If you are cold calling now; if you intend to start cold calling; if you have to cold call and don’t want to—then you need to read this article very carefully.
I am defining the activities and stats you must control if you are to succeed. Sales is a numbers game. These are the numbers. I have also posted a stat sheet, yours for the taking. This free resource is at www.billgood.com/coldcalling.
Key Concepts Defined
Hot Prospect: Someone very interested, financially qualified, willing to begin the sales process by setting an appointment now. No appointment = not hot.
Cherry: A prospect who is interested, financially qualified, willing to receive investment literature. Mostly, your cold calling should focus on finding cherries, because cherries, properly developed, become hot prospects.
Appointment Set Rate: The percentage of cherries required to get a hot prospect. 10% means 10 cherries are required to set one appointment.
Hot Prospects/Sale: This is the number of hot prospects required to produce a sale. The best salespeople I know rarely close more than 50%. Rookies typically are in the 5% to 10% range.
Cherries Per Hour: This is how many cherries you can generate per hour. Professional grade is 2–3. Failure is generally 0.5 or even worse.
The Failure Zone
We are going to work backwards by starting with an annual goal, say $5 million AUM.
I will estimate how much selling time is required for you to hit the goal. Then I will figure out how much prospecting is required.
When the time required exceeds the amount of even an unreasonable workweek of 60 hours, we know we cannot succeed. Hence: failure zone.
By the way, if you thought building a financial services practice is a 40-hour a week job, you dream. It is at least 60 or more for at least two, or even three, years.
I am going to further assume you cannot afford seminars. Direct mailing is out of the question. Your “connections” are few and/or poor. It’s cold call or else.
I have built two models for your intense study. Initially, each will result in failure. Let’s call these models the “cold calling failure zone.” You cannot succeed if your stats fall in this zone. By applying failure analysis, we can then determine what you must do to succeed.
My first model assumes you intend to pursue a higher net worth clientele. Your average account size is $500,000. For most rookies or junior advisors, this is a fantasy. So let’s also build a second model based on average account size of $100,000. For those in rural or small town markets, this is reality.
Here are my assumptions for my failure zone models.
I am assuming, correctly I believe, that it is easier to open a new client relationship for $100,000 than $500,000. This is reflected in the higher closing rate and appointment set rate. Regarding the 10% closing rate for $500K accounts, that is an awful closing rate. Again, we have to start somewhere. An “awful close rate” is a decent assumption for someone new in the business, or needing to ratchet up to the next level.
Let’s take a step backwards and figure out how much selling time we need. I’m going to assume it does not take any longer to close a $500,000 account than it does a $100,000 account. From lots of narrative data, it might take less. However, we’ll assume it doesn’t take any more.
First appointment: 2 hours.
Half of your first appointments will produce a second appointment.
Prep time for second appointment: 2 hours.
Second appointment: 2 hours.
Half of your second appointments require a third appointment. Since most of these will be closing calls, I am assuming zero preparation.
To open 10 accounts with an average of $500,000 AUM: 425 hours or 8.5 hours/week.
Fifty $100,000 accounts: 1062.5 hours or 21 hours/week.
Let’s take another step backward. With up to 21 hours/week invested in selling, we could have a problem. Let’s push our analysis back into lead generation.
Now you see why this is a failure zone. There are only so many hours in a week. We need 121 hours to hit the goal on the $100K account plan, and 78 hours on the $500K plan. My inner southerner says, “this dawg don’t hunt.”