Tuesday 06 February 2018
Why creating value is the most important way to grow your business
Tuesday 06 February 2018
The term ‘value’ has many meanings. In business, it often refers to a product’s monetary worth.
An alternative meaning of the word 'value', as it relates to the importance or usefulness of something, is quickly gaining ground in business as the most important way to grow client loyalty, share of wallet and drive business profitability.
Recent Macquarie research shows how this notion of value is taking off among accounting and financial planning practices.
According to Macquarie’s 2015/16 Accounting and Financial Services Benchmarking Report, 79 per cent of firms that earned above-average profits last year said “adding value” for existing clients was their main driver of profitability.
Head of Client Strategy for Macquarie Wealth Management, Sherise Mercer, says the research highlights a new trend among high-performing practices.
“We know from our past research there is a direct link between a client’s level of satisfaction and their propensity to recommend the firm, to buy additional services, or to stay with the business long-term.”
“The new benchmarking data tells us that high-performing firms are looking at those drivers of satisfaction to power their business growth.”
She says when it comes to creating value, there are two sides to the coin.
“The first is driving up client satisfaction through valuable interactions and experiences. The second is extracting value for the business, in the form of financial return and other business benefits,” Mercer says.
The benchmarking report reveals the most successful businesses are adding value in a number of ways.
One third (32 per cent) of above-average profit firms added services which, in turn, increased the number of services per client, and lifted fee levels across the business.
Another way firms are driving value is through client referrals. Almost three-quarters (71 per cent) of high-performing firms rely on referrals from their existing clients as their primary source of new leads, highlighting the criticality of a loyal client base.
Three steps to creating value in your business
While many firms struggle with the idea of creating value, Mercer says it doesn’t have to be hard. She distills the process into three steps:
1. Understand the issue
The first step is to understand the issue. What problem or need are you are solving for your clients and why?
“This is about clearly articulating your value proposition. Our past research shows that clients who feel highly satisfied with their adviser are those who feel valued beyond the business or advice transaction. Clients want their adviser to understand them and their needs, and will feel most valued when their needs are being met, not when you are merely effecting a transaction,” Mercer says.
Building value builds trust, and trust is the most important driver of business growth.
2. Define the interaction
The second step is defining the interaction you have with clients. How and when do you interact, and who is involved?
A common challenge for many advice principals is how to spend more time with their most valuable clients. It’s not an easy task – but it is doable.
Successful firms look at their internal structures and think about how they can reframe staff roles and incentives to align with their new value proposition. They also look for external partnerships they can leverage along the supply chain to create new value for the client.
“Simply put, principals should be spending the most time with clients who have the greatest strategic importance to their practice. These could be high volume clients, benchmarks, inspirations or door openers. This is the surest way to maintain a healthy referral pipeline,” Mercer says.
3. State the impact
The third step is impact. Why is your offering important to your clients? Does it provide meaning beyond a transaction?
“This last step is the hardest one because it requires you to understand your clients’ needs on a rational and emotional level and communicate that you are able to deliver that value,” Mercer says.
“We know that changes in technology and growing access to data and information are influencing the way clients interact with their finances, and their financial advisers.
“As part of this, clients are resetting their expectations of what ‘good’ financial advice looks like. More and more it’s looking like a relationship, not a transactional exercise,” she says.
She adds that leading advice firms are those that are investing in frictionless information exchange. That is, defining which information is important to share with their clients, and how best to share it to deliver the desired emotional experience.
Putting all of this together, Mercer says demonstrating how you add value is as important as delivering the value.
"You need to show clients how your actions and services have contributed to their satisfaction with you and your firm. That requires heightened awareness of how and when you communicate with them.
“In the end, building value builds trust, and trust is the most important driver of business growth.”
Three steps to creating client value:
- Issue – what issue or need are you solving for clients?
- Interaction – how and when do you interact with your clients and who is involved?
- Impact – does what you offer provide meaning beyond a transaction?
Make your voice heard
For more than 10 years, we’ve been conducting benchmarking surveys for small- and medium-sized clients across a number of industries to help them identify, and make the most of, available opportunities.
The 2017/18 Accounting and Financial Services Benchmarking Survey is now open. We’d like to invite you to participate and help build a quality report that's a true reflection of the industry and where it's heading. Take part now.
Unless stated otherwise, this information has been prepared by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502 and does not take into account your client’s objectives, financial situation or needs.
This information is provided for the use of licensed and accredited brokers and financial advisers only. In no circumstances is it to be used by a potential client for the purposes of making a decision about a financial product or class of products.