Q&A (Answering Listener Questions) | FEE042 – Transcript

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Okay, so let’s get right into some of the questions that we’ve been letting. The first series of questions we’ve been getting actually had a lot to do with the past couple of episodes where I had mentioned or made some mention about tracking ratios and the importance of tracking all the ratios you have, tracking your marketing, tracking your business and just tracking everything you possibly can. And the questions were what are the most common, what are the most popular tracking ratios that you’re using, what are some good ratios to be, I guess, striving for. So I want to speak to that a little bit. And the first one I want to, I want to talk about what’s called the solvency ratio. Now, this is when, I brought up this ratio because it’s probably the one ratio that has given me the most confidence to allow me to take money out of my business and to either put it into personal use, reinvest it into higher, you know, a higher return type place. So it’s called a solvency ratio and for me, you know, the solvency ratio can be used in many, many ways. But let me just explain what it is.

So solvency ratio is really, it’s a ratio that gives you confidence that where you sit today financially is either comfortable or not comfortable. Because one of the things that I like to do is make it easy to manage my business, make it easy to run my business. And so what I did was I said well what’s important for me to know about my business that I need to know that would give me confidence along the way so that I know that what I’m doing is great because I don’t have a lot of time so I need to make this quick and easier for myself. So, you know, I remember listening to somebody who was kind of talking about this and what was an important factor for them and this was a real estate agent in the example that I was listening to, the real estate agent, to him, to this particular agent, he was, what was important to him, he gauged his success by how many, you know, those lock boxes that when you go and a real estate agent gets a home, they put the lock box on the front door so that anybody can go and sort of tour the home with another agent and the key is already there so you don’t have to worry about picking up the key from the listing agent. Well, he had on his window ledge, he had 12 lock boxes and to him, he used a metric and that’s really what these tracking ratios are they’re just metrics that are important to you. He used a metric that said if I have any less than, or any more than two or three lock boxes on my window ledge I get concerned. He said if I know that, you know, cause that means that basically, virtually ten properties are out there in the marketplace that are working for him while he’s doing other things. So he can very quickly look over at his window ledge, how many lockboxes does he have there. If he’s got two lock boxes or less he’s comfortable. If he doesn’t then he knows he needs to get those lock boxes on some doors somewhere, so he needs to get some listings. So that was his quick way of knowing, it gave him sort of a way of focusing, what do I need to do this week. If he looks over and there’s no lock boxes, great, now he can focus on doing other things cause he knows, he’s confident that he’s got stuff working for him. But if he looks over and there’s seven lock boxes on his window ledge he knows he needs to go get some more properties to list. So that was just his quick way of doing things.

For me, I came up with a solvency ratio. So what is the solvency ratio to me. Well, really what it was to me was something that allowed me to feel confident about taking money out of my business or making sure that I wasn’t sitting on too much money or, you know, any of that. So how did I come to what my ratio was. Well, basically I said to myself, listen, what are my fixed expenses going forward, what do I need, know I need to cover on a monthly basis. So let’s just use an example, let’s say you need to cover $50,000 or $20,000 or whatever that number happens to be, let’s use $50,000 just because it’s a simple number to use. So if I know that every month I have to cover basically expenses and salaries and all that sort of stuff of $50,000 then I know that over the next 60 days I’m going to have to cover, I have to have $100,000 of something, of revenue or something coming into the business in order to cover that. Otherwise I can’t keep the doors open and the lights on past that point.

So from a comfort level if I had, I don’t know, I’ll just, let me send it out to you. If you knew you had $50,000 a month that you had to cover and you knew over the next 60 days you would have to cover $100,000, if you had $25,000 in cash in your accounts how would that make you feel? For me it would make me feel a little uncomfortable. If you had $50,000 how would it feel? You’d, to me again I’d feel a little uncomfortable. If you had $100,000 in cash which was there to cover that you knew you had just sitting there, had no other purpose it was just sitting there in cash that could cover your next 60 days payables, how would that make you feel? Well, you know, probably a little bit better. If you had $200,000 sitting there to cover your next future, next 60 days’ payables which are equal to $100,000 over that time period how would that make you feel. You know what, probably really, really good.

