Filling your Pipeline

The following is based on one of The Covenant Group’s clients. All of the names and telling details have been changed.

It’s called “pipeline management”. Oil producers do it; automobile parts manufacturers do it; I have a friend who is a large-scale hog producer who does it. Entrepreneurs should do it but most don’t, or at least not well. What we are talking about, of course, is having a consistent stream of raw materials or work-in-progress to keep production flowing without interruption. In the world of a financial advisor, that means having systems in place that continuously channel new business opportunities to you.

Consider a couple of subtle points in this description. First, we used the word “pipeline” not “funnel”. In the past, sales training encouraged us to “fill the funnel” with prospects in the hope that enough would eventually filter through to become clients so we could survive. In today’s world, that kind of inefficiency cannot be tolerated. The only people who should be in your prospecting system are those who meet your preferred client profile and with whom you fully expect to do business. Secondly, while the intent is to develop new business, it does not have to come from new people. Your pipeline should also include existing qualified clients with whom you expect to do additional business. In fact, one of the keys to growing your business will be the effectiveness with which you leverage the client capital you have already created. Client capital doesn’t show up on a balance sheet but it is truly one of the most valuable assets in a thriving advisory practice. Let’s look at how large that asset should be.

When we ask advisors how many people are currently in their pipeline? Most answer from 15 to 40. When asked how long people stay in the pipeline, responses typically vary from 2 weeks to 3 months. Our recommendation — you should have 200 to 300 people in your pipeline and the time horizon for dealing with them should be 24 to 36 months. Whoa, you say, what happened to the old “30 days up or out” philosophy I learned so long ago? Doesn’t your strategy mean finding and keeping a lot of deadwood in the system for a long time? What’s the value in that? The answer is “No”. What it does mean is having two effective systems at work; a series of promotional activities to identify and attract a sufficient number of the right people and an effective strategy for cultivating them into clients or culling them from the pipeline. Since most advisors have to work to get people into the pipeline before they worry about managing them, we’ll narrow our comments to that part of the process.

Research has highlighted the pay-off — out of every 100 qualified people in your pipeline, approximately one-third will do business with you in the coming 12 months; one-third will do business with you in the next 12-36 months and one third will never do business with you (and need to be culled from the system). Three key conditions need to be met to achieve these results: 

• only those people who meet your preferred client profile go into the pipeline; 
• you have a relationship management system that progressively moves people toward wanting to do business with you; 
• you have a sound planning and sales process that motivates people to take action. 

Given these ratios, then, having 200-300 qualified people in the pipeline should translate to 60-100 new sales year after year. Multiply that by the average revenue you generate from new sales to your preferred profile clients and my guess is that it will add up to a significant income.

So how do we get from, say, 30 people in the pipeline to 300? The starting point is always going to be internal, that is, your existing client base. The opportunities there are three-fold: completing implementation of previously developed plans, cross-selling additional products/services and obtaining introductions and referrals. Note how often, however, emphasis has been placed on having only ‘qualified’ or ‘preferred profile clients’ in the pipeline. The message is to focus on those clients who have the highest value to you, both from the potential of revenue they bring as well as the willingness they have to introduce you to others like themselves. Segmenting your existing client base is an obvious prerequisite to identifying these people and establishing a development program directed specifically at them. We should expect Pareto’s Principle — the 80/20 rule — to apply, whereby 80% of our revenue comes from 20% of our clients. In fact, however, our experience is that the reality is even more pronounced than the rule. The “Top 20” clients of leading advisors typically represent at least 80% of revenue and more than 100% of the practice’s profitability, regardless whether the advisor has 200 clients or 1000. Consequently, the appropriate strategy seems to be to concentrate efforts on your 20 best clients.

So those become the first 20 names into our pipeline. If the ratios hold true, 6 or 7 of them will do additional business with us in the next 12 months and another 6 or 7 will do so within the next two to three years, assuming we manage the relationship well. The next 20 to 40 or more names should come from introductions and referrals from these Top 20 clients. Is it unreasonable to expect your best clients to introduce you to at least one other person like themselves once a year? Research clearly indicates, for example, that most HNW clients would be more than willing to provide referrals — but they report that their advisors haven’t asked them! Why not adopt a policy of conducting an in-depth face-to-face Annual Review with each top client. Use a prepared agenda that includes asking for at least two introductions. Even if you are successful only half the time, it would add 20 new high quality names to your pipeline.

How about taking each of your Top 20 clients to lunch on their birthday and inviting two of their business associates or good friends, who are not your clients, along as a surprise? (Get the names from the client’s spouse or administrative assistant.) That should add another 30-40 names to the process. Hire the pro at your golf club to conduct a “Pitch ‘n Putt” clinic for a 6-8 of your best clients and ask each one to invite a friend or business associate. Do it two or three times through the summer and add another 20–30 names. Organize a “Client Appreciation” occasion such as a wine-tasting, cooking class, sporting or cultural event and encourage your clients to “bring a friend”. A couple of these events per year should result in 20 or so new introductions.

Looking externally, are there opportunities to “tag team” with collateral professionals such as accountants or lawyers by co-sponsoring seminars on estate planning or taxation? Even better, conduct small workshops yourself on those topics for lawyers and accountants who need CE credits themselves. Demonstrate your expertise to 5-6 of them twice a year and it is almost assured you will be asked to work jointly with at least one of their clients each, adding 8-10 names to your inventory. So let’s see where we might stand after one year.

If the ratios hold true, this should result in 30-35 new “preferred clients” in the first year. Repeat the process the following year but now you can add the 30-35 new clients from Year 1 as sources of introductions and referrals, which will bump the total number of new names in the second year up to about 160 which added to those still in the pipeline from Year 1 moves you much closer to the 300 mark. Bottom line is that consistently employing 6-8 promotional activities, some directed internally at existing clients and some directed externally at people you would like to attract should allow you to build your pipeline to 200-300 people in three years or less.

________________________________

The Covenant Group is referred to by many as where entrepreneurs go to become Business Builders. They are considered to be thought leaders and authors of the best-selling books, The 8 Best Practices of High-Performing Salespeople, The Entrepreneurial Journey, and The Business Builder.