©2018 by Red Rock Strategic Partners.

Organic Growth: Create a Unique Goal to Meet Your Needs

July 26, 2018

Organic growth often refers to the growth in an advisor’s client base that did not occur because of an acquisition of another advisors’ book or through marketing and referrals efforts. Expressed another way, organic growth is the internal growth or the growth from its existing client base—not from the clients they acquired during the period.

 

Is Organic growth good?  Should it be the top goal of an advisor, year after year? What is the right balance between growing your client base from existing clients versus gaining new clients from external marketing and referrals? My experience is that many advisors rely on organic growth to meet their professional goals.  The most successful practitioners create goals to meet their unique needs.  It’s a bit like Goldilocks, you need just the right balance.  Relying too much on organic growth is a dangerous practice.  Given that an “average” advisor loses 5-10% of their clients in any given year due to all kinds of attrition, one is going to be challenged to stay even.

 

On the other hand, spend too much time on generating new clients and your service levels could drop and the attrition expands.  So what is the right balance? To come up with the right answer for your practice you must revert to good old basic math!  I am reminded of two mathematical principles:

 

  • The power of loss avoidance on performance - how difficult is it to replace a “good client” if they leave?

  • The power of compounding - how important is a new client who will grow with you over an extended period?

 Where does this leave us? My experience and advice is threefold:

  1. Predetermine your desired growth rate. If you want to grow at 10% and you have 10% attrition, then your true growth rate needs to be 22.2%!

  2. Protect your “A” clients at all cost. Can I reduce that attrition rate to only 5%? Deliver a consistently high level of service to these key clients.

  3. Organic growth can only take you so far! Turn on that marketing and referral machine now!

 It’s time to face the reality of our or any business. To survive you must grow. Margins are being squeezed. Without a sound strategy to grow your business, the laws of negative growth take over and eventually will make you obsolete! Tend your garden accordingly and see it continue to grow!

 

 

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