Sometimes clients become friends. You are a benefits professional. Your primary focus are business owners. Some have become friends. Business has gotten slow and they need to make some hard decisions. You can help them both in your role as a benefits professional and friend. Let us look at how.
What's all this talk about business getting slow, you ask? Isn't the S&P 500 up almost 5% year to date? Doesn't it look like interest rates are coming down? Doesn't that mean the business climate is good? Drive around your local area. Do you see empty storefronts? Have you seen businesses closing? Are clients complaining business is slow? Some businesses are finding it tough to get by today.
Let us look at a dozen potential bad decisions your business-owning client might be about to make. When looking at why these are bad decisions, you must maintain the belief this is a rough patch, but business will get better.
- Reorganizing. From your employee's viewpoint, this means layoffs. It drains morale. Your best employees sense they are not valued and the company does not value their loyalty. They start looking elsewhere for more secure employment. Consider: Talk with your banker about getting through this difficult period. If you work with a local bank, they likely understand your business almost as well as you. Perhaps you can use this as an opportunity to hire skilled, but disenchanted employees from a competitor doing layoffs. There are other ways to avoid layoffs, such as a hiring freeze or not replacing retiring employees immediately.
- Delaying payment of bills. A strategy cash-strapped business owners often adopt is stretching out payment on money they owe, while pressing people owing them money to pay quickly. One is bad, the other not so bad. Consider: You need to pay your bills on time. If you are a late payer or default, this can damage your credit rating, cost you interest or make you subject to stricter terms in the future. One way of encouraging prompt payment is to offer a small discount for bills paid in advance of the due date.
- Raising goals before salespeople get bonuses. Many firms maintain a salesforce where a small salary is paid and the majority of their compensation is on commissions or bonuses. Sometimes the salesforce get bonuses when the group exceeds the monthly sales target. When business is slow, there is the temptation to raise the sales targets. This brings additional increased revenue to the company, instead of sharing it with the sales force. Consider: Setting goals no one can hit causes problems. Some salespeople decide "the end justifies the means" and deceptive sales practices are used. Others quit and move to a competitor. Their good customers are now your good customers. There are other ways of increasing sales. This involves talking with your customers, learning what they need and trying to meet that need.
- Raising prices. When business is slow, it is tempting to increase your pricing so the same volume of business will cover your expenses. Unfortunately, the higher pricing reduces your volume of sales. Consider: Try these two approaches: First, it might make sense to raise prices, but the customer needs to know if there is any benefit to them. The financial services firm raising prices might have put in real time pricing for clients checking prices and executing trades at home. That is a benefit. What are the reasons you are raising prices? Are you raising them less than your competitors? The second approach is to keep your pricing stable, but reduce your costs. A local restaurant does that well. When beef prices are up, more pork entrees are added to the menu, because pork prices might be lower. You are keeping pricing stable while others are pushing prices up.
- Measuring everything and watching employees. Frederick Winslow Taylor is considered the father of time and motion studies around the 1880's. The idea was you could improve efficiency if you monitored every action of your employees and developed processes they would follow. Today, managers might put cameras everywhere or monitor employee internet activity to confirm they were working 100% of the time, not slacking. You can see how this is demoralizing. Consider: Using the logic optimally designed processes get more work done, how about asking your employees how their tasks might be done more efficiently? Their firsthand knowledge is valuable. This might lead to the design of better workplace procedures with the added benefit of employee buy-in.
- Taking away employee benefits to save money. Benefits cost money. You are in the business of selling benefits. Some come through your firm, others from within the company. The business might give employees a company discount on buying the firm's products or free taxi rides home when they work late at night. Consider: Cutting benefits will hurt recruiting and employee retention. Research shows people often choose an employer and stay because of the benefits on offer. There are ways to save money on benefits through making small changes, like modifying travel expenses, employee parking or work from home policies. You are still keeping the high profile benefits in place.
- Reducing hours the business is open. You can make a good case for reducing hours your business is open. Closing during a time when you have little business can make sense. The downside is you are asking customers to conform. Restaurants might decide to be closed on Mondays, a traditional slow day for business or eliminate lunch service, opening in the early evening. Consider: Let us stick with the restaurant example. There are people who want to eat out on Mondays. If everyone except you is closed on Mondays, you are the only game in town! If you offer discounting on Monday or "bring your own wine" (assuming that's legal) you can give people a reason to dine out on Monday!
- Leaving longtime suppliers to save a little money. You might be losing customers because they say "I got a better deal" and they buy elsewhere. Shopping for the best price on commoditized products can make sense. Consider: People stick with suppliers for several reasons. Put another way, cost is often the last reason businesses change suppliers. You might shop around, talk with your longtime supplier and ask if they can work with you on price concessions because business is slow. Years ago, when the stock market was doing badly, some financial advisors explained to clients they were reducing account fees as a concession to clients.
- Continuing to take the same amount of money out of the business. You are the owner of the business. Things have slowed down, but your personal expenses are still high. You cut expenses at work, but still take out the same amount for yourself. Consider: This might build up debt the company owes and needs to be repaid. It can make more sense to take a pay cut yourself and let employees know you are making that concession for the future viability of the business.
- Deferring maintenance. You have been in stores that are dirty. The shelves are poorly stocked. The walls need repainting. There can be more serious problems. Putting off repairs might sound like a way to save money. It is not a good idea. Consider: Research shows putting off maintenance might push up those costs later on, perhaps as high as 600%. Even if you feel it must be deferred, at least try to keep the customer facing areas as inviting as possible.
- Dropping discounts connected to customer loyalty programs. Airlines invented frequent flier programs. Hotels have loyalty programs based on points. Supermarkets want you scanning for loyalty card when shopping. There is a benefit, which motivates the customer to comply. A restaurant might be letting customers earn points towards free meals or cash back. If you eliminate the program, you save on those free meals. Consider: Eliminating the program is a bad idea. It brings customers through the door more often. You gather valuable data concerning customer's buying trends. You might scale back or change benefits, but highlight the ones you are keeping and how the customer gains.
- Passing along increased costs. You have seen this a lot in local businesses. Their costs went up, so your costs go up. This might be a big issue in construction and contracting. Many consumers think it's an excuse to raise costs and keep them high. Consider: Customers understand prices are going up. It is important to be transparent. A good strategy can be to explain where prices are going up, coupled with where prices are held the same or even going down. The supermarket Lidl uses signage to show which items have price reductions.
Related: Raising their game: How brokers can sell benefits (and help clients boost retention)
Your business-owning client can find themselves in a difficult situation. You want to be part of the solution, not part of the problem.
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Bryce Sanders
Bryce Sanders, president of Perceptive Business Solutions Inc., has provided training for the financial services industry on high-net-worth client acquisition since 2001. He trains financial professionals on how to identify prospects within the wealthiest 2%-5% of their market, where to meet and socialize with them, how to talk with wealthy people and develop personal relationships, and how to transform wealthy friends into clients. Bryce spent 14 years with a major financial services firm as a successful financial advisor, two years as a district sales manager and four years as a home office manager. He developed personal relationships within the HNW community through his past involvement as a Trustee of the James A. Michener Art Museum, Board of Associates for the Bucks County Chapter of the Fox Chase Cancer Center, Board of Trustees for Stevens Institute of Technology and as a church lector. Bryce has been published in American City Business Journals, Barrons, InsuranceNewsNet, BenefitsPro, The Register, MDRT Round the Table, MDRT Blog, accountingweb.com, Advisorpedia and Horsesmouth.com. In Canada, his articles have appeared in Wealth Professional. He is the author of the book “Captivating the Wealthy Investor.”
