We’ve all been there. You sign up a new client and get to work. You priced your services based on a certain scope and expected level of activity. But some time after you begin, the scope and level of activity begins to change and grow. Some may be the result of a client’s own organic growth. While some changes may be due to minute work – which is when the client calls and says this should “only take a minute.” Many times that minute quickly turns into hours and your sleep turns restless with nightmares of work left unfinished.
These types of issues are typically referred to as “scope creep,” which every firm suffers from to some degree. The best way to handle this situation is to ensure you have a clearly defined scope and volume of activity in your proposals and contracts from the start. A well-defined scope, along with gentle reminders, helps clients recall your agreement and mitigate scope creep. But even with parameters in place many firms are ill prepared to manage scope creep.
Here are some actionable steps to take to help you and your team properly identify scope creep and ensure your clients’ level of activity remains within parameters of your agreements.
The old adage of “what gets measured gets managed” holds true for scope creep. But what should be measured? Effective firm management requires a consistent focus on the things that matter. Key metrics like fee per transaction, total client bank/credit card feeds managed, realization rate, utilization rate, client sales growth rate, client customer count, etc. are all indicators of scope creep, whether it is due to client growth or those “only take a minute” requests.
|Monthly fee||Realization rate||Fee per transaction|
Many firms don’t invest the time, have the talent, or want to hire third parties to consistently track these key metrics. If they do, it is sporadic at best. Analyzing key metrics with regular frequency provides a clear picture of historical performance and trend indicators. Recognizing client growth and knowing when you are approaching the limit on your existing agreement facilitates future contract renewals. Sharing key metrics with your clients’ supports your assertion that they should increase their commitment to your firm. You helped them grow so you should benefit from that hard work as well.
Now that you have the key metrics for EVERY client, you can compare how your fees are growing relative to the entire client portfolio and establish benchmarks. You can then set goals for the overall firm, teams and individual client managers. Incremental improvements through data analytics and analysis make a big difference on a firm’s profitability by setting expectations with clients and your team members. Firm improvement relies on continued and consistent review and focus on performance and benchmarks.
Firms need to ensure scope creep doesn’t haunt their dreams of success. Take action by measuring, tracking and improving the key metrics associated with client scope and activity compliance to agreements in place. Be sure to leverage appropriate technology like Tally Street to help so your team can focus on more productive activities. Your firm’s margins and your quality of sleep will be better for it.