So now we’ve got some information that’s very valid for this particular ratio cause we know what your comfort level is at a certain point. For me I was, you know, pretty comfortable once I hit basically if I had $100,000 in the bank and I knew I had $100,000 of future 60 days’ payables that I had to cover. Yeah, I was just getting comfortable. Well, if you look at that and you say $100,000 in the bank over, or divided by, $100,000 in future 60 days’ payables that gives you a factor and that factor is one. Now, if you had $150,000 sitting in your bank account and you had $100,000 of future 60 days’ payables then that gives you a factor of 1.5. Or if you have $200,000 divided by $100,000 is a factor of two. So now you can get a comfort level for what your factor is. You now know what a comfortable factor is and what an uncomfortable factor is. So what I did was, I simply took that solvency ratio and I built it into our salesforce database and I said to my bookkeeper, I said, listen, every Friday I want you to update this particular thing on my database which, and there’s just two numbers I need you to update, number one I need you to update what the cash on hand is, what is my liquid cash on hand that I have available to me that I can access within a moment’s notice. I need you to add it all up and put it into this spot. Then I also want you to take a look and say, forecast forward and say over the next 60 days what are the, you know, what are my future 60 days’ payables, what do you expect I’m going to have to cover and put that number in. And then just leave it at that cause I programmed our system that when I refresh our dashboard it comes up and it says okay your factor for this week is two, your factor for this week is three, your factor for this week is one, you know, so whatever. And then I colour coded it and I said, okay, if my factor gets to two or below or sorry, below two and then or even below one and a half, I want you to code it red, I want you to make a red box show up. If it’s between one and a half and say two and a half or three I want you to put it in yellow. And if it goes above three I want you to put it in green. Why did I do that? Because I wanted to be able to very quickly look at my dashboard and if I see any red on my dashboard I need to get concerned. I need to dive into things and find out what’s going on. If I see yellow I can cruise along, I don’t really have to pay too much attention to things. If I see green that tells me I am technically too flush with cash and I need to get that cash working for me. So, you know, it gives you my ratio.

Well, I tell you when you start doing this it’s amazing. The first time I started this and I’ve talked about this in other shows, I believe. The first time I did this I was in the red, I was in the red for probably a full quarter and it really motivated me to get things going. And then when I started to see things coming along I was making better decisions. I was starting to see cash starting to build up. So then suddenly I got into the yellow zone. Yellow zone was sort of okay I’m cool, I’m kind of cruising along there. And then, you know, get it up to the green zone. Anyways, it just allows me very quickly to do it.
Now I actually use this with my clients and my clients love it. Number one, business owner clients, teach them how to use this they will thank you, thank you, thank you because it’s just such a great way for them, they have the same challenges you do, you know. Their challenges, they’re always afraid to take money out of the company. Well, you don’t need to be afraid to take money out of the company, you just need to give yourself permission but you need to know what your permission parameters are. So we show business owners.

This was an amazing tool that I used with individual clients. I had this couple in my office and she was just very worried all the time and they fought about money all the time. He would say sweetheart you don’t need to worry about it, it’s all fine, it’s all fine. She wouldn’t really understand how it could be fine because she worried so much. So we had this discussion and I basically went through a very similar thing. I said what are the, what are your fixed costs, what are the things you know you have to cover every week, every month, you know, what’s it going to be. And we went through what their future 60 days’ payable were. Then I said now how would you feel if, knowing what your future days’ payables were, let’s say it’s $20,000 you’re going to have to pay, you know, to cover your bills and all that sort of stuff. And then we went in and I said now if I told you that you had a savings account or bank account that had $10,000 in it how would you feel. And she say oh I wouldn’t feel that great, I’d be worried. I said okay how would you feel if there was $20,000. She goes I’d feel much more confident. And we sort of walked through that process and we were able to get her factor for her. So I then looked at him and I said now you understand what we’re doing with this, you understand the calculation. She’s going to ask you once a week what your factor is. You’re going to tell her what the factor is. And I looked at her and I said now you know where this number’s coming from, you know what the factor represents, you know what your comfort level is. You know that anything above x factor makes you comfortable and you don’t have to worry about money anymore. They loved it, they basically, it changed their conversations about money. She no longer has to worry when she can just say what’s the factor, he calculates it basically says to her sweetheart the factor is two and a half. Okay, great, I’m good now. Or the factor’s three or the factor’s whatever. Cause then they can just start making better decisions.

So that’s definitely one ratio that I think has been the most impactful for me and in identifying and being able to run my business. Cause I can very quickly look at my dashboard, see my factor and it tells me everything I need to know about my financial position, so I know really where I stand.

Now, the next one is what I call the PDA and it stands for profit distribution accounting or profit accounting or whatever you want to call it. It’s basically accounting for business owners. Now this doesn’t replace the accounting for your accountant or for your banking or your banker or whatever it happens to be. This is just simply something that I recommend you use to give you an indication as to how much you can comfortably take out of your business. Now the factor that we just talked about, the solvency ratio ties into this a little bit so let me go through what I’m talking about here. So what is a profit distribution. Well, profit accounting is what all business owners I feel should do pretty much on a, I would say I do it on a monthly basis. I’ve heard people talk about doing it on a weekly basis but it really depends on your business. I think for our business a monthly basis is more than enough because it does take a little bit of time to do but it’s something that’s important.

