[IMGCAP(1)]In my travels around the country one of the objections I hear most often from managing partners about the effectiveness of marketing is, How do I determine the return on investment on my marketing/sales expenditures?
In order to help answer this challenging question I ask them to tell me about their marketing and selling process, and I am often met with a blank stare. From my years of experience, one fact that is always clear and measurable about ROI is new business. If we know how much new business a firm has generated, then to determine ROI all we need to know is how much was spent to obtain the new business. Here is the disconnect! Many firms cannot relate to this formula because for them, there is no connection between marketing and sales.
I suggest that all partners with marketing and business development responsibilities should work with a written Revenue Action Plan, or RAP. In that plan, all the marketing support should be clearly documented, whether it is print or other media ads, brochures, mailing pieces, seminars, newsletters or e-mail blitzes to support the prospecting effort. This supporting marketing expense can be totaled and compared to the new business results of the individual plans.
To further organize marketing, all the marketing support in the individual RAPs can then be set up to support the firms annual marketing plan. Once completed, the total cost can be reviewed and redundancies can be eliminated, saving marketing expenditures and increasing ROI.
In addition to the marketing plan generated from combining the actions in RAPs, the firm quite possibly could consider some other marketing initiatives. These initiatives might encompass branding or community services, which, in effect, are overhead and should not be calculated into ROI. Thats because they are not intended to directly generate revenue, which is different from the marketing support generated from the RAPs.
When using this method to evaluate ROI, two other issues should be considered:
How do you value new business when the new business continues for many years?
Since the selling cycle from prospect to sale often takes more than one year, some portion of the annual marketing expenditures has a future value.
This leads one to conclude that you are actually getting even better results than the raw ROI calculation gives you.
If you were to ask partners what percentage of their clients they (a) love, (b) tolerate or (c) hate, generally you will find about 20 percent fall into the hate category. This is actually a staggering amount. In effect, you could say that on average, one day a week, a partner services clients he dislikes. This has been a problem at accounting firms for years and stems from the fear of losing revenue, with so many fixed expenses to cover in managing an accounting firm.
Behind the reluctance to fire a client we dislike is the lack of confidence that we can replace the lost revenue. Using RAPs over time will allow management to see a consistent flow of new clients and more accurately project future new business. And in the green era we are in, we have learned that one persons waste might be another persons raw material, so transitioning clients that do not fit your practice to another more appropriate firm might even benefit you in other ways. The firm you outsource to might return the favor by sending you a client that does meet your criteria. Also, since the RAP helps target new business, we have a much greater chance of replacing the hated clients with loved clients. Being able to do so consistently can help build a world-class client base.
Even when firms use RAPs, a common error they make is the lack of both supervision and accountability. Since we are discussing partner actions here, the supervision and accountability do not need to be strenuous. They do, however, need to be consistent. My experience with partners is if you stay on top of them long enough, they will follow through.
Along with some hand-holding, enough cannot be said about the value of peer pressure. When some partners have success, other partners notice. If supervised properly, peer pressure can be used to generate action, because I have found that partners can be very competitive. This must be done carefully, however, since you do not want the competition to divide them. Instead, you want encourage them to work more effectively together for the good of the entire firm.
Creating a process that connects marketing and sales can allow firms to get a reasonable estimate of their ROI. The process allows firms to replace clients who do not fit the firms expertise with those clients who are ideal. Having a process is not complicated and there are many firms who have embraced this approach successfully.
The question is, Do you want to be an industry leader or continue to be doubtful about the effectiveness of marketing?
Elements of a Revenue Action Plan
Delineate cross-selling opportunities
Choose prospective clients
Work your referral sources
Plan your marketing
Schedule face-to-face as well as phone meetings
Estimate potential fees as well as probability of success
Document supervision and accountability
Burt Bierman, CPA, is a senior consultant with the Rainmaker Academy. He is a former partner at JH Cohn and the Videre Group.
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