Balancing Sales and Client Retention

 

Renee Conner, CEO, PensionPro and  Jill Dennis, Partner, Dunbar, Bender & Zapf 

Ask any business owner to choose what’s more important; existing client retention or new sales, and you’ll find the answer is both. Sales and retention are equally important. Of course, sales teams will argue that new business is more important, and operations teams will argue that retention is key; but the truth is that both are essential to the operation of a well-run company. Showing sustainable growth and a healthy bottom line (EBITDA) are the two basic metrics of your firm. Ask an investor if they would rather invest in a company with 0% growth and 20% EBITDA or one with 20% growth and 5% EBITDA and the answers will vary. But offer a third alternative with 15% growth and 15% EBITDA and most will choose this option over the other two. Retention feeds the bottom line while sales increases revenue. Both are equally important.

Retention is truly key. For every $100 in revenue lost, you need to sell $200 in new revenue to have $100 in growth. So, retaining the original $100 makes all the difference. Additionally, new business acquisition is expensive. Estimates vary, but most TPA’s state that after absorbing all the time and effort through the sales and conversion process, it can take anywhere from 2 to 4 years to become profitable on a plan. Sound high? Don’t just estimate the cost of time and effort getting the plan where you were ultimately hired. What about all the proposal meetings, design illustrations, marketing materials, events and sales staff for all the prospective clients that you don’t win? Win or lose, they all cost time and money. We many times assume that the costs of a new plan end at conversion. Depending on the depth of your conversion process and requirements, administering a plan for the first time is more time consuming than working on a plan year after year. Tracking time is essential for understanding the full cost of new business.

So, if you offer excellent cost-effective service, you won’t lose plans, right? Wrong. Not all plan loss is within your control. If you are lucky and very efficient, the majority of your plan loss should be due to merger and acquisition, plan termination, law changes or corporate bankruptcy. However, the most exceptional, cost-effective, quality service in the world cannot change the normal cycle of business. Customers will still be lost, so growth is imperative.

While we can’t control plans lost due to normal business cycles, we can avoid losing plans due to service issues. Hire and train quality employees to identify and report service issues by teaching excellent customer service skills. Survey your clients annually to give them ample opportunity to critique your service. Respond to inquiries promptly and with an open mind to change your service delivery. Embrace modernization; just because something has always been done one way doesn’t mean that it’s still the best way. Use software to streamline your process and focus on ways to make things easier for the client.

So, what about sales? How do we retain existing clients and generate new business at the same time? If retention is key, then growth is imperative. Since we know that in the best scenario, good TPAs will lose clients, growth is essential. Hire dedicated staff to focus on the sales process and the maintenance of referral relationships. Treat your referral sources as if they were clients by implementing routine communications and proactive outreach to keep your relationships healthy. Monitor the activity of referral sources by tracking, not only the plans that they have with your firm, but the date of the last plan that they referred. If you have a number of plans with a single referral source, but you haven’t seen a new plan in years, ask where the new business is going. Do the same tracking for proposals so that you understand if a referral source has dried up. Also, don’t just measure the number of new plans you added in a year, look for the new referral sources you may have won. Expanding your referral base is important for future growth.

Also, don’t be afraid to ask for referrals from your existing clients. If you are good at servicing and retaining your clients, it can flow into new business. Many of your plan contacts belong to HR groups or committees that might offer opportunities for new business.


 

PensionPro Business Demo

Jill and her team use PensionPro and PlanSponsorLink to track sales and service current clients. Join a one-hour demo of PensionPro Business with the PlanSponsorLink Add-On to see how you can do the same.



By:
William Renninger
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