The study found that even in challenging market conditions, the businesses that focused on client relationships and operational excellence sustained growth and profitability.
Despite a slowdown in growth, figures still show an increase in revenue to $3.6m (£2.8m, €3.2m) in 2015 from $2.3m in 2011 and a rise in assets under management to $588m in 2015 from $365m in 2011.
Some key business successes from operational efficiency include:
Client retention The importance of client relationships shines through in the Schwab study, and shows that despite market turbulence, 97% of clients stayed with the firm. It is a recognised fact that attracting new clients is more costly to a business than retaining existing clients. Improving the business and delivering on promises to customers leads to greater retention and revenue.
Client referrals When clients are satisfied, it increases the likelihood of a referral to friends or family. Having a referral process in place ensures these referrals are handled correctly and the opportunity is maximised. The Schwab study also found that in 2015, approximately 75% of new clients at firms with $100m or more in assets under management were gained via referrals.
Improved client outcomes By having processes in place, such as a centralised investment proposition, advisers can ensure a repeatable process is in place, and clients’ investments are effectively managed. Making the most of outsourced arrangements can help ensure investment experts manage the investment decisions on behalf of clients, helping to improve client outcomes.
Risk management Mitigating risk should be a core concern to business owners as it can greatly impact whether the business achieves its goals. By ensuring robust systems and processes are in place, risk should be controlled and managed effectively.
For people serious about improving and strengthening their business, it is worthwhile spending the time on structuring the business properly.
Operational excellence will be achieved if all business functions are aligned towards a common goal. Analysing and streamlining business systems and processes can provide the structure required to deliver a high service to clients in a cost-effective way.
Client promises need to be delivered on consistently, from the first time and every time thereafter. This will help build real business value that becomes tangible.
Spotlight on operational efficiency
Operational efficiency is the capability of a business to deliver products or services to its customers that the customer values, in the most cost-effective manner possible, while still ensuring the high quality of its products or service and support is maintained and scaled robustly.
Operational effectiveness is having the client insight to then integrate problem solving, teamwork and leadership within the business to then deliver products or services that meet and exceed customer expectations. The result is the continual ongoing improvement of the business.
Both operational effectiveness and operational efficiency involve focusing on the clients’ needs, keeping the employees positive and empowered, and continually improving the current activities in the business.
