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Inflating Cost or Service? How to survive the margin squeeze in your advice business

Written by Carl Woodward, co-founder of Simplify Consulting

Now more than ever, a focus on cost optimisation and reduction has to be at the heart of an operations function’s strategy.

The perfect storm of wage inflation, skills shortages in the market and global inflationary pressures resulting in prices rising almost everywhere mean that doing more with the same or less is as important as it has ever been before.

To maintain margins as costs increase do you pass it on to the client? Most are likely to pass it on as salary bases need to be contained. After all, with inflation hitting the lofty heights of close to 10%, there is an expectation, verging on resigned acceptance, that fees will increase.

This needn’t be the only path. There is an opportunity to gain a competitive advantage and maintain margins when everyone else’s are being squeezed. To do this requires a laser focus on three important activities:

· Servicing clients in the most efficient way, which means:

o Embracing digital capability (and encouraging your clients and business connections to do the same).

o Adhering to a mantra of ‘right first time’ in order to prevent costly re-work.

o Having a tenacious focus on the removal of all ‘process waste’ (those activities that aren’t adding value) and ensuring that ‘the client’ is at the heart of everything (yes, it’s 2022 and that still seems innovative for some companies!).

Also, do a bit of mystery shopping! Why not phone your own office switchboard number and experience the interactive voice response for yourself (and listen to the hold music!)…it might be eye-opening…or ear deafening! Are you helping clients to to the right person and the right help quickly and efficiently?

· Being compliant and operationally robust

o The cost of breaches, non-compliance with regulation and risk events resulting in operational losses will hurt more than it ever has done before. But they are usually avoidable.

o Having resilience embedded in your operations process, leveraging technology capability where it is available and proactively mitigating risk by having a strong ‘managed and assessed’ control environment is crucial to keeping your cost base low.

· Simplifying your proposition

o Remove any areas of your client proposition that are complex or difficult to administer (where it is quick and easy to do so).

o Close off dormant clients and remove clients who simply aren’t cost effective, really understand where value is derived from.

o Be clear about each element of your client service roadmap.

o Encourage or even incentivise channels that are efficient and optimal and ensure all client interactions (written and verbal) are simple to understand – with calls to action clearly signposted.

o Don’t create failure demand unnecessarily through a poor service model.

Currently, anything your business can do to break the link between volume growth and FTE growth has to be pursued, to help manage costs effectively.

This difficult environment calls for the ability of your business to scale, to do more with the same or even less than you had before. Attrition is on the rise, recruitment costs more and takes longer than ever before and upskilling people quickly is no mean feat. We are encouraging our own clients to empower their teams to drive efficiency and create capacity. The results will speak for themselves….

 

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