Do your relationships measure up?
Feel the churn
Churn is the measure of how many clients stop ordering your appraisals. Usually it’s a hard stop. A grinding halt. As commercial fee appraisers, it’s never a good feeling. The reasons are varied; reports with too many mistakes, chronic late deliveries or perhaps a disagreement with a reviewer. Losing a client is like when Stan of South Park puts his money in the bank, only for it to vanish in seconds due to the volatility of the market. “Aaaaaand it’s gone.” Just like your client.
Guesstimates can be helpful in certain circumstances, but not in appraising. But it does leverage well into problem-solving and thinking abilities. The focus is more on the approach to getting the answer right. With this in mind, the metrics of churn for commercial appraisers should be measured. One metric hardly ever measured is the return on relationships (ROR). This would include your external clients, internal staff, appraisers and reviewers.
Why relationships are No. 1
Often times the issue with appraisals is the process takes out the human element. Emails back and forth generate a two-dimensional relationship. This lack of real relationships doesn’t allow a mulligan for the occasional bad appraisal by a good appraiser. If anything, conversations and relationship building will motivate both sides of the fence to work harder to consistently achieve the best appraisal possible.
Drive “value” to your clients
Creating a network of relationships will provide a strong return to your appraisal firm. Analyze the pipeline process in the course of bidding, creating and sending appraisals. Can this process be improved? Who’s in charge of what? Who’s responsible for client relationships?
What defines a successful relationship? How often do you meet your clients in person? Do you send them personalized gifts? How well do you know them? What’s their favorite sports team? Do they like scotch? Are they a dog lover? What’re their interests?
3 ROR success principles
- Be around people that can help you
- Share perspectives
- Give and receive feedback
Measure your stuff
- Reoccurring Revenue – the amount of revenue generated by the client over a fixed time. Usually measured monthly, quarterly or annually.
- Average Reoccurring Revenue – This is equal to the average appraisal fee. Can be influenced with more complex assignments.
- Average Cost of Service (per client) – the reoccurring costs of all creation, support, management, client service and delivery of appraisals.
- Client Lifetime Value – total revenue to your firm from a client from day one.
- Churn rate (AKA attrition) – percentage rate of client cancellations over time typically annual. The probability that a single client will cancel during a specific time period.
Technology is 50% of the answer
The other 50% is processes. It can be a game changer for your firm’s metrics if you go out and buy our products, Datacomp (comp database), Edge (report writing) and Manager (appraisal workflow). However, if you end up shelving (or partial implementing) the products because you’re too busy; then you’ve not moved the needle at all. If anything, you likely created discouragement with your team. It also diminishes the ability to attract younger talent.
Process will also identify problem areas. For example, Manager’s dashboard can quickly show bid to acceptance ratios by client. It can identify late appraisals. It can show you a calendar of upcoming reviews to reduce weekend work. Manager can help you bid more effectively with real-time appraisal workload view. This allows you to anticipate volume spikes reducing late reports.
“We’re too busy to stop and invest in our relationships.”
For some of us, clients have disappeared over the years. Oftentimes, we don’t really know why they left. That’s a missed metric, a lost opportunity. If we don’t stop the churn, we will feel the burn.
Significantly improve client relationships and thus retention. Increase average reoccurring revenue. Lower the average cost of service and increase the client lifetime value. “Aaaaaand it’s back!”