By: Daniel C. Finley

Strategically Segmenting Your Client-Base

Building a client-base from scratch can be a life time endeavor. You hope that all clients stay with you throughout your entire career but the fact is that some will simply move on or unfortunately pass away. That’s why it is so important to maintain the balance between prospecting for new clients and servicing your existing client-base.

Jim Loehr said it best “It’s not how many hours you put in with a client or on a project. It’s the quantity and quality of your energy – your focus and force – that determine whether that time is valuable.”

But, should all clients receive the same level of client servicing when you only have so much time to service an established book of clients? I believe they should not. And, if you believe this as well then you must also believe that strategically segmenting your client-base is a big part of the solution.

To clarify what segmenting your book is all about, I want you to think of it in terms of an educational grading system. Much like your report cards, you want to have “A-Clients” in your business book.

And, that is why I have created a tool called The Client Segmentation Worksheet which splits each client into four criteria to create the overall “A, B or C-Client Grading system. Let’s take a look at each of the four criteria so you can map out this tool on an Excel spreadsheet.

Column #1: Assets under Management:

This is the amount of money that you are managing for the client. You must determine what dollar amount is the minimum for each of your “A, B and C-Clients”. The important thing to remember is that this amount can change over time.

Take for instance Susan K. a thirty five year veteran financial advisor who needed help segmenting her book of clients. Originally, she felt that all “A-Clients” needed to have $1M or more with her. However, we determined that her minimum account size should be $1M because she had a number of clients that had over $5M with her and that her “A-Clients” would be those that have $5M or more. 

Column #2: Revenue

This is the percentage of annual revenue that you are making off of the assets. A rule of thumb is 1% of assets under management. However, some advisors will discount this based on the asset size.

It never surprises me that most advisors never think to segment their client-base past assets under management. In Susan’s case she realized that there were several high net worth clients who were simply buy-and-hold investors or those who had their assets in low turnover ratio investments.  

Column #3: Likeability Factor

On a scale of 1-10 (1 being worst, 10 being best) how well do you like working with your client. We all end up with a range of client personalities and those who have working styles that vary.

Susan was shocked when I explained the likeability factor column and after some thought she realized that there were a few larger clients that were more challenging. Also, there were some smaller clients that she liked so well that she thought of them as friends.

Column #4: Referral Factor: On a scale of 1-10 (1 being worst, 10 being best) how often do the clients pass along referrals? The reason why this is important is because sometimes a smaller client can be great referral source for larger prospects.

When we discussed the Referral Factor she admitted that this was a very difficult subject because she rarely asked for referrals. And, the few referrals that she did get were typically unprovoked.

Understanding The Client Segmentation Worksheet:

A client must have at least three out of the four criteria to get a proper ranking. An example would be an “A-Client” having $5,000,000 at 1% revenue with a likeability and referral factor of 7 or higher. If three out of four criteria are filled, then the client is considered an “A-Client”. 

Why Strategically Segmenting Your Client-Base Works

Segmenting your book of clients is not an easy process, it takes some dedicated thought. The reason it works is because it forces you to determine who really is the most deserving of your time. When you do this you are sure to retain more clients and have peace of mind knowing they are getting unprecedented service!

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