So what you do is you simply say you need to analyze your business first of all because you need to find out what your profit distribution rate is and that rate is a percentage. And your profit distribution rate is the profit that you’re going to generate for yourself from your company every year. You’re going to figure that out in advance because that’s what you’re going to be taking out. So how do you do that. So what you do is you take your past 12 months’ worth of monthly revenue and you simply put a spreadsheet together the, a monthly spreadsheet so you have January through to December. And you’re going to say okay in January of last year or of 12 months ago or whatever, you don’t even have to be calendar year it can be whatever—but you go back 12 months. You say okay for that first month what were my total revenues for that month and you just put them in. So if you have any bookkeeping or if you’re managing your books or whatnot you should be able to pull this information. If you can’t then I’d definitely you use something like a QuickBooks or whatever, whatever solution’s going to allow you to track your books. If you don’t have bookkeeping going on in your business you need to be able to track your numbers.

So you take a look at it, okay, what’s my total revenue for that month. Then you have a line which is your profit distribution rate or your profit distribution amount. And that amount is based on a percent. Now, you can build this into a spreadsheet an Excel spreadsheet but I would recommend that when you’re doing this you’re going to have the ability of just toggling that one field whether it be 5%, 10%, 15%, 20% whatever the number happens to be, you want to be able to toggle that field and have it change the entire spreadsheet. So start off with 5% for your analysis. So then you have your total revenue, minus your profit distribution, minus the owner’s draw or salary depending on how you take your income. So for owner it could be it’s your household, so if you’re working with your spouse then it’s the amount that you both take out. So it’s your, the owner’s income, the owner’s income for that time period. And it could, whether it’s a dividend or not, I don’t care what it is, it just, you have to take that out, that amount out.

So let’s say you had $20,000 in total revenue, your, if your profit distribution was 5%, you know, you take 5% of that and then you take off your owner’s salary. So now you’re left with a net operating revenue, okay. So this is the amount of revenue that you have available to you to run your business. Not pay you cause you paid yourself first, that’s the whole premise of this is paying yourself first. Now you’ve got your total operations, net operating revenue. From that you now take off your fixed expenses. These are the expenses like your rent, your, you know, lease payments, whatever, the things you can’t get away from, you can’t change or you can’t defer, you just have to pay them every month, that’s what you want to put in there. So then you say okay my net operating revenue minus my fixed expenses gives me a number. Hopefully the number’s still positive. Then you take that positive and then from that you take away your variable expenses and then you get a number at the end. Now, what’s very important about this is if you keep on building this out and you do this month by month by month you’re going to build out a spreadsheet that’s going to tell you very clearly what rate you could take out of your business in profit and still have your business operate profit, operate without running out of money. And then what you’re going to do is you’re going to take a look and you’re going to try and get to the point so you have a sum, a total at the end of the 12 months where you summarize everything and add up all the columns, like a year at a glance. So you’re going to toggle that distribution rate to the point where your net profit at the end after taking your owner’s salary, your profit distribution rate whatever that happens to be, you’re going to get to the point where you’re going to get that bottom line being close to zero. Now what that does for you is that gives you an indication as to what your profit distribution rate could have been for the past 12 months but without blacking your business out. And then you’re going to take a look at it and say geez over the last 12 months I could have taken an extra—because remember you just, it’s the amount of extra you’re taking over and above your regular salary or draw that you take—I could have taken an extra amount of money out and it wouldn’t have blacked out my company. That’s an important number to know. That rate, that percentage is an important number to know because now once you’ve established what that is if you feel that for the next 12 months you’re going to be kind of similar to what your past 12 months were, you’re not, you know, incorporating a lot of extra expenses or anything like that, that you now know what your profit distribution rate is.

And once you’ve got your profit distribution rate you can now use in your business going forward and here’s how you use it in your business going forward. What you’ll do is every month you’re going to track this information on a go-forward basis. Then at the end of each quarter you’re going to take a look at the amount of money that’s been allocated to your profit distribution account, cause that’s a notional account. You can either do it as a physical transfer where you physically transfer money from your bank account and put it into a new account or you can just track it on a notional basis. Either way you’re going to have an amount that is built up on that rate. So if you’re taking 10% every, then 10% of every dollar that comes in goes directly to the profit distribution account. Now at the end of the quarter you’re going to take a look at what that amount is, add it up and you’re going to take 50% of it and you’re going to pay yourself. You’re going to give, actually cut a cheque for yourself, you’re going to cut a cheque that’s going to come right to you. Now it’s either if you don’t need the money personally to sort of pay down maybe a personal debt or to use for lifestyle expenses or whatever then just move it into, you know, in Canada if you have a corporation move it into a holding company within the corporation so that you’re not paying extra tax on it by taking it personally. But you’re going to carve it out for yourself. Now, by doing that you’re going to be able to, you’re going to start building up the right and the comfort level to take money out of your business so that you can actually build your lifestyle to have a better lifestyle. The reality is lifestyle, good lifestyles costs a lot of money. So you need to be able to take enough money out so you can start to live your lifestyle and create some lifestyle design without blacking your business out.

Utilizing your profit distribution accounting and your solvency ratio that’s going to give you such amazing information. And what I recommend is every quarter make a payment to yourself and then just keep on tracking it. Now one question that will come up is at the end of that quarter when you paid out 50% remember there’s still 50% that’s still left in that account that gets added to the next month’s profit distribution. And you’re going to keep on building that up and then you’ll take the 50% at the end of the next quarter.

