After Scott Hanson, CFP®, consulted with employees of a local Sacramento Calif. firm on early retirement, the number and quality of new clients caught his attention. He and his partner saw the similarities of the workers and realized that focusing on these employees would lead to a successful practice. Indeed, that focus led to creating the Hanson McClain Retirement Network, a network of over 100 independent advisors.

 

Even if you never focused your practice, your clients probably have some similarities because your style is comfortable for them. To uncover these similarities, examine the characteristics of your top clients. List the following across the top of an Excel spreadsheet: “client name, employer, industry, neighborhood, referred by, trade/civic association, hobbies/interests, other.” Next, complete the form by filling in the information for each of your 25 or 30 best clients.

 

A market might be multiple clients with the same employer, in the same industry or in the same trade association. It might be several clients in the same neighborhood or with the same interests.   Two or three clients in a single market are enough to get you started.

 

After examining your existing clients, review your interests and skills to find other potential markets. Then you can prioritize these potential target markets based on their size and fit with your client base. Through this exercise you can build a client base comprised of your ideal clients.

 

Narrowing your client focus to specific markets means spending a lot of time with these clients. You will want to enjoy spending that time with them.

 

One way to ensure that you will enjoy that time is to search your natural market. John Flinton, a CFP® practitioner with Ameriprise Financial Services, focused on his former profession, Veterinary Medicine, when he started his practice. Flinton had been a Veterinarian for 15 years and was very familiar with the local practitioners in North Kingstown, Rhode Island. 

 

Your potential target market could come from former employers, hobbies, or a not-for-profit group you support. It could also come from community organizations, your neighborhood, or friends from high school and college.

 

Like many planners, David Hilton, CFP®, focused on a Redondo Beach, Calif. hospital because he provided their retirement plan. Hilton won an exclusive contract for ING Financial Advisors and was thrilled when the hospital asked him to office in their facilities. Hilton credits his strong relationships to that proximity as well as his client-centered approach.

 

What services do you offer that could lead to a potential market? Start with any services used by multiple clients. If the services are unique, that provides a stronger indicator of success.

 

 

 

Once you have identified potential markets, determine which are the most promising for your practice. To evaluate a market’s promise, you need a clear vision for your practice.

 

The advantages of target marketing were well known to Stuart Ng, Burbank Calif., when he saw the opportunity. As CFP® practitioner, Ng had the skills the credit union wanted. With about 7000 well-paid employees, the single-firm credit union had the concentrated, loyal market Ng envisioned.

 

Loyalty within the target market is helpful but knowing how many members meet your client profile is critical. With the investable assets and average revenue of clients in your ideal profile and the income you need from the practice you can prioritize the markets. Defining the number of planners, the location and the specialties in your vision will add detail and motivate you to achieve the vision despite obstacles.

 

Your average revenue per client and your income needs tell you how many clients you need. Decide if these clients should come from one target market or more than one. One factor is whether the market is large enough to meet all your needs. Also, consider your comfort with a concentrated client base. You may prefer a more focused approach while building your ideal practice, planning to diversify the practice when it is mature.

 

The size of the prospective market is important. Estimate the number of members that meet your client profile and your likely penetration of those members to calculate size.

 

Investable assets of the members of the target market are hard to come by so you will have to use a proxy like income or spending patterns. Of course, having $250,000 in income or owning a million dollar home do not always come with a million dollar investment portfolio but they may be the only clues available. These factors can help you estimate how many members of the target market meet your client profile.

 

Make a conservative estimate of penetration to improve your chances of meeting your income goals.  You might get all the members of a market with 10 members but 100% acquisition is unlikely with a market of 50 or more. 

 

If the market seems small you could add another target market or redefine your market. For instance, if the business is part of an industry, neighborhood or community organization you could expand the market to include members of this organization. 

 

Measure fit by the market’s common needs that match your skills. You want needs that will allow you to develop in-depth expertise and individualized solutions without constantly reinventing the wheel.

 

To see if your markets have common needs, talk to 6 or 7 members of the market. Find out if you can address their needs and if the needs are being met by others. Show your interest in their market and see if they can help you develop a strategy to serve the market.

 

The first steps to define a target market include categorizing your best clients, reviewing your interests and examining your skills to identify potential target markets. Next, define your vision for your practice, quantify the potential of the target markets and evaluate client fit to prioritize those potential markets and narrow your client focus. By narrowing your client focus to specific clients, you can get those clients to narrow their focus to your practice.

 

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