Pre Reading for Class #4
The following is the "thinking" you must do to be able to visualize and monitor your success in the coming months. Please read through this word problem and have a general understanding of your personal numbers for our next meeting.
What is a close rate?
Close rate = new clients signed divided (÷) by prospect meeting held
What is a prospect meeting?
Simply, it's the meeting (by phone or in person) where you formally lay out your company's value and ask for a prospect (family) to join / pay your company.
- If you have multiple prospect meetings with a single family/client before signing on, that should count as one prospect meeting in thinking about your close rate.
- How many meetings does it take to get to a close? That figure is not for this exercise, per say, but if you can cut the number (of 2 meetings per close, for example) in half, it will be a huge time savings for you. Note: if you are having an issue with closing deals, let's coach trough that soon.
What is your close rate?
I have given you the tools so far to figure that out. A typical close rate for a well targeted prospect in your industry of the $1 million + AUM client is around 25-35%. Clearly poorly targeting of prospects will lower this rate and increase the amount of work you must do to close clients. Also, the higher net worth of the prospect the more the close rate will decrease -- however not by as much as you might think. Let's say you have a lower economic target market, maybe your close rate is 35-40%. If you target people with $5 million +, the rate may be closer to 25%.
To track marketing, you must understand the formula to get to your goal. This is your business, your livelihood, your baby. This should be an exciting problem for you to figure out and track.
Start with using your close rate to figure out protect meeting numbers:
As a coach, I have a close rate of about 40%. This means, if I get someone in for a free initial coaching meeting, 4 out of 10 will probably become clients.
How many meetings do I need to get 10 new clients?
Based on the close rate, 25 free meetings will net (=) me 10 new clients.
Now you need to go a bit deeper -- What does it take to get a "meeting"? Asks minus (-) "Nos"
Usually, if I ask someone to do a free coaching meeting 3 of 4 say no or give me a “non-response no.” That’s a 25% “yes” rate.
How many people do I need to ask to get 10 new clients? Let’s see, I need 75% more asks than meetings.
So, if I ask 100 people, I will net 25 meetings, right?
By simply looking at the number of clients I have or my total revenue, I WILL NOT get a good view of my progress toward my current year’s goal. It's important to break down the numbers for yourself. For example:
If I want 10 new clients a year, how do I track my success?
How many asks do I need to make per month? Take the number 100 and divide (÷) by months of the year (12) is 8 asks per month.
How many asks do I need to make per quarter? Take the number 100 and divide (÷) by four (4) is 25 asks per quarter.
If you get hung up on simply making an ask, you will be way behind in the "game."
Let’s say you muster up just enough to make an ask of 10 people in a year. You will net out with 2.5 meetings and 1 new client.
What is the Formula?
Asks # multiplied by Yes Rate % equals (=) # Meetings. Then Meetings # multiplied by Close Rate% equals (=) New Clients #
If I want to create _____ new client’s a year, what do I need to get there? How many Asks? How many per month? etc.
Example: Asks 100 multiplied by Yes Rate 25% equals (=) 25 Meetings. Meetings 25 multiplied by Close Rate 40% equals (=) New Clients 10
So, just as we did with the "Big Fish" exercise, you can go even deeper into what makes up an ask.
Ann Pendley calls the precursor to an "ask" a "state of the company."
So how many state of the company discussions do you need to have to get comfortable with an ask?
Play with your goal and this formula and see what your projections will be based on your current level of engagement.
What does 2017 look like?
What does 10-20% increase for 2018 look like?
How much new engagement do I need to do?
Where / how can I do more engagement with my target clients?
Where will I find the time to do this?
Make a game of this. It's a numbers game you can have fun with.
What happens if you find a way to change your "yes rate"? Maybe you get better at explaining value better for example.
The number of asks will change dramatically and the number of clients will shift.
If anyone comes up with a great formula spreadsheet to play around with these numbers in real time, I would love to see it and share a good one with the group.
Now that you are panicked by the numbers to meet your goals, here is some good news. You are only responsible for two things:
- Keep your energy in a positive place 24/7 so that you are in an open mode for attracting clients.
- Work the numbers
If you work the numbers, the results will come.
YOU DO NOT HAVE TO WORRY ABOUT REJECTION or if clients like you/your product.
You only have to work the numbers -- Did I give a good presentation? Yes, and that counts as a "meeting". The prospect gave me a quality decision? Great that's a "yes or no" for my chart!
Getting a "no" is PART OF THE GAME. Never avoid it. Welcome it -- as long as it's not a BS no like, "You are more expensive than Merrill Lynch"
Note: if you build a business model based (partially) on avoiding "nos" maybe its time to rethink your approach/services/prices, etc.
Hope this is illuminating for my "mathy" folks.