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Practice Makeover

Gary Hager leaves nothing to chance, especially when prospecting for new small-business clients. His efforts start with brainstorming sessions he holds with existing accounts, whom he asks for names of associates to approach. But before making any overtures, Hager, president of Integrated Wealth Management in Edison, N.J., does a ton of research. With the help of a database-marketing firm, he examines

Gary Hager leaves nothing to chance, especially when prospecting for new small-business clients. His efforts start with brainstorming sessions he holds with existing accounts, whom he asks for names of associates to approach.

But before making any overtures, Hager, president of Integrated Wealth Management in Edison, N.J., does a ton of research. With the help of a database-marketing firm, he examines everything from his clients' alma maters to local companies they do business with.

This way, when Hager gets together with a client, he is armed with all sorts of specific questions to help the small-business owner delve into his memory banks and come up with referrals.

It's a surefire technique, and, says Hager, well worth the effort. “Small businesses are the highest-potential population that I can think of, in terms of the amount of business they can bring in,” he says. Indeed, most of his $150 million in assets under management now come from such clients.


Like many advisors, Hager has decided to focus on the small-business community, and for good reason. With about 20 million small businesses in the U.S., the market comprises a wide-open opportunity. What's more, there's an almost never-ending amount of work you can do for these clients, from selling retirement plans and insurance to the company itself, to taking care of the personal portfolios of company owners and employees.

Hager points to a typical client for whom he not only handles the company 401(k), but also does financial and estate planning for key executives and the owner, for a total of about $500,000 in annual business.

“There are just so many things we can do for them,” he says. “It's like the plastic surgeon who does four or five things to make a patient more beautiful vs. doing just a nip and tuck to one particular area of the body.” The more work you do for a firm, the less likely it is that the owner will jump ship.

At the same time, small-business clients aren't your usual suspects. For one thing, their situations are more complicated than those of garden-variety corporate executives, who only have to worry about their own personal investments and estate planning. Small-business owners are usually highly protective of their companies and slow to trust advisors. As a result, finding prospects, and turning them into solid clients, can take a long time and require tactics you might not ordinarily use.

Probably the best way to find prospects is through referrals. While that's true for any client, it's of special importance when it comes to small-business owners.

“By having referrals from someone the business owner knows and trusts, you're starting at third base,” says Irving Katz of Katz Insurance Service and Katz Retirement Service in Irvine, Calif..

The key lies in establishing a reliable referral-seeking system. Hager starts the process soon after he feels he's established enough of a track record with a client to bring the topic up. First, he'll edge into it, pointing out the value he's brought to the client. Then, to make sure referrals can be reasonably expected, he asks point-blank whether he or she has been dissatisfied with any aspect of his service.

He recalls that one client with whom he maintained a very deep relationship admitted he didn't like the fact that Hager had received commissions on insurance. After they discussed the matter, the client seemed satisfied, and Hager felt it was safe to move to the next step: asking to set up another meeting to discuss possible referrals.

Two weeks before the referral meeting, he sends everything he knows about the person's business and other associations — anything from what linen service the business uses to its ink supplier — to a marketing firm. He uses the marketing research to inform leading questions.

When he met with the owner of a technology firm about four months ago, for example, he was ready with such queries as “Whom do you know who looks to you for advice?”; “Whom do you know who recently sold a computer business?”; and “Whom do you know in the technology business in Vienna, Va.?”

The client came up with 30 names. Hager then asked his client to write all of them letters. About four days later, he followed up with an initial round of phone calls. The result: About five of the referrals have become clients.


Another way to get referrals is to develop a network of accountants, lawyers and other professionals who will send you prospects (as long as you do the same for them). Again, that's something you might do when looking for any type of client, but it's essential for establishing credibility with small-business owners.

“You need to develop your centers of influence so you can treat them as your outside salesforce,” says Dan Sondhelm, a partner with Sunstar Wealth, a marketing firm specializing in the financial industry. Generally, such contacts will start off with a limited amount of business, but can lead to much more work in time.

Greg Large, a managing partner with Lenox Advisors in New York, recalls an attorney who referred him to the CFO of a small business to discuss instituting a qualified plan. A few weeks later, the man asked Large to discuss redoing the life insurance contracts on the company's principals — and, eventually, to handle his father's investments.

You can also do things to make sure you're top of mind when the members of your network need to find an advisor. Large, for example, runs 20-minute presentations once a quarter at about 10 accounting and law firms, where he or his partners discuss such issues as new tax laws.

They're usually invited by a senior partner of the firm. “We speak during their monthly meeting, probably the only time everyone in the firm is in the same room together,” he says. “That way, just about everyone sees us.”

