“Retention explains profits better than market share, scale, cost position, or any of the other variables usually associated with competitive advantage.”
— The Loyalty Effect, by Frederick F. Reichheld
I was driving into Boston in the middle of a snow storm last week, on my way to an early morning business breakfast. Feeling pretty bad already — cold hands, cold feet, poor driving conditions and forced to put on a suit at 6:00 in the morning — I decided to accentuate my misery by tuning into National Public Radio at the height of its winter fundraiser.
Despite the fundraiser, I’m happy to report that I did manage to catch one actual news story: One of Boston’s oldest and most prestigious law firms had announced that morning that it would be closing its doors forever, after 106 years of operation.
I won’t mention the firm by name so as to spare their feelings (not to mention so as to spare us getting sued by an army of out of work lawyers), but according to the report, the managing partners took a look at 2003, and decided that they could not sufficiently replenish their dwindling client base in the coming year. Unable to fill the leaky bucket fast enough, they saw no choice but to disband.
Frankly, I was shocked. How was it possible that a firm founded in 1897, and that had gone on to serve thousands ( tens of thousands?) of clients over the next 100+ years, was going out of business because it couldn’t generate enough client activity?
Was it because nobody needed attorneys anymore?. Was it because some scandal had erupted involving the firm? Was it because international corporations had set up law production in other countries where the legal help was cheaper and priced them out of the market? No, no and no. So what happened?
I have no idea. But I have a pretty good idea of what didn’t happen.
If my experience with other professional service firms is any indication, I’m going to guess that they spent too little time paying attention to their existing relationships.
Because after 106 years selling legal services — which like every other professional service is more about selling relationships than it is about having some kind of secret formula that your competitors can’t get their hands on — you should no longer be in the position of looking for more business. It should be looking for you.
The most valuable, sustainable, defensible asset that any professional service business has is its existing relationships. Everything else (everything else) about you and the way you do business can be copied almost overnight by a competitor. What they can’t copy is 106 years of relationships.
So with the new year staring us all in the face, I have three suggestions for you on how to make sure that 106 years from now (at about the time the Big Dig is finally completed), your business is in an even stronger position than it is today:
1. Get Systematic. Develop a system for staying in touch with your house list (via email, phone, hand written notes, print, and face-to-face conversations), correlating your effort / expense with a ranking that you give to each of these people based on their potential to contribute to your business. Spend less time filling the bucket and more time repairing the holes.
2. Evaluate and Fix Your Current Approach. Take a look — from the outside in — at every interaction point you have on a day-to-day basis with your house list. From your marketing collateral, to your web site, to your contract renewal notices, to your invoices, make sure that you’re doing all you can to offer a consistent, clear, welcoming face to everyone who comes in contact with you and your firm. Spend less time looking for strangers and more time taking care of friends.
3. Get Your Company E-Newsletter Out The Door On Time, Every Single Month. Many of you (don’t make me name names), start up great newsletters, but by about month five, begin slacking off. I know it takes time, but when you look at the other things you and your staff do in the name of “growing the business,” your newsletter is right up there as one of the most scaleable, cost effective activities you can undertake. Throw some other tasks overboard and publish your E-Newsletter on a regular basis.
Bottom Line: Relationships are organic — they take time to build. The bad news is that you can’t build them overnight. The good news is that neither can anybody else. Get going building yours today, and before you know it you might have a 106 year head start on your competition.