Q: Why should I give up a client that pays me a fee and I do almost nothing?
A: Your time has value. Any time not spent with your best clients is diluting your income. There is always work involved, even if it’s merely a once a year annual review. Regulators are increasingly focused on how much service is being provided for a fee, so the days of doing almost nothing for a fee are gone. At Freedom Wealth Alliance, we believe in a fair service offering for each client relationship not just the big ones.
Q: What if these small clients someday inherit money or win the lottery?
A: Obviously the odds of wining the lottery is very small, an almost laughable reason to have a client of any size. However, the odds of inheriting money could be more reasonable. But what about all the years spent servicing a small client for this remote chance that someday they will have enough money to qualify as a great client. The opportunity cost can be greater than you think.
Q: They might refer some one that has money and therefore I should always service them.
A: Let’s be honest, they are likely not receiving your best service model and therefore unlikely to refer someone who might be a substantial client. Generally, larger clients refer larger prospects. Now is the time to redefine your ideal client and build your business accordingly.
Many industry best practices have demonstrated that transferring these smaller relationships to someone who has more time to cultivate them has a more meaningful impact.
To calculate your hourly rate, divide your annual Gross Revenue by your projected annual hours worked (remember to subtract vacation and personal time), That’s your hourly rate. Next determine the number of hours needed to properly support each client and multiply that by your hourly rate. Any household below this target rate it is less profitable for you and is a candidate for reassignment.
You now have more time to nurture your best client relationships, and possibly doubling the number of your most productive relationships. From a business perspective this is a much better use of your time and talent. You win! The clients win, and the firm wins.