[Day 15…Pipeline Development Exercise…START HERE]

As you set your sights on adding new relationships to your practice, it may be helpful to walk through a simple analysis. All you’ll need is a pencil and a piece of paper to answer 8 basic questions.

  1. How much business have you done over the past 12 months?  For most advisors, this is an easy question.  Don’t worry about products or payouts; just write down your total revenues from all sources.  For example purposes, let’s use $500,000.
  2. How much of this revenue is repeatable?  In other words, if you didn’t add any new clients in the coming year, how much business would you do?  Since no one can predict the future, you’ll have to make an educated guess based on your experience, business mix and assets under management. For newer or more commission-focused advisors this number probably ranges from 40 to 60 percent of production.  More experienced, particularly fee-based, advisors with solid asset bases might use estimates in the 70 to 110 percent range.  To continue our example, let’s assume 90% of $500,000, or $450,000.
  3. What is your gross revenue goal for the coming year?  Again, keep it simple. Don’t worry about categories or grids. How much gross revenue have you targeted for the coming year?  In my view, anything less than a 10 percent projected increase may mean you’re not stretching yourself enough. So, for our example, we’ll use 10 percent growth, or $550,000.
  4. How much new business do you need to generate to achieve your production goal?  Specifically, non-repeat business, revenues from brand new clients to your practice.  Your answer is the difference between your year-ahead target and your repeat business projection.  You’re simply subtracting your answer to question 2 from your answer to question 3.  In our example, $550,000 minus $450,000 equals $100,000.
  5. What is your current average revenue per relationship?  Take your answer to question 1, your trailing year gross production, and divide it by the current number of households you manage. Alternatively, if you’re focusing on adding Ultimate Clients (my recommendation), you could base your calculation on this requirement. For example purposes, we’ll assume 100 existing relationships, so our answer to this question is $5,000.
  6. How many new relationships will you need to achieve your revenue target?  If you divide your average revenue per client (question 5) into your new, new business total (question 4), you’ll come up with a targeted number for new relationships. Continuing the computations in our example, our target for new relationships is 20, $100,000 divided by $5,000.
  7. How many TOTAL active prospects do you need to meet your new relationship target?  My work with advisors indicates that most close in excess of 50 percent of active prospects. You can adjust your actual target based on your past success rate.  So, if as in our example, you need 20 new relationships, you’ll need a TOTAL of 40 active prospects. 
  8. How many NEW active prospects do you need to add to your pipeline to meet your total?  Unless your pipeline is totally empty, you already have a number of active prospects.  Simply subtract your the total of your current active prospects (from your pipeline report) from your answer to number 7.  For example purposes, if we assume you already have 15 active prospects, you’ll need to add 25 NEW active prospects (40 minus 15).

At this point, if you’ve been running these types of calculations for your own practice, you may be thinking this exercise is too simple.  And depending on your experience as well as the quality of your pipeline, you could be right.

But, before you move on, consider two final points:

Prospecting is tough work, but when you realistically set a target for new relationships and work backward to your activities, you can produce better results with a lot less effort and stress.


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