As time goes on you’re just going to be able to see things. Number one you’re going to be able to see when you’re doing your analysis really you’re going to see, it’s almost like x-ray vision into your business. Because when you see listen if I want to take out a profit of 10% or, I mean, I recommend getting to a 20% level. But, okay, so if you want to take out a profit, let’s say your profit rate’s at 10%, you’d set it at 10%. You take your salary so you’re not changing your salary, you’re still getting that. Then you’re getting to your fixed expenses. And at the end of paying your fixed expenses if you go negative then there’s a problem in your fixed expenses. Because you can’t even cover your variable expenses so there’s going to be a problem in your fixed expenses. Take a closer look at what those fixed expenses are and maybe there’s areas you can start to cut, maybe there’s some things that you can start to get rid of in there. If you’re profitable after your fixed expenses are covered and then you’re negative after your variable expenses well guess what. You’ve got some variable expenses you need to take a look at. So it just gives you some x-ray vision as to where in your business you need to start, you know, analyzing in order to do that.

Now, at the end of the 12 month period you can then start taking a look at the profitable ratio that I talked about in one of the previous episodes, actually I think it was the last episode where I talked about the 40, 35, 25. What that’s doing is saying okay 40% of your revenue should go to owners or salary, 35% of the revenue should go to operations and 25% of the revenue should go to profit. You can actually keep those ratios in check because now you can pretty much pre-program that form so that every time you update it it kind of tracks what your ongoing ratios are and then at the end of the 12 months you can take a look at what your ratios are and then you can start making some good decisions from that.

So once you get it all set up it’s amazing how easy it is but it’s amazing how much information you can actually glean from those two, the solvency ratio and the profit distribution ratio and that accounting. It’s just amazing what you can glean from that and how you can run your business very, very simply.

Okay, now moving on to some marketing ratios. So this is an important component because the great thing about the style of marketing that I promote which is education-based direct response market and the great thing about it is you can track everything. And it really is just kind of paint by numbers. I mean, whenever I think of marketing tracking ratios I think of a paint by numbers because you know that if you follow the numbers by the end of that painting if you followed them properly you’re going to have a pretty cool looking painting. Well, same thing when it comes to your marketing. If you follow the numbers and make your decisions based on what the numbers are telling you not what you think, what you know, you’re going to make better decisions along the way.

So let’s just start at the very beginning. The first ratio that I think is an important one is really how effective was whatever marketing piece you sent out. So if you have a Facebook ad or if you have a Google ad or if you have a flyer that you send out you need to know how successful was that flyer in just getting read or just getting looked at. So, you know, and so the number you’re looking for if it was a flyer was how many people looked at it. Well, or looked at the piece of content that was being promoted in that piece. So what you can do is there’s a way you can set up your Google analytics to track the traffic that goes to one of your landing pages. Well, if you set up a specific landing page that’s only going to be seen by people who saw that flyer and followed the URL on that flyer then you’re going to be able to know, listen, I sent out 5000 flyers and this many people saw the flyer, that engaged in that flyer because that’s how many people actually found the landing page. Because remember they’re not going to find the landing page if they don’t know the URL. The only way they got the URL was by looking at the flyer. That can give you some insight as to whether or not your flyer was getting read. Same thing when it comes to Facebook ads, you know, in similar is was what the reach. I know, you know, it’s great on the online marketing because you can track all those details. But, you know, using that flyer example is a good example because you set up a landing page for that flyer and then that tells you how many people if you send out 5,000 it tells you how many. So you can track your ratio on that. So what that allows you to do cause one of the questions that we had was well what’s a good ratio. Well, a good ratio, honestly it’s kind of a, this is going to be a frustrating answer is it’s the best you can get it to be. It’s the highest number you can get. So there is no good or bad ratio. It’s just, there’s a better or worse ratio compared to a split test of an ad or a flyer.

So what I’ve done is if I have a flyer, I make two flyers. One week I send out one flyer to one list and, you know, you might use unaddressed ad mail where it’s a geographically targeted list based on some criteria whatever. So I know I’m sending out say 5,000 to this particular mail route. Then the next week or two weeks or whatever timeframe you want it to be you send out a different flyer to the exact same list. Now, what is it you’re changing. Well, when you’re doing split testing you only want to change one thing. So I might test something like, I might send out a flyer that has the exact same look and feel and everything’s identical except I might change one word in the headline or I might change the colour of the paper. So it’s only one change. So you make that one change then you take a look at okay, results for flyer number one and results for flyer number two cause we know we sent the same number of flyers, which one got more views. Which one got more people typing in the URL. Well, whichever one that was your ratio now, that’s the higher producing ratio. So that’s when you can say okay, this flyer now beat that flyer so now the next time I do it I’m going to send it to the same list but I’m going to do something different and I’m going to see if that made it better or worse. And you keep on refining that, that’s going to be able to do the first step.

