treatment and again for responding to the potential stroke. Implementing an Incentive System This “lump sum” payment is an incentive system of sorts, which is changing how doctors and hospital operate. By incentivizing doctors and hospitals to do it right the first time, rather than promoting as many operations as possible, the hope is that the cost of healthcare will decrease. A recent story featured on National Public Radio, titled “Three Ways Obamacare Is Changing How a Hospital Cares for Patients” by Lisa Chow, discussed that at Summa Akron City Hospital in Akron, Ohio, doctors are preparing a new way of doing business, which I believe could be used as a model for financial advisors. Three new approaches are being used at this hospital to profit from the new Medicare payment system. Doctors are using checklists. Doctors and hospitals are teaming up. Where they were previously paid separately, they will now be paid together with one lump sum. Outpatient follow-ups are being more heavily conducted as there is now an incentive to keep patients out of the hospital for 30 days post-surgery. As a sales trainer for financial advisors, I see these three changes benefiting financial planners as well. Checklists Atul Gawande, a doctor and professor at Harvard Medical School, popularized checklists in The Checklist Manifesto. Since 2009 when the book was published, doctors and hospitals have begun using checklists more frequently. Checklists help to reduce simple error and produce a consistent product or service each time for a client. They also reduce the cost of providing service....

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Last Monday, I introduced you to the concept of ballerinas playing for the Dallas Cowboys and how even though they are good at what they do, they probably aren’t the best linemen, just like financial advisors are not the best marketers. There is great difficulty in successfully marketing via the Internet for companies with hordes of cash and experienced employees, let alone a financial advisor who has no experience or interest in learning, developing or knowing about Internet marketing. There are two hurdles with Internet marketing. First is that it is quickly changing all the time. Second is that Google has a strong hold on how and what to do. For example, Jack Waymire, founder of Paladin Registry, told me a story of friends who had a fantastic specialty pet products business that they ran over the Internet. In February of 2011, Google came out with a major change in its algorithm, called Panda. This devastated many Internet businesses, including this particular online specialty pet food retailer, taking sales from $70,000 a month to $0. Overnight, the business was shut down and had to come up with a different marketing plan. Consequently, Jack believes that financial advisors need to spend a great deal of time learning and focusing on what to do with marketing or seek out a person or organization for help. And low and behold, Paladin Registry has done just that! Here’s what I learned from my conversation with Jack; I hope it can help you market your business. Breaking Through Google Google has recently completed another update called Hummingbird.  This update will benefit content providers, which are the people or organizations that provide authoritative information and advice on the Internet. This means that financial advisors need to be authoritative or become “influencers,” providing information that prospective clients can find on the Internet. This is what will enable financial planners to get on to the first page of a Google search. Jack believes few financial advisors are equipped to do this. Second, financial advisors need to be proficient at publishing content all over the Internet. This means understanding search engine marketing and search engine optimization as well as utilizing social media and joint ventures (i.e. partners who help promote your content and services). Paladin Registry — One Stop Marketing Solution For Financials Advisors The Paladin Registry offers more than you might imagine. What you get is the professional Internet marketing and established site to create your own profile. It is similar to a pre-formatted personal website that fits within the criteria that investors should look for in financial professionals. Paladin Registry boasts of having 50,000 users with...

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