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Friday, August 8, 2008

Work less Hours, Earn 50% More

Here’s what they teach at Harvard Business School—focus, focus, focus. Notice that every great company of today (Intel, Cisco, Microsoft, Sun, Oracle, Home Depot) does only one thing and does it really well. If you deviate from this principle, your business will only be a fraction of what it could be. A recent study by Cerrulli Associates found that 75% of financial advisors offer the same products and services and are indistinguishable from one another. Those that carve out a niche earn 50% more.

Start with the triangle above and build your business from any corner. Many financial advisors think that focus means selecting a target market. That’s only one way to succeed—by selecting a group of homogeneous prospects (e.g. people over age 60 who are retired who live in zip codes 94556, 94559 and 94563, prospects with stock options from technology companies, owners of business with revenues less than $5 million).

You can also build your business around being a product specialist. Let’s say you are a wizard at selecting utility stocks. You can succeed very well with such a product specialty or you could succeed with a marketing specialty. Maybe you have a skill at developing direct mail. Maybe you have a skill at giving seminars. Start at one point on the triangle and then build your business around that to get focus.
Let’s say you want to do seminars as your sole marketing technique and build your business around that. That will dictate that you can only do business with people who will come to seminars. People in their 40s and corporate executives are too busy. So, you must focus on retirees and small business owners because that’s who you can get to come to seminars. Notice that these types of prospects will then dictate the products and services you offer. You would not offer investments in stock options for these two groups but you would offer estate planning. Because you choose to build your business by marketing with seminars, your business must be with local prospects. People must be close enough to you to attend a seminar (therefore, you will not be doing business with prospects who live more than 20-30 miles away).

Seminars lead to face-to-face appointments so you will either need a nice office near your prospects or be ready to go to their homes and offices. This also a need for a nice wardrobe.
Notice that the initial choice upon which you build your business dictates everything else, such as office location, how you dress, the types of people you prospect. The truly successful business builds everything around the initial choice. Its amazing how many financial advisors have an incongruous business where the pieces don't fit together.

Let’s take another example. Assume your business is insurance solutions for business owners (key man insurance, deferred comp, disability). Clearly, you have identified both your products and your target market in one shot. However, you’ll get even more traction and expand your business faster if you specialize in specific business owners, e.g. those with business revenues of $5 million to $15 million or those business owners with a manufacturing business or a supplier to a manufacturing business. By adding more focus, you can get more referrals from owners who know each other (birds of a feather flock together), you get much clearer about the needs of a homogeneous market and in a short period, you position yourself as a specialist.

Focusing entails turning away business. For example, when your business owner client asks if you can help his son with his 401k choices, you say no, and promptly refer him to a colleague that works with employees.

Here’s an example from one advisor's business. His target market is seniors. Therefore, he markets with seminars because seniors like to meet people face-to-face in a non-intimidating venue. Here's what he says, "I manage a lot of blue chip stocks, sell annuities and provide estate planning—the services that seniors want. My office is close to where they live. I prospect in only THREE zip codes with a high senior population and my office is right in the middle. I’m in an elevator building so they don’t need to walk up stairs. My building has parking because they come to see me. My business name is Senior Resources. I wear light colored shirts and dark ties (same as they do). Notice that everything I do is built around my initial focus for my business."

By dealing with one type of client, a narrow set of products and services, you become much more efficient, you work fewer hours and you get the benefits of higher income that accrue to a specialist. You build a better referral network of homogeneous prospects and you gain insight into your market that other advisors do not gain.

Before you turn your attention to finding a better prospecting system or hiring a new assistant to increase business, first consider that lack of focus is the source of less-than-desired economic success. When your business is unfocused and you take any client with a few bucks to invest, you can never build a business of value.