Then you can also track things like okay, well now maybe you’ve dialed in the flyer and you know that the flyer’s starting to work because you’re getting, you know how many you sent out and you’re getting more and more views, people are going to the landing page, so that gives you some information. But now we’re going to take a look at okay, well, what’s your metric or your, the ratio that you’re using for the landing page. Cause remember maybe you got people to look at the flyer, maybe you got people to type in the URL but now when people get there how many people are actually requesting the content. Again Google analytics will track this for you. And the way Google analytics does it it says okay I know the landing page that you’ve got and I can tell how many people go to that landing page. But then you can put a little thing on the, on a thank you page. Cause when you put a flyer together once they’ve submitted—or sorry, not a flyer, when you put a landing page together once they go in and they request the information then when you hit submit it actually puts them onto a thank you page, sort of a thank you for your submission or whatever. Well, you can then tell Google to say look track how many people hit that thank you page. So there’s your ratio, you now know the people who went onto your form, you now know the number of people who actually filled out the form and then you know how many filled out the form and actually requested the content because this number of people actually hit the thank you page. And the only way they made it to the thank you page was if they filled out the form. So now you can see if I had 100 people look at my thank you page cause I knew 100 people typed in the URL then you can see well how many people hit the thank you page. If there were 25 people then you’ve got 100 people hitting the landing page and 25 of them went through so you now have a 25% conversion on that landing page. And that’s how you track it. And you simply say okay great now I’m going to do the same thing, I’m going to send out a flyer but I’m going to track a different landing page and maybe put a different headline or a different coloured headline or whatever the one thing is you want to track to see okay will that increase or decrease the number of people who are actually requesting the content. And so you can dial in that. Then once they’ve requested the content then you can watch well how many people if they requested the content now they’re on my email nurturing list. Okay, great, so now they’re on the list. Well, how many of those people are actually calling you for appointments.

Now, you know, obviously you want to get these numbers as high as you can, you want to get the conversions as high as possible. But the thing you’ve to remember is that this type of marketing, it can give you instant results, there are some people that are just so eager to get the information from you because they’re so motivated and they just figure, hey, you know, this guy’s got some great information, boom, I’ll give him a call. I’ve seen it, I’ve been actually sitting at my desk and I’ll see somebody, I’ll see an email come in saying hey somebody just requested content A. And then I know okay if they request content A it gets delivered to them and I know the autoresponder sort of sends them out an initial email. I’ve had within an hour of seeing that first one come in, I’ve received an email from somebody saying, from this person saying hey I’d like to get together for a meeting. And I can do that because I can track it all, I can see it all in my system. I know who they are, they’ve get added to the nurturing list, they get added to my database and as soon as then I get an email from that person I can link it to my database, boom, you can see that sort of progress. And I’ve had that happen where it happened sort of within the hour. And that’s for the highly motivated people who are really looking for that.

Not everybody is like that. Now, people are looking though because when you’ve attracted their interest with the content that you’ve put together they are looking, there’s something about that that’s interesting them. It’s not necessarily where they’re interested in buying right now but something about what you put together is interesting them and, you know, that’s where you want to kind of nurture that along. And that’s why the nurturing campaign is so important. You know, one of the things that the reason why we do this is because there was a great study that was put together that said of the people who end up buying your service or buying the product or whatever it is and they did some testing on this, the results really work out that of the people who buy over the next time period 15% of them will buy immediately or within the 90 days, 85% of them will buy within the next two years. So if you don’t have a campaign set up that will actually track that over the, track that and nurture those leads that you’ve been getting for at least two years you’re actually losing out on 85% of the people who look at your information or who request the information.

So your effectiveness could take some time but once you start then there’s this kind of funnel that keeps getting filled up. And then all of a sudden you get to a point where you, you know, you put an ad out there but then somebody maybe replies, then when you take a look at the appointment that you just got you realize wait a minute I’ve sent them so much information I’ve been just nurturing them along. Well, now you can take from that what was the piece that actually made them contact, what was the last piece I sent them because there was something in that piece that motivated them to actually pick up the phone and give me a call or pick up the computer and send me an email. So you can analyze that as well. But you’ve got to understand that it does take some time and that’s why the automation of this whole process is so important because if you don’t automate it you’re never to complete, you’re never going to follow through. You’ve got to put this together in such a way that it just runs itself, all you need to do is the upfront which is get the flyer, send out the flyer. Once that’s done the system takes over from there. And just, you know, keep on working that.

Well, then eventually you’re going to get a client from one of your campaigns. Now the great thing about this business is and this whole process is that number one, the costs in setting this up are so low. I mean, the biggest cost we experienced when it comes to our advertising is the actual printing and mailing of a flyer. I far prefer right now doing all my advertising online. Now, I know that not everybody’s online, not everybody in my target market is online so I do need to follow up with and support my online marketing with my, you know, physical marketing. But I do it in a sort of an education based direct response way.

