Client churn sucks.

Getting new clients as a Fractional CFO is hard enough as it is, which makes it even more painful when an existing client leaves.

The worst part is when a client leaves unexpectedly:

😀 Margins are up

😀 Cash flow has improved

😀 You've got some solid strategies in place for them

And then BAM!

You get the dreaded email:

"Hey, Michael. It's been SO great working with you for the past 6 months. Honestly, you've been amazing. We've just decided to go in another direction, so we'd like to cancel our Fractional CFO services going forward."

Oof.

This can feel like a total blindside hit because all of the client's key financial metrics are up and to the right.

You try to save it, but the reality is that once you get these messages, the relationship is cooked, and there isn't much you can do to salvage the situation. You've got to go find a new client.

But if everything is dandy, why would they fire you?

Over the past decade in the Fractional CFO industry, I have had this exact scenario play out more times than I'd like to admit. By all metrics, the client's financial situation has improved. Things are moving up and to the right. There's even a great plan in place to continue in that direction.

So what gives?

In this scenario, churn is almost always because of one of two reasons.

First, there may be a misalignment of goals. In other words, what YOU THINK their goals are is different from what their goals ACTUALLY are. For example, you might think their primary goal is to pay down debt. However, in reality, they are more concerned about increasing the owner's monthly compensation. Due to this misalignment, things aren't going in the desired direction.

(Side note: You're probably thinking, "Why would there be misalignment in goals?" The answer is because sometimes clients tell you one thing when they think another. Sounds wild, but believe me, it happens. ( I could write an entire blog just on that topic and how to avoid it.)

Second, clients sometimes just don't buy into the strategies you've laid out. They might not think they're realistic. Sometimes they don't understand them. Other times, they just don't agree with them. The reason doesn't really matter - if they aren't bought in, they churn.

So are we just out of luck?

As I mentioned earlier, once you get the breakup notification, the client is probably gone for good.

Which begs the question: Is there anything you can do to proactively identify problems or disconnects before the client opts out?

Last year, my firm set out to answer that very question.

After testing half a dozen different concepts, we landed on a winner.

On a scale of 1-7...

At the end of each of our monthly CFO calls, we started asking our clients a simple question:

"On a scale of 1-7, how confident are you that the strategies and tactics we laid out today are the right ones to help you accomplish your goals?"

In other words, are we focused on the right things?

If the client answers 7, everything is great.

If they answer 6 or less, we ask the follow-on question:

"What would need to be true in order for it to be a 7?"

From there on, we get really curious and try to suss out what's actually going on and identify the disconnect.

We also have our team immediately report back to me any time a client assigns a score of 6 or less, so the rest of our team can assess the situation and provide help as needed.

Sometimes that results in me calling the client to see what's going on. Other times it might mean making some suggestions or offering additional guidance. Sometimes the CFO handles it without any help.

The real real here is that this process has FOR SURE saved two clients that I am certain would have otherwise churned. That's nearly $250,000 in annual revenue that was saved by this simple question.

In one of those cases, there was a misalignment of goals. In the other case, the client had other issues with the CFO that needed to be sorted out.

In both cases, the 1-7 rating proactively signaled that there were issues that needed to be addressed. The system worked, and both clients were saved.

Implementation

This might be one of the easiest customer satisfaction processes you could ever implement.

At the end of your next CFO call, just start asking your clients, "On a scale of 1-7, how confident are you that the strategies and tactics we laid out today are the right ones to help you accomplish your goals?"

If you get a 7, give yourself a high five.

If you get a 6 or less, resist the urge to get defensive. Instead, get curious. Find out what's going on and see what you can do to get things back on track.

ProTip: I've found that about 5% of clients will REFUSE to give a 7. They're the types that say, "I never give anything a perfect rating." Annoying - but this isn't a hill worth dying on. In those cases, just move along and treat their 6 like a 7. 

That's it for this week. 

See you next time!