With summer here, many firms are planning retreats beginning to set growth goals for next year. It’s the perfect time re-think your goal-setting process. Don’t just think in terms of acquiring new clients when setting target numbers; it’s important to evaluate all factors that will contribute to your final growth goal.
- Average Useful Life of Clients: From mergers and acquisitions to changes in management — there are a number of factors that will lead to lost clients. Every client has an average useful life cycle. If your firm’s average is ten years, that means on average your firm will lose 10% of your clients every year. If your firm’s average useful life is 15 years, you can expect to lose 6.7% of your clients per year.
- One-Time Projects: You should also consider the amount of one-time project work your firm does in one year. Typically this averages 10-20% of a firm’s total volume.
- Net Growth: The net growth you want to achieve this year.
After evaluating these three factors, you can determine your growth goal. For example, if you have an average client life of 10 years, 10% of your revenue is one-time projects, and you want to grow by 10% next year, you really need to generate 30% of gross new business to achieve your 10% new growth goal.
As you can imagine, it takes a lot more activity to generate 30% gross new business than it does 10%. So it might be helpful to break down your goal and determine exactly what you’ll need to do to realize it.
- How many new clients will your firm need to secure?
- How much additional work to current clients will you need to sell?
- How much of a price increase will you need to consider?
When you actively define you growth goals with these three components in mind you can easily assess how realistic or aggressive your goal is. Tracking each of these on a quarterly basis will give you the ability to measure how you are doing against your overall goal. If one of them is lagging, you can increase activity within that component or adjust to make up the difference another way.
Be realistic when setting goals. Make sure your firm can generate enough activity — and that you have enough money budgeted in your growth plan — to achieve your goal.