So by doing that one kind of supports the other and what I’m finding is that, you know, people are hearing about me, I’m sending out nurturing emails, all this stuff is constantly going on. I’m sending out, if I’m, you know, put into a newspaper advertisement or, sorry, a newspaper article and I’m quoted in it I send that out. So people are seeing me in all different ways. The reason why I’m sending that information out is because I need to sort of nurture them along and say hey you know, I’m still active, I’m still doing stuff. Every so often I send out one of those nine word emails hey are you still looking for, are you looking for a financial planner, you know, and all that just kind of nurtures that along.

But you’re going to get a client from it and then you’re going to be able to go back and say here’s the client, I got some revenue. Track it back and say where did all this begin. And then it’s going to happen again and again and again. And by tracking that information cause, you know it’s not like you’re getting, you know, 25 new clients a month from this. It doesn’t happen that way unfortunately. I’d like to get it to the point where you can do that but in the type of online marketing that I do I can’t get the volume, I can’t get the reach because, you know, the way that I do it it’s very micro focused and I’m just focusing on putting my ad in front of somebody who has maybe liked a certain page on the—well, I mean, I’m limited by the number of people I can get to. So my biggest frustration is I can’t throw enough money at my marketing to really ramp it up. I’ve got sort of limitations on what’s going on with that. But anyway, there’s always ways of doing it and we’re constantly testing to try and get that.

My point is that, you know, it doesn’t take, it doesn’t cost a lot of money to do it this way and then when you get one new client the revenue you get if you follow a fee-based, the fee-based model that I promote, the revenue you get from that client over the next 12 months is enormous relative to the cost of acquiring that client. Sure, there’s a cost in time of setting this whole thing up but once it’s set up it just happens. And the cost involved in actually running a Facebook ad is, you know, is very, very low.

Now, what I find interesting as well is, and I talked about this in the academy, I had a discussion with the academy members and it was a coaching call and I said, you know, you all have to be what I call marketing aware. And marketing aware is where if you’ve don’t the nurturing and you’ve done all the testing and the monitoring of your marketing, you know which ads work and which ones don’t. You know what’s kind of the thing that’s garnering the most leads or the most attraction, you know which one it is. So if you have that in your back pocket, an event takes place that you can capitalize on, for example, for a while we were getting, you know, I think if you can get anything above, you know, in Facebook anyways, if you can get anything above say a 1% conversion of your, 1% conversion where you’ve got, you know, if 1% of the people who come and take a look at your ad request a piece of content that you’ve promoted, then you’re doing really, really well. Well, we then recognize there was a, kind of one of those news, sort of the investigative news reports that came out and in Canada anyways they went around and they shopped at a whole bunch of different financial institutions and they had hidden cameras on them and microphones and whatnot and they recorded the whole thing. Well, the press that that got was ridiculous, I mean, it was all over the internet, it was all over the news. It was crazy and they were basically saying, look, you know, there was all these financial institutions they went, did some secret shopping and they just got horrible advice and blah, blah, blah. And people were looking into it because they’re like well I wonder if the company I work with was one of those companies. And it was just, it was actually it was negative press for the industry which I wasn’t really too happy about. And I was actually talking with one of the people who was involved in that piece and he’d mentioned that he was interviewed for, and commenting on some of the bad advice that was being given. But what he did say after the fact was he said, you know, what they didn’t show unfortunately was all the good advice that was being given. There was much more good advice than bad but you know how the media works, they just basically harp on the bad advice. And they just say oh, you know, look this is the bad advice that was being given.

So it wasn’t that great. But, what I did was I recognized that now there was a buzz in the marketplace. So I targeted key pages. Now it could have been the page for the news company, so if it was, you know, if people were going online onto Facebook and they wanted to see the video they would go to that company’s Facebook page. So I targeted all the viewers or people who liked that Facebook page and I targeted them in my geographic region cause I didn’t want to deal with people who were in a different province. I wanted to deal with people who were local to my office. I put that ad in front of those people and I sent it out. Well, my conversion on that went, it quadrupled. It went from 1% which I thought was really quite good to over 4%. That’s huge especially since there were a lot of people who were looking at that. So we actually got quite a few leads that came in from that all because I had an ad that I knew worked. I put it out there, I put it in front of the people and it resonated. It was sort of in line and it resonated with the people because if it was, in that example it was about bad advice. So the content that we were promoting was how to choose a good financial planner. So obviously people who were looking, you know, it was kind of just in line.

Well, it worked like a charm and we got a lot of good leads from that and so our conversion went up really high. Well, that was because it was kind of, we were able to capitalize on kind of that wave, that buzz that was going on. So be marketing aware, get your core marketing pieces and know what your metrics are on those pieces so you can actually then benchmark it and say okay well I knew the first time I ran that we were able to get it up to around an average of 1%. But then as soon as I ran this and I saw 4% come through oh my gosh, I was in heaven. Well, guess what, we kept on running it, kept on running it. And you keep on running it until that starts to taper back down and then you can say okay people have seen it enough, we’re done.

