When a professional services firm wins a new client it is almost always because the client is switching from another service provider. Whatever the client’s motivation to make the move, there is inevitably short-term pain in the form of switching costs that must be endured. What is your firm doing to recognize and mitigate this switching costs?
Emotional / Psychological Switching Costs: Once I was involved with a CPA firm client pitch that seemed like a sure-thing. But then, all of a sudden, the process came to a screeching halt and the prospect went silent. “What happened?!” we wondered. The client couldn’t bring himself to break-ties with his current service partner. It was too difficult a conversation so he avoided by not taking any action at all. Once we learned that this was the issue, we were able to offer some moral support, remind the prospect why the change was important to him, and offer some guidance on how to approach the discussion.
It can be a difficult thing to deliver bad news (the loss of a client would surely fall into this category) to someone you’ve trusted to support your family or business. Show compassion to your prospects and ask how they’re feeling, if they have any questions about the process, and what could make it easier on them.
Time / Effort Switching Costs: I am currently switching banks (mine was just acquired) and it is PAINFUL. No fewer than 10 hours have been invested into this process and it’s not over yet. I’m not regretting my decision; I’m just annoyed at the time investment, and concerned that if I forget about a transfer or bill pay tie-in that there will be penalties and headaches down the road. (Anyone want to guess my motivation for writing about switching costs this month?)
Both you and your clients will invest time in onboarding their company to your systems and helping them become proficient with your processes and way of doing business. Whatever you can do to streamline, organize, communicate, mitigate risk, remove duplicate effort, prevent errors, etc., will be greatly appreciated by the new client and will reaffirm their decision to make the move to work with your firm. A best practice would be to have a checklist for the client that includes roles/responsibilities, timelines, and contact information for who can answer questions. Oh, and maybe a small gift? Something with your logo would be nice as a gesture to convey that you’re excited they have chosen to work with you.
The client has a learning curve to get proficient with your systems, but you have a learning curve to understand their business, who to go to with questions, their goals and how to help them. Be cognizant that their previous service provider already knew all of this information, so the client is incurring additional effort in getting you up to speed. Surely your excellent ideas will far outweigh this in the long run, but do try to document and share information internally so that the client isn’t answering the same question multiple times.
During the client’s onboarding process someone may ask a question that compares your system to how they are accustomed to doing things. I have two thoughts on this. First, it’s possible that the previous service provider is doing some things better than you firm does them. Be open minded to learning new things and potentially implementing improved systems. Good ideas come from unexpected places! Second, it’s important to have standard practices, but there may be times when exceptions are needed to satisfy certain people. Just be sure that this exception is communicated with your whole team so the client doesn’t have to mention it time and again throughout your relationship or it will become a proverbial thorn in their shoe.
Monetary Switching Costs: Your firm may have a higher or lower cost structure than the previous service provider. Regardless of the ongoing fees, there may be actual monetary switching costs. For instance, some hourly employees may need to work overtime to deliver information to your office in order to transfer their account, or there may be some hard costs like purchasing new checks, new business cards, or additional equipment like an encrypted scanner. If you are aware of these expenses it might make sense to cover the cost as long as there is no conflict of interest. You could give a discount on the first invoice if directly paying for the materials isn’t standard practice in your profession.
Winning a new client is cause for celebration. Just remember that your new client has made a big decision to switch service providers and have entrusted you. Be sure to invest in earning that trust by putting your best foot forward starting with the onboarding process and you’ll save everyone stress and time. Read more of my ideas related to new clients in my blog post: Setting Expectations is a Critical Aspect of Onboarding Clients.
And, of course, if I can help your firm, please contact me.