Segmenting Your Clients
Time Management
Most advisors start out in the business the same way, with no clients and no prospects. Their immediate focus is to obtain as many clients as possible, as quickly as possible. As the business grows, so do the demands for service and support. At some point, capacity and scalability become an issue. It’s a common rule of thumb in business that 80% of your revenue comes from 20% of your clients. This principle applies to revenue as well as time management. So, how can an advisor free up time to prospect and manage more client assets without adding expensive resources that cut into revenue? The answer is client segmentation.
What is Client Segmentation?
Client segmentation involves grouping clients in categories based on a number of objective, and sometimes subjective, criteria that the advisor deems relevant. Simply put, clients have different levels of needs and will require different levels of service.
Creating a Service Matrix
Now more than ever it’s extremely important that you to have a clearly defined matrix that shows the advice and services that you provide your clients are in their best interests and that your fees are reasonable.
4 Step process to get started
Step 1: Define your Ideal Client. Consider these questions:
- What type of client will help you achieve your vision of the business?
- What unique financial needs does this client have?
- How much revenue does an ideal client generate for the business?
- How many ideal clients do you need to achieve your vision?
Step 2: Evaluate your value proposition. Before you start building a service matrix, you need to first evaluate your value proposition. Your value proposition should clearly outline the different services you provide to each segment of your client base to match their unique needs. When used correctly, a value proposition will save time, reduce costs and increase the overall service experience.
- What you do for them
- Why you do what you do for them
- How you deliver what you do for them
- And what you charge for what you do
Step 3: Segment your book into specific tiers and determine the profit potential of each tier:
- Divide your clients into tiers (A, B, C, D or Platinum, Gold, Silver, Bronze)
- Define the products and services you will offer to each tier.
- Which clients generate high amounts of revenue but need more of your attention?
- Which clients generate low amounts of revenue but need more of your attention?
Step 4: Clean up your practice. Once completed, a segmented book will help you identify which clients do not meet your ideal client profile. Do you have any unprofitable clients who should be referred to another firm? Releasing a client or turning down a prospective client is not an easy thing to do. Letting a client or prospective client know your service model does not fit their needs is a necessary step that can be accomplished in a friendly, professional manner.
Get started.
The first step is always the hardest. Not only will you be saving time down the road, you’ll be creating efficiencies, cleaning up your book and achieving higher levels of profitability. Contact Iron Point for a no-obligation 30-minute coaching call.