So you can really track that information on a live basis. And it’s something that I really recommend that all of you do is really focus on what your numbers are and really get clear on what a good producing ad is for you. Keep on split testing it, keep on going through it and keep on doing all that information so you can try and get those conversion ratios up as high as possible and then be marketing aware for the different type of content that you have and try and find those little places where you can inject it in because chances are a good working ad in a buzz situation is going to just be a phenomenal working ad. And I tell you, I increased my results by 400% on that. So it was a really, you know, good executed structure.

Now that’s what I’m recommending you do when it comes to the marketing ratios. And that’s what I mean. So, you know, it does take some time when it comes to tracking, it does take a little bit of that time to get clear on what your ratios are but once you’ve got them then you can follow it through. As soon as you get one client, that’s the crazy thing about this is that it doesn’t take many new clients to make it all worthwhile. I mean, the reality is last year if we brought on just one new client from the marketing we did we more than 400% returned our marketing. Well, I mean, we took on 13 new clients last year and, you know, believe me it more than compensated for all the marketing costs that we paid.

That’s what’s called good investments in your business. So that’s what I want people to get to, I want them to really, you know, really dial their numbers in. And, you know what, it’s not an easy process, if this was easy, everybody would be doing it. But for those of you who are listening to this you can now start to realize that it’s possible and it’s easy to do once you’ve worked it through once. So focus on that.

Okay, so that sort of covers some of the questions on ratios. Now I wanted to sort of jump onto just a question that, from a newbie standpoint. So people who are newly getting into this, one of the questions was listen there’s so many credentials out there, which is the one I should really focus on to make it worthwhile for me. And which one is good to have, which ones are really not worth having. Where should I go, I just don’t know where to turn. Because it’s, you know, I have what’s called the curse of knowledge. I don’t know what it’s like for somebody new getting into the business to go where do I go, where do I turn. So I’m hoping this little discussion will sort of shed some light on that.

Now I do have some strong beliefs in the financial planning world. I believe that everybody who’s in this space who’s going to be holding themselves out as a financial planner does need to have credentials associated with them. It’s not required to actually make your business work because I know a lot of financial planners who aren’t credentialed. But I believe that the regulators eventually will say listen, we need to regulate this, there is a big push for turning the regulation into a profession and in order to do that there does need to be a certain level of compliance and if you’re going to call yourself something you better have proven your education on that thing. So that being the case my recommendation is that if you’re going to be getting into the fee-based financial planning world and you’re going to be following this type of methodology that I’m talking about through the podcast and through the academy then my recommendation is focus on your CFP first, your Certified Financial Planning license. That is the one that is kind of being seen as the gold standard or the proficiency standard for financial planning. Now I’m not saying it is the standard, I’m saying it’s being seen as the standard. There are other more advanced financial planning credentials you can get which will, I believe, support the core CFP. I don’t really feel that for, to be a good, to be seen as a good financial planner investment licensing or credentials around, you know, investment research and that sort of thing, the CFA, you know, those kind of, again they can support and they can actually, do a good job in supporting a CFP but the core one is going to be the CFP. So I would recommend focusing on that first and then as you build out your brand and as you build out your business and as you make your business an extension of you focus on the designations and focus on the credentials that are going to actually support making your business better. So if you are going down the road where you want to do more of the actual investment selection or security selection it’s going to be a good idea for you to get your CFA. If you really don’t have a lot of interest in that then don’t really spend the time on the security selection analysis designations. If you’re going to be going down the route where you’re going to be offering insurance to your clients then definitely you’re going to want to get some insurance licensing for sure to be able to offer the products. But you’re also going to want to maybe, you know, go down the route of being a CLU or something like that that’s going to give you some deeper understanding that can support your knowledge in that space, in the insurance space that will actually make you a better CFP.

So that’s kind of where I think it makes sense to go when it comes to the credentials. The CFP is probably the, you know, being seen as the gold standard, it is the one that seems to be the worldwide, the CFPs are, you know, all the different organizations are coming together and saying hey let’s work together to really make this sort of the recognized core credential for the financial planning space. So that’s how I would recommend that you move forward with that.

Now another, somebody asked me for, to sort of expand on who qualifies for my services, my financial planning services. And so I just thought I’d just sort of walk you through for me personally where, you know, where things go with our clients. You know, our firm, we do have other planners who are working in our firm who will deal with clients who maybe I shouldn’t be dealing with or really am not, don’t want to be dealing with so to speak. I tend to be right now focusing on my attention just strictly on business owners. That’s the area that I tend to be working in. Now if somebody who isn’t a business owner comes to us, you know, we may recommend another financial planner in our office meet with them. But they’re all following the same methodology and the financial planning process and all that. So, you know, it really just depends on where they’re coming from.

