It is interesting to note that despite the many changes our Industry has been through, one fundamental thing has not changed in creating a profitable financial planning practice.
That is knowing who you wish to do business with and what you will charge them for your services, i.e. your fee that covers your cost and includes a profit margin.
That information is not new, however I continue to see lots of businesses who have not applied that formula.
This now leads to a typical scenario where the business is showing the following signs:
- Poor profitability
- Wide range of ongoing fees with many so low indicating the service is being provided at a loss;
- Services provided are very broad with some transactional and no ongoing engagement, fee paying clients split between those with small ongoing fees and those paying enough for a profitable ongoing relationship;
- Reviews being conducted for a large volume of clients with significant backlogs for delivery of advice documents;
- Staff morale issues created by never ending high volumes of work;
- New clients engaged who do not fit the business;
- Poor at saying no to prospects for advice.
This business presents the classic profile of opportunities arise that promise short-term benefits, but may bring long-term problems. The fact is a business can’t pursue every opportunity.
In doing so, it loses focus. It spreads resources too thin, which is clearly apparent in the above example.
So, what has a target market got to do with this scenario?
Essentially if we target the appropriate client profile we bring on new clients who can afford to pay our fee that is correctly calculated including our profit margin. In other words less clients, however more profitable clients.
Defining the business’ target market is the selection of the clients that the business wishes to service from the wider market of available customers. To ensure the business focuses on those clients that it can service well and profitably and to attract those ‘type’ of clients through referrals it needs to look at establishing a target market profile.
This is a profile of the types of clients the business wants – specifically! These clients will be the cornerstone of a successful and sustainable business.
Importantly having a target client means you can build a business based on delivering what that client needs. This means the business operates more efficiently and the staff know what is required.
I see good businesses understand their client behaviours well:
- Those that are willing to pay for and value advice;
- They are often time poor;
- Can be loyal when they perceive that they have received value;
- These clients often become regular referrers.
If you have not yet completed work on who your ideal target market is, I would urge you to complete this as soon as possible. I have seen many examples where this can lead you to a more profitable business and a more manageable one.
If you would like to know more about how Futuro can help your business, give us a call on (07) 3018 0400 or send an email to firstname.lastname@example.org.