At the same time, cold calling isn't necessarily out of the question — as long as it serves as a supplement to other prospecting work and is done creatively. In fact, other partners in Large's firm do old-fashioned cold calling. But, they do so by finding names of business owners mentioned in the local news and then taking an innovative approach to making contact.

For example, one partner recently saw an article about a successful business owner in the area who had won an award. She clipped the article, glued it to a plaque and sent it to the prospect, with a congratulatory note. The approach worked, and she became a client.


However you get your prospects, don't bug them too much. Small-business owners, who generally spend their days juggling many tasks, don't have a lot of time — and they're bound to get turned off by too much persistence.

“Small-business owners probably get 10 cold calls a day from someone trying to pitch a product,” says Doug Charney, senior vice president of Charney Investment Group of Wachovia Securities in Harrisburg, Pa..

One effective tactic is to regularly send articles of interest on topics that don't specifically relate to your own discussions. That way, you can keep in touch, without seeming too intrusive, and show you have their best interests at heart. And, because they're so busy, expect the process to be slower than usual.

For the same reason, when it comes time to make your pitch, the key is brevity. That means preparation is essential, with lots of bullet points and important numbers. At the same time, however, you'll also find that many small-business owners know a good deal less about investing and managing their finances than the typical affluent client. As a result, the questions they ask may be considerably more basic — and their financial situations may be surprisingly chaotic. Hager points to the owner of an office copier rental company whom he recently took on as a client. While the company is highly successful, the man “has done virtually no planning,” he says. That includes everything from having an out-of-date will to having no idea what his business or the building he owns is worth.

The result is that landing an account, and making any headway during your first few meetings, requires imparting a healthy dose of Finance 101 and a lot of hand-holding — what Jeff Sloan, a small-business expert with in Birmingham, Mich., calls, “extreme customer service.”

Katz usually spends much of the first two or three sessions with small-business clients on financial education. After the first meeting, he usually sends the client off with a packet of information on investing and other financial topics. When they meet again, he quizzes them on what they've absorbed. If he's not satisfied with their answers, he'll go over it again, and if that's not enough, he'll bring in the client's CPA.

Advisors use medical or retirement plans as a way to get a toehold in the business. Then, when the relationship is secure, they try to take on other work. Daniel Reagan is a case in point. About 10 years ago, Reagan, a rep and insurance agent with Fleischer Jacobs Group in Burlington, Vt., sold a nearby architectural firm a group medical plan. In the ensuing years, he has added group disability, a 401(k), supplemental disability for key employees and a business-continuity plan for handing the company over to four key employees.

Ultimately, however, the most effective tactic is one that takes the most work: turning yourself into something akin to a business advisor — someone who knows as much about the issues surrounding running a company as retirement plans or insurance. “You become their partner,” says Charney.

If that sounds tough, it is. The issues you're likely to face are often complex and may require doing a kind of digging you're not used to.

Harlan Kappel, with American Express Advisors in Dallas, recalls a client who, in his initial meeting, complained that his big problem was with cash flow. Kappel looked over the client's financial statements and discovered that the issue wasn't cash flow, but rather, the company's system for accounts receivable and accounts payable. The next meeting, he presented a flow chart of the process to the client, along with a recommendation for how to change it. Those steps doubled the amount of money the company collected.

Of course, the quickest way to establish that you have the appropriate business moxie is having real-world experience running a business yourself. T. Phillip Webb, an insurance rep with Webb Financial Group in Fairhope, Ala., who focuses on small business, previously owned his own sporting goods company and ran an oil and gas partnership.

“I can pick up their financial statements and tell them pretty quick what some of their problems are,” he says. “It helps build credibility.”

If you don't happen to have the right experience, however, don't give up. You can accomplish the same thing through the lessons you learn from your clients, it just takes a lot longer. “Once you start working with small-business owners, you learn from them and apply it to other stuff,” says Charney.

He points to a chiropractor who recently called for advice about whether to buy his own building. Thanks to previous experience advising other clients on similar issues, Charney felt comfortable offering his counsel.

“After a while, business owners start to see you as a resource,” he says. Hopefully, a resource they never want to lose.

Think the small- business market isn't big enough for you? Take a look at these statistics:

Total No. Small Businesses (under 500 employees, including self-employed):

22.6 million

Total No. Small Businesses (under 500 employees, not including self-employed):

5.6 million

Average Receipts:

$1.4 million

All figures are for 2001; Average Receipts is for 1997, the most recent information available

Source: Small Business Administration

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