So for me I would be working with the business owner. So if I’m working with a business owner how does that sort of experience unfold. Well, we sit down, I go through, we have conversation with the business owner as a business owner and that really gets the rapport and builds the rapport for them recognizing, yeah, this guy is more in tune with my needs and concerns and whatnot because he’s a business owner cause he’s touching on points that really, nobody else has really touched on. Now, what’s interesting is, this goes back to the financial planning process that we talk about, is, you know, I’m not asking anybody to bring anything with them to their first meeting because I don’t want those details to get in the way of a good conversation. So I’m just going to be talking very generally about it because I want to find out more about who they are and what they’re looking for. And then we determine okay you know what we go through the first couple meetings, we determine it does make sense to move forward. And they say to me great I want to move forward. So we come back and we do a complete comprehensive financial plan. What I’m looking for in the plan is, I’m just looking to give them some clarity as to what they’re on track for and what, to give them some insight as to whether or not, you know, they’ll come back to me, if they don’t like what they’re on track for believe me they’ll tell you. And that’s exactly what happens. And they come back and say you know what I want this to happen. And so you’re telling me I can’t so what do I need to do. Well, that’s just where the financial planning conversation goes from.

So then once we’ve established what makes sense to them that they feel like, you know what, I am on track for now knowing what I’m on track for it’s in line with what I’m looking for, it kind of resonates with what I’m looking for. Then now the question becomes how do I make that a reality. And so that’s where the implementation comes from. And generally what we’re going to be doing is we’re going to be aligning ourselves with an investment counselling firm or private portfolio manager who we can turn to to say look, we’ve found the person or the firm who we feel is going to best handle the management of your investments. Because at the end of the day you’ve to invest your money, you’ve got to put it somewhere. So we get very clear on what we need the investments to do, what the objectives are and then we find the right firm for that. Now we charge an investment oversight and implementation fee so we again charge a fee for monitoring that and making sure that it’s all integrated with the financial plan.

We also then go through and do a full analysis, a needs analysis on insurance, living benefits, life insurance, that sort of thing. Really just to get a clear understanding about, you know, are there any, is this client exposed in any way, are there any risks that they need to be aware of. And that allows us to really just, you know, clarify for the client that, yeah, we’re touching on everything, we’re making you aware of all the areas that we feel you should be concerned about. Our question back to them is are you then concerned about the areas we’ve brought up. Generally what they’re going to say is yes or no. And if they say yes then we say then we need to dive into it further to see if we can’t find solutions that can alleviate this concern. You know, maybe it’s a life insurance issue, maybe it’s a disability insurance issue, maybe it’s a long term care issue. Whatever it happens to be we’re then going to go through that analysis.

And so we identify those opportunities from the planning sessions. The planning meetings and the planning conversations, that’s where we sort of oversee everything, but then we can identify what needs to be implemented, then we have separate meetings that we book for the actual let’s go through what the implementation options are, let’s look at the details and make sure that we’re putting the right solutions in place for them.

And that’s how it sort of all unfolds, it just, you know, it’s the planning process, it allows you while you’re doing that planning process you’re going to start to recognize opportunities, you’re going to tag those opportunities on your system so that you can monitor them properly and then, you know, maybe all the opportunities don’t get dealt with in the first year. Maybe you’ve recognized some opportunities that are just, you know, if you keep on piling them on, maybe it’s too many things and too much can be a bad thing. So you need a place to kind of warehouse them and bring them up in future review meetings and that’s exactly what we do.

So I hope that gives sort of a clear understanding about, you know, how the whole process unfolds for me anyways. And then when we go through our review meetings with clients we just, you know, go through the review, update their plan, see if there’s any areas that we’re concerned about. If there are we have the conversation and then we address those concerns.

And that pretty much, you know, that kind of covers things. I mean, there are some other questions that have come in but as I said I want to kind of keep this, the shows to a bit of a minimum now. I don’t want to have them go as long. We’ve had some feedback where people are saying, you know, hey the shows are great, love the content, they’re just really long. So what we’re going to try and do is we’re going to try and keep them down. We’re going to aim for about the 30 minute mark, chances are, you know, knowing me and how I tend to talk quite a bit we’re going to go beyond that as in today’s episode. You know, right now I’m up to 49 minutes in this little talk. So we missed the 30 minute mark so I’m going to do my best to try and keep them down to the 30 minute mark so we can kind of keep the focus on that. But, hey, I got a lot to talk about so we’re going to, you know, I guess that’s not a bad thing.

So anyways, that is it, that covers some of the information. So if you have any other questions from this episode or from any other episodes or just questions in general, please send me a note, make some comments in the show notes. We’ll definitely take a look at those and hopefully answer any of these questions for you in upcoming episodes. But, you know, what it’s all possible and it’s all doable and I urge you to get out there and build yourself a better business. With all this information there’s no reason why you can’t do it.

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Copyright © Scott E. Plaskett 2014 All Rights Reserved. No part of this document may be reproduced without Scott E. Plaskett’s written permission.

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