Marketing and Sales Alignment: Driving the Eight-Figure Exit

Have you ever considered the relationship between your RIA’s marketing and sales departments? Are they working in harmony to achieve the same goal, or do they operate as separate entities that occasionally cross paths? Marketing and sales alignment is an essential element in creating sustainable growth for the eight-figure exit. In this entry, I’m going to explore the relationship between sales and marketing, as well as some helpful metrics you can track to develop much-needed synergy.

Follow Along With The Financially Simple Podcast!

This week on The Financially Simple Podcast:

• (00:55) Common sense definition of marketing

• (02:44) The brass tacks of sales and marketing

• (04:27) Some key metrics

• (08:34) Factors that impact your churn rate

• (12:38) What is your break-even point?

• (14:14) Marketing doesn’t work in a straight line

• (17:27) Create a feedback loop

Marketing and Sales Alignment: Solving Common Pain Points

I’ve often said that being a business owner isn’t for the faint of heart. You work long hours, miss out on important life events, and take on more stress than anyone has a right to. While no two businesses are exactly alike, you can be sure that they all have one thing in common… pain points. The RIA space is no different in this regard.

Every RIA faces its unique set of pain points, and these challenges often revolve around:

• Not enough qualified leads. It isn’t enough for your marketing team to simply generate a list of names. If the leads your team is getting have no reasonable chance of becoming a client, it creates inefficiencies in your sales process. Likewise, this will damage your firm’s close rate.
• Client attrition. Misalignment between your sales and marketing departments can lead to greater client attrition. Without an effective and concerted nurturing campaign, you run the risk of losing clients you worked so hard to get.
• Poor ROI on your firm’s time and resources. Silos between your marketing and sales teams lead to stagnant growth and can be costly. Without the necessary synergy between teams, the eight-figure exit will likely remain out of reach.

These are just a few of the pain points that can stem from sales and marketing working independently of one another. You see, when your sales and marketing teams work together seamlessly, incredible things occur. Metrics soar, costs decrease, and business life cycles become more concise. In fact, sales and marketing alignment can lead to a 38% higher sales win rate. So, how can you create marketing and sales alignment in your RIA? Let’s explore some key metrics that can help foster alignment.

Understanding Client Lifetime Value

Now, I’ve covered the Client Lifetime Value (CLV) metric in the past, but it’s worth revisiting. Basically, CLV is the total worth of a customer to your business over the entire relationship with your firm. Instead of merely looking at individual transaction values, CLV considers all potential transactions during the client relationship.

For example, let’s say Client A engages your firm for personal financial planning. Meanwhile, Client B engages with personal financial planning, business planning, and retirement planning. Both clients remain with your firm for five years and they each have a net worth of $750K. Which one offers your firm a greater CLV? Clearly, it’s Client B because they utilize more of your RIA’s services. But how do you calculate CLV?

Annual Revenue Generated by Client x Duration of Client Relationship – Cost of Acquisition & Service = CLV

So, let’s look at Client A once again. Client A generates $7,500 annually based on a 1% of AUM fee. Over five years, that’s $37,500. But let’s say it cost you $10K to acquire Client A and you spend around $1,500 per year to service their account. That leaves Client A with a $20K CLV. So, why is this information important when working to create marketing and sales alignment?

Why is CLV important?

Some of you might look at this as “getting in the weeds,” but the reality is this… CLV is the compass that guides your business strategy. Understanding your client lifetime value enables you to:

• Determine who your most profitable clients are.
• Identify key traits and characteristics among your most valuable clients so you can create detailed personas, allowing you to more effectively reach prospects like them.
• Make accurate financial projections.
• Set data-driven limits on client acquisition costs.

When retaining an existing client is five times more cost-effective than acquiring a new one, CLV becomes a critical metric. Supporting this is research by David Reibstein, Professor of Marketing, at the Wharton School at the University of Pennsylvania. Reibstein’s research showed that the probability of selling to an existing customer is up to 14 times higher than the likelihood of selling to a new customer. Which brings me to my next point.

Client Retention: The Necessity of Nurture Marketing

Friends, I can’t tell you how many times I’ve encountered business owners who throw all of their resources at client acquisition, in an effort to fuel growth. Of course, you need to acquire new clients for healthy and sustainable growth. However, ignoring those who are already in your book is an error that could cost you the eight-figure exit. In fact, studies show that increasing customer retention by 5% can boost profits by up to 95%.

You see, marketing and sales alignment also requires a healthy balance of acquisition and retention. Client retention, often referred to as the “churn rate,” is a powerful metric for determining client loyalty. Knowing your firm’s churn rate helps you identify weak points in your sales and marketing processes.

Related Reading: Top Four Reasons Clients Leave an RIA

Why do clients leave their advisors?

1. Poor Communication: 85% of clients say that their advisor’s frequency and style of communication influence their decision to stay.
2. Perception of Value: With investment apps and a wealth of knowledge at their fingertips, many investors believe they can achieve better returns on their own.
3. Dated or Lagging Technology: Many investors choose firms based on the digital experience they offer. Clients want convenience and accessibility.
4. No Personal Connection: 25% of clients say they are willing to leave an advisor they don’t feel a personal connection with. In fact, “Clients are more comfortable and more likely to continue their relationship with advisors who are able to integrate the financial and the personal into their financial advising practices. Those advisors who don’t will likely face limitations in the advisor-client relationship and may find that they are ultimately unable to satisfy the client,” according to Dr. James Grubmann of the Wharton School.

In the RIA industry, client retention is generally strong—97% according to the 2022 RIA Benchmarking Study by Charles Schwab—but understanding why clients leave is essential. Data like this can inform your sales and marketing strategies, enabling you to strike a balance between retention and acquisition. But how do you tie metrics like CLV and client retention rates together for the sake of market and sales alignment?

The Break-Even Analysis and the J-Curve

Friends, marketing ROI isn’t like other areas of your business. It doesn’t move in the same way or follow the same timeline that other investments do. This is especially true in the RIA space where you won’t always have a “one-to-one” result. This is where the break-even analysis comes in handy. I remember the first time I spent $100K in my company. My expectation was that a $100K investment in my firm would lead to $100K in new revenue.

Of course, this wasn’t the case. Instead, I made a large initial investment in order to attract a couple of new clients who wouldn’t “pay for themselves” until years later. You see, the J-curve approach shows an initial loss followed by a dramatic gain. Marketing investments may not bring immediate returns, but with time and persistence, they can yield substantial results. Therefore, you want to calculate your break-even point beforehand. Doing so will help you properly allocate resources to cover your business until the initial investment has been recouped.

Wrapping Up…

Friends, marketing and sales alignment doesn’t have to be complicated. These metrics are the tools you need to create a strategic vision for your RIA’s sales and marketing. By uniting these departments and aligning their vision, you can facilitate growth. Additionally, synergized sales and marketing departments can become more efficient in lead generation and closing, helping you nurture connections and turn leads into loyal clients.

Look, I know life is hard, but life is good. We are so blessed! Working to align your marketing and sales efforts to drive sustainable growth that can lead to the eight-figure exit can be frustrating. It doesn’t have to be. By tracking a few shared metrics and making data-driven decisions, you can make sales and marketing at least financially simple. Hey, let’s go out and make it a great day!

Unifying your sales and marketing departments to become more efficient and drive toward the eight-figure exit is a difficult proposition. Especially when you’re trying to maintain a successful RIA practice. Let us help. Reach out to our team to learn more about how we could help you reach your goals!