This is your biggest cost
What is your biggest cost?
I have asked this question to many distributors / advisors and I have never got a powerful answer. Try answering this question yourself and you might find yourself saying these:
- Office (Rent)
The first 2 are most common and often account for more than 50% of your costs. The next two costs are technology and marketing, but it is very critical where you spend them (just like how critical it is to inject the needle in the right vein). We need to be surgical about these expenses rather than just spending on something called as technology and marketing. I can get into several layers of detail here, but the objective of this post is something else. It is to open your eyes to your biggest cost and inspire you to do something about it today.
Did you get a hint about what your biggest cost is?
Let me break the suspense. It is Inaction. Yes, I repeat Inaction.
What? I can feel some of you even saying “Nonsense”. I do not blame you. We cannot see it ourselves just like an investor who cannot see how staying out of the market is costing him money rather than being invested in the market. Can your investors see how being out of the market has cost them? I bet they cannot. That is because they are not used to seeing it that way or have not been trained to see it that way. In short, more than an expense ratio, volatility and behaviour are 2 of the biggest costs of investing. In a similar way, most of us cannot see the real costs in our business.
I am sure you know the term “Opportunity Cost” – the loss of other alternatives when one alternative is chosen. A world class professional asks herself “What Opportunity am I missing by not doing this?” The mediocre person however thinks “What is the Cost I am incurring?” I can get really deep on this subject, but I want to move on to my key point.
The real issue is that most people think that there is no cost of not doing anything. “Inaction is not costing me”, you might think. You are wrong “Inaction is often our biggest cost along with an inability to change. There are many on the other hand who believe in change and yet unable to act. The biggest cost therefore is INACTION, and it takes the CAKE always”.
Let me now tell you the ways Inaction is costing you.
The biggest needle mover in any business is client acquisition. There is no business without acquiring clients rather there is no real business without acquiring ideal clients who trust you with 100% of their assets.
Ask yourself the following questions:
a. In the last 6 months, have I acquired more clients than the prior 6 months?
b. Have I acquired my biggest clients in the last 6 months?
c. Have I signed up clients who I could not sign up before?
If the answer to any of these questions is “No”, there is a real problem with your client acquisition strategy, ability and skills and it needs serious fixing. This is because the best across the world have been able to do all the above. Nick Murray has brilliantly said “At moments like this, amateurs obsess about how upset their clients are, and that tends to paralyze them. True Professionals make the conscious decision to obsess instead about how upset everyone else’s clients are”. Like I have written earlier, this is one of the best times to acquire clients. You can literally make the next 6 months and the next 2 years your best client acquisition phase provided you ACT. It requires you to move out of your comfort zone, learn, practice and master world class ways of acquiring ideal clients.
Inaction on this part is costing you ideal clients, 50-200% growth over the next 2 years, lost revenue, lost profits, and peace of mind that you are building a rock star business. A firm with a Rs.40-60 Crore AUM has left Rs. 25 – 50 Lakh revenue for the next 2 years. A Rs.200 Crore firm is losing more than Rs. 1 Crore in the next 2 years and Rs. 50 Lakh- Rs. 2 Crore plus every year hence. These are not just made up numbers. These are numbers that have been done.
The second area where Inaction costs is Client Retention. A firm in Bengaluru is losing Rs. 30 Lakh of revenue which is 22% of their revenue every year for the last 2 years. They are still sitting and doing nothing about it.
Now, Ask yourself “How many clients have I lost in the last 6 months?” If the answer is more than 5-10%, you are in trouble especially if they happen to be your top 20% clients. A lot of people I have spoken to have lost anywhere from 20-45% of revenue. Doing what you have always done, or 20% better will not help address these 2 problems. You got to do something radically different.
The third area Inaction costs in is Super Productivity. I asked many of you “How much is the cost of your 1 hour?” Most did not have an answer. I then asked, “How much is the value of your 1 hour?” Most did not understand the difference between cost and value. I have a finer point here and I will cover this later but for now imagine if there was a better way to conduct your first meeting in a powerful way that would land you a client in 1.5 hours instead of several meetings, how much would this save you? I have seen potential savings of 20 hours + per client and multiply this by 50 and you have created 1000 hours for yourself. How much is that worth to you? This is insane and invaluable. Multiply this number by Rs.2500 or Rs.20000 per hour or whatever you think your value is? Adding close to 6 months more time allows you to focus on client acquisition, client delight and most importantly an ability to work on your business.
I can go on and on highlighting additional areas where Inaction is costing you but addressing these top 3 is the difference between a mediocre firm and a world class firm.
The choice is YOURS. Who do you want to be?
A mediocre firm that is pushed in different directions by the winds of change OR
A world class firm that is intentional about its Direction, Choices, and Action.