Creating equitable COI referral alliances
If one forms a business alliance and one party gets more out of it than the other, is that alliance likely to last long term?
Of course not. It is not equitable.
One party at some point is going to feel that the relationship is rather one-sided and and therefore unfair. Everyone knows this, and pretty much everyone has been in a job, business partnership, personal relationship or alliance at some time in their lives where they have ended up feeling like the one doing too much of the “giving”. So probably everyone knows what it feels like to be in the situation where “it just isn’t fair”.
Could it be that this is the underlying reason why so many efforts to cultivate great ongoing business alliances fail?
I believe so. Nowhere is this more true than when the business alliance is essentially a personal one, such as two professionals agreeing to try and help each others respective businesses by cross-referring. Creating, or being, a Centre Of Influence (COI) in other words.
Much of the COI/Professional relationship is personal. It hinges upon trust and mutual respect – both personal beliefs – and depends on complementary professional expertise which is relevant to the other parties target market or clients. That last point is also personal – it is about the personal skill and expertise of a particular individual. In the sense of creating mutually beneficial COI relationships therefore it is largely a personal relationship which is being developed. As with any other sort of relationship it needs to be equitable to flourish and be valued by both parties.
Equitable is the important word in the business sense. It is also the word which is often overlooked in trying to build great COI relationships, and the primary reason for them not flourishing. One party feels that the relationship is not fair, and that it is disproportionate in the effort or results.
Let’s consider a typical (simple) example:
A Financial Adviser and an Accountant both do complementary work with the same sort or clients in the same area, and both agree that it would be helpful to each other and to their respective clients to cross-refer to each other. No money is changing hands for these referrals, and each keeps whatever revenue they derive from their own business efforts.
The Accountant refers 3 clients to the Financial Adviser. In this example let’s assume that the Financial Adviser does business with all 3 of them, and the average revenue per client is $2,000. So the Financial Adviser has generated $6,000 from the business relationship. All good so far.
The Adviser refers 2 clients to the Accountant, and in this example the Accountant does business with both. Each is worth $5,000 to his firm. So the Accountant has generated $10,000 in revenue from the business relationship.
Yet, in examples such as this (which are not uncommon), both parties become dissatisfied with the relationship.equitable-business-alliances
Why? It makes no sense surely…both were getting some new business and both were helping clients….
It is about the lack of clear expectations and equitable success measurements.
The Accountant feel that they have referred more people than the Financial Adviser and that this is unfair. The Financial Adviser feels that the Accountant is not referring enough business to make it fair. The relationship begins to wither….
To manage this issue requires clear understanding about what is good business for each, and what the appropriate success measures are. To use a more extreme example, if the Accountant generated $3,000 from each new client and the Financial Adviser generated $30,000 from each new client, then it would be a reasonable expectation for each that an equitable business alliance might be one where the Financial Adviser was introducing a lot more clients to the Accountant than the other way around. Both understand why, and feel that the relationship is worth pursuing. Both also now have some clear measures to help understand how the the alliance is progressing.
If both parties understand the others type of business and general revenue models they can form reasonable views as what would make for an equitable ongoing business relationship. Dissatisfaction is far less likely. A mutually beneficial business alliance which lasts long term is far more likely.
Two growing practices getting the types of business that is valuable to them while providing great service and expertise to mutual clients is the outcome isn’t it? So be clear about how that is defined and what is equitable for both, and there is a far stronger likelihood of having an excellent COI relationship.
Tony Vidler is a business adviser who helps business professionals build more profitable advice businesses. He is also a conference speaker, personal business mentor and sales coach. Find out more at http://tonyvidler.com/financial-adviser-coach-blog/