There are multiple strategies to retain your business customers. In this blog, we focus on one critical strategy to retain your business customers: Maximize your Centers of Influence.
Let’s start by defining “Center of Influence.” In business, we refer to centers of influence (or “COIs”) as those individuals that continually send you customers. Whether the customers are individuals or businesses, your COIs are a constant pipeline for your business. In this blog, we focus on maximizing your COIs that refer business customers to you. But the strategies work similarly with consumer customers too.
One simple example of a COI are dentists. If you are an orthodontist and own a practice, who is your best source of referrals? The children’s dentist! Children initially go to a pediatric dentist to ensure everything is fine. Dentists teach children about cavities and also observe how their permanent teeth are growing. As soon as the dentist detects that the permanent teeth are not straight, they tell parents to think about braces. Dentists usually have a couple of their preferred orthodontists, and they give the parents their contact information. Parents then follow up with the “trusted orthodontist” who will take care of their children’s teeth and visit your clinic. At that point, it’s up to you, the orthodontist, to ensure they buy your services and stay with you.
Customer retention is just as crucial as customer acquisition.
Customer retention should be an ongoing strategic objective for financial institutions. Retention is just as crucial as customer acquisition. And one could even say that losing an existing customer is more costly than acquiring a new one. Why? Because you have to “undo” everything you set up for each customer and start the process of acquiring another one. All your time spent training the customers or additional resources hired becomes an expense with no income to show for.
There are multiple reasons business customers leave your institution. One important reason is simply ownership succession. The ownership transition from one generation to the next may not include your financial institution. Why? Because the next generation successors don’t have an existing relationship with your institution. Therefore, they go to other banks or credit unions they know or have relationships with already established.
Another reason is that the current owners sell the company to a new team of investors or another established company. The new owners use different institutions than yours to meet their banking needs, maybe even your competitors.
Who are the primary Advisors for businesses?
Business owners work with three primary advisors during an ownership succession whether the successors are family members or outside investors. And the succession process begins 24 to 36 months before any deal is closed. Below are the three primary advisors to businesses:
- CPAs and Accountants: Business owners work with their CPAs on tax matters and in preparing financial statements to present to potential buyers.
- Mergers & Acquisitions (M&A) Attorneys: The attorneys get involved in drafting the Letters of Intent (LOI) for the potential buyers. The business owners selling their business hire their own attorneys to review and negotiate the LOIs.
- Wealth Advisors: Business owners, your customers, typically work with their wealth advisors ongoing. They may be the first ones to know when the owner is planning on selling the business. The wealth advisors begin the planning process and work with the tax accountants on multiple scenarios years before deals close. Not all financial institutions own a wealth management company. Therefore, it’s important to create an affiliation with a wealth management company.
Notice that the bank or credit union is not one of their primary advisors. This is a huge opportunity for your institution to become one of your business customers’ four primary advisors!
How to identify and maximize your COIs.
It is important to first identify your Centers of Influence so you can then maximize the relationship. Below are some strategies on how to do so:
- As you acquire a business customer, ask them who their key advisors are and ask for an introduction. You can then start building your own relationship with your customers’ advisors.
- You can also ask existing business customers who their key advisors are and establish a relationship with them going forward.
- If you have already identified your COIs, then get to know them better at the personal level. It’s important that your COIs feel appreciated and valued. Your COIs may or may not be your customer but treat them as your best customers!
- If you can, reciprocate and become their COI as well. Referring your institutions business customers to some of your COIs’ firms can be a win-win. Of course, you need to use common sense and avoid conflicts of interest. But it can be done to meet some of your business customers’ needs that your institution cannot meet. Examples are referring them to a tax accountant or an attorney that is also your customer and your COI.
- Always say “thank you” to your COI and let them know if the referral became a customer. COIs like to know what happened to the referral.
- Lastly, ensure you build relationships with your COIs’ successors too. If your COI is a partner at an accounting firm and he/she is going to retire, ensure they introduce you to their successor. Take the initiative to get to know their successor and offer your banking services to help their customers. Do the same with attorneys or wealth managers if they share about their own retirement timeline.
One Critical Strategy to Retain Your Business Customers – Conclusion
As mentioned above, there are multiple strategies to retain your business customers. One critical strategy to retain your business customers is to maximize your Centers of Influence. You acquire COIs by getting to know your business customers’ advisors early in the relationship. The goal is that when the time comes to selling the business, you retain the business as customers.
Knowing and building relationships with your Centers of Influence is crucial to retain your current business customers after they sell their business. Remember, it doesn’t matter if the business owners sell to their family members or to new investors. What’s important is that you’re building relationships with the successors and your customers’ advisors.
It’s also important to build relationships with your COIs’ successors. Doing so will guarantee your pipeline will continue growing indefinitely and it won’t dry out.
I hope these strategies encourage you to identify your COIs and maximize your relationship with them, so your institution continues to grow.
