Summer is in full swing, but it’s not too late to start developing a solid business strategy for the Fall, so we’ll round out our snapshot of “A Three-Phase Program to Fast-Track Your Design Business for Profit.” Dr. Tami Hausman participated in the panel at the 2015 AIA National Convention in May, along with Lisa Henry, CEO of Greenway Group, and Steve Whitehorn, managing principal of Whitehorn Financial Group.
In this installment, Steve stresses the importance of strong relationships to build a successful practice.
Get into The “Relationship” Business
The financial success of any firm is built upon its personal relationships. However, many firms often fail to realize this basic truth. Firms spend an overwhelming proportion of their marketing budgets on the pursuit of new clients, rather than nurturing existing connections. This approach is outmoded and counterproductive, as projects from repeat clients constitute the majority of many firms’ businesses.
According to Donna Fenn, contributing writer for Inc. Magazine, acquiring new clients can be costly, while existing relationships are more reliable and profitable. In fact, repeat clients spend close to 70% more than new ones. By investing in its existing clients, firms earn trust and fortify alliances. For example, if an architect needs to renegotiate a fee during the design process, a long- term contact is more likely to give approval than a first-time client.
Trust, confidence and chemistry
Good relationships are about three things: trust, confidence, and chemistry. Firms benefit greatly from nurturing their best connections and letting go of those that aren’t working. If the chemistry isn’t there, then let it go. Parting ways with a big project client may seem counterintuitive. However, difficult clients waste resources and diminish profits.
If you’re still not convinced, think of it this way: The Economist’s “80/20 Rule” demonstrates that 80% of any businesses’ profits are generated by 20% of its customers. By keeping strong client relationships and discarding unprofitable alliances, firms free up time and energy to devote to their top 20% clients, resulting in greater financial stability overall.
Good relationships equal profitability
Architects can’t afford to spend time on projects that aren’t working, especially as they’re subject to unique pressures that often result in diminished budgets and strained cash flow. By recognizing that client relationships directly influence profitability and paying close attention to their best assets, firms can move forward with stability and confidence.
Steve Whitehorn is the author of the upcoming book, Ensuring Your Firm’s Legacy, and Managing Principal of Whitehorn Financial Group, Inc. The firm is the creator of The A/E Empowerment Program®, a three-step process that helps firms create a more significant legacy and empowers them to achieve greater impact on their projects, relationships, and communities.