Everyone knows it makes sense to control costs. It’s a fundamental factor of any good business.
If you run a pub or a restaurant, hiring lower-cost labour is going to save you significant amounts of money over a year. You could also keep staffing to the absolute minimum and get the existing staff to work harder. And if you also get away with giving staff less training and support, you can save even more money on your middle-management costs.
Those decisions probably have a relatively limited impact on each client interaction. To be honest, service standards in most pubs and restaurants are just OK anyway, so you won’t even look particularly bad against your competitors with this approach.
Making lots of small compromises adds up to a pretty big win for the bottom line.
Apply the same thinking to products where safety is important; like airlines, or cars. If you churn out a lot of units, one small saving on a screw (for example, substituting the current more expensive version with a less hard-wearing one) might save you a lot of money.
Does this seem like good business to you?
The real impact of cost cuts
You can see the short-sightedness of this approach already, can’t you? In fact, you’ve probably been on the receiving end of some of these cuts.
I live in London and I’ve been in pubs on a Friday night, which I would have thought is peak time for generating revenue. Yet the business is totally understaffed - I’ve waited 20 minutes before to get served at a heaving bar.
I’ve been to restaurants with the ‘please wait to be seated’ sign on display, only to wait so long that I’ve ended up leaving.
So what happens if you apply this cost-saving thinking to your financial planning business? In fact, a lot of firms do.
The thinking goes that if we print on thinner paper, it doesn’t make that much difference. If my website looks a bit 1990s, well, no one buys from my website anyway. If I hire cheaper staff who aren’t very client savvy or friendly, it’s not a big deal. If I don’t invest in technology so my team stays effective, efficient and responsive to clients, so what? Clients aren’t leaving, are they?
The problem with this approach is obvious.
Building a business, a brand, and a reputation in your local community takes years and years to create. One seemingly small decision to skimp doesn’t seem like a big deal. But it is. Worse still, the costs are often unknown and unquantifiable.
Clients might not be leaving, but they’re probably not referring either. This is likely to be because while they are happy enough and know you well enough to put up with your quirks, they don’t feel safe enough to subject a friend, relative, or colleague to those same issues either.
How many restaurants or pubs have you decided you won’t visit ever again due to a poor service experience? How will those businesses ever be able to quantify that lost custom from you, and goodness knows how many other people like you?
Rather than looking to cut costs, what if we looked to add more value instead? What happens then?
Small changes, big success
In a competitive environment, getting a little better all the time doesn’t always seem worth it in the short term. If I rent better quality premises, will it pay me back? If I hire better staff that cost a bit more, will anyone notice? If we spend extra time building cashflow models for all of our clients, what difference will it really make? Our clients love us already.
But in the long term it’s these things that separate the great from the good. Just like compound interest, these small positive additions add up.
The great financial planning businesses focus on adding value, and doing more in a few key areas:
- Simplifying paperwork and processes – making it easier for clients to do business with them, even in a highly regulated environment
- Creating cashflow models for everyone – cashflow models let clients see and understand their own situation better. If it adds value to clients, it’s worth making the extra effort to learn the system and to use it effectively
- Simplifying the investment process – making it more likely to deliver, more transparent and understandable, and reducing investment costs in the process
- Providing one point of contact for client service – restructuring client service teams so administrators also possess the skills to act as client relationship managers, providing one point of contact for clients. This improves service delivery, and also reduces business costs by leveraging adviser time
- Returning calls and emails within 24 hours – no more than would be expected by most clients, yet surprisingly not delivered by many larger organisations
- Answering the phone in a friendly way within three rings – to let clients and prospects know they are valued and the firm is open for business
- Holding client events – once every year or two, to facilitate a sense of community among the client base
- Investigating and investing in new technology – improving efficiency within the firm and providing greater access to information for clients, something that is well overdue in financial services
To quote Seth Godin:
“Organisations that add just a little bit every day always defeat those that are in the subtraction business.”