CHAPTER THIRTEEN

The Law of
Incubation

The Most Profitable Relationships
Mature over Time

Recently my company secured one of the most lucrative relationships in our history—a seven-figure, multiyear deal. But we had been adding value to the former bull’s-eye prospect for over three years, first establishing high trust then fostering that trust until the relationship matured into a long-term partnership. And that’s where the real profits loomed. But the truth is that we’re still not done adding value. As long as we are in business together, my company will continually seek to meet the maturing expectations of our partner, as they will seek to meet ours, because we know that’s the only way to realize the full value of the partnership.

When a business relationship is a right match, as it grows so does its earning potential. A friend and client, Jeff Lake, exemplifies this approach to maximizing client relationships.

By his own admission, for years Jeff was an eight-ounce bottle with sixteen ounces of fluid in it. He was working seventy hours a week and spending 75 percent of that time prospecting and attempting to build new relationships and only 25 percent of his time fostering existing relationships with paying clients. And while he had gotten pretty good at keeping all his plates spinning—doing just enough to keep most everyone happy—his quality of life had gone downhill. He and his wife had just welcomed a baby girl into the world that year, and his ever-increasing time at the office was sapping time from his family. Not only that, he wasn’t even close to realizing the full value that each of his existing clients could bring him. Cognitively, he knew something needed to give; but practically speaking, he wasn’t sure what to do. He tried this and that for a few years but nothing seemed to stick. He was still working long hours and found himself more and more disturbed at his lack of quality time to do what really mattered, especially off the job. The thought that stuck in his mind most was coming home one day to a little girl who hardly knew her daddy. That, he determined, wasn’t going to happen.

In 1993, Jeff decided to do some research outside his industry to determine how other sales professionals maintained a high level of success while keeping their quality of life intact. He was doing well, producing about $60 million a year in sales, but he was determined to find a way to reclaim a high quality of life and still maintain his productivity.

As a result of his research, some coaching, and a few seminars, Jeff realized that what he needed to do was change his approach to client relationships. He was spending too much time trying to build new relationships and not spending enough time fostering his existing client relationships to realize their maximum value. While he knew it would take some time and quite possibly a drop in profit, Jeff was committed to making this change. Part of this process was scaling back on the number of clients he worked with in order to completely serve those whom he deemed the cream of the crop. He began meeting with his clients and explaining this change in approach, and an overwhelming majority applauded his efforts. They, too, felt that quality of life was more important than anything.

Since 1993, Jeff has remained committed to his strategy of realizing the full value of each client relationship. In fact, he now spends just 25 percent of his time looking for new business—75 percent of his time is spent building and growing his existing relationships to maturity. And while his profits did drop slightly at first, he and his team of four now produce $250 million a year in sales—a 400 percent increase. And most importantly, he only works an average of forty-five hours a week and takes ten weeks of vacation a year with his growing family.

To understand the Law of Incubation as Jeff does, you have to recognize one thing: There are no shortcuts to building the most lucrative, long-lasting relationships. Don’t get me wrong here. Following the HTSS will certainly secure most of the high trust relationships you desire—and those relationships will dramatically increase your profits in the first few years. But to maximize your profits over time, you must understand the way relationships work.

Go back to our dating analogy. How many stories have you heard of men who invested a lot of time, energy, and creativity trying to captivate a beautiful woman in order to win a date with her? Those stories are fairly common, right? (And so are sales appointments.) Maybe you’ve experienced a similar story. But if you asked the guy pursuing the woman if he thought he’d reached his goal by landing one date, he’d be quick to correct you. Getting her to say yes to a date is just the first step—albeit an important step—if the ultimate goal is a lasting marriage. Beyond that first date, important steps must be taken to grow the dating relationship, steps that will determine whether the two will get married (Law of Courtship). Furthermore, once the two are married, that’s really just the beginning of their life together. Beyond the marriage vows the couple must come to terms with all that is necessary to ensure the marriage’s success. And in the end, the man who wins the woman’s heart for good—and vice versa—is the one whose actions have consistently fostered the trust that was established on those first few dates. Something very similar must happen if you desire your sales relationships to reach their potential.

A LESSON YOU SHOULD ONLY LEARN ONCE!

Ninety-five percent of salespeople go 95 percent of the way and get only 5 percent of what’s available to them. Five percent of salespeople go 100 percent of the way and get 95 percent of what’s available to them. You must decide in which group you want to be.

The Law of Incubation says that the most profitable relationships mature over time. To be certain that you get this before we go any further, I want you to understand that we’re not talking about merely having tenacity and a never-give-up attitude. Those are certainly admirable qualities, but they’re not nearly enough to make a relationship last. Relationships that are fruitful and enduring are not comprised of parties that are committed to perseverance. (If that were all it took for a relationship to last, the national divorce rate wouldn’t be nearly sixty percent.) The most productive relationships are comprised of people who are committed to consistently adding value where value is most needed. Incubation is the process by which you consistently add value to a client for as long as you do business together, knowing that over time that will ensure that the relationship matures to fruition. Think about it this way: A girl doesn’t stay with a guy because she’s overwhelmed by his persistence. She stays with him because of the value that he adds to her life, and the value that she adds to his.

RELATIONSHIPS THAT REACH MATURITY

The salesperson who adds value after the sale clearly demonstrates that the relationship is more important than revenue, and the person is more important than profits. Incubation is not about getting a sales relationship going. That’s what the High Trust Selling System is for. Incubation is about keeping a sales relationship flowing. While adding value is critical throughout the selling process, following the Law of Incubation is about using the long-term transference of value as your main client-retention tool.

The salesperson who adds value after the sale clearly demonstrates that the relationship is more important than revenue, and the person is more important than profits.

Salespeople are notorious for landing a sale and then never doing anything beyond that to sustain the relationship. Most give their one time clients no reason to continue in a relationship with them, and they are therefore constantly stuck in an acquisition mode where the stress is high and the stakes are never certain. The truth is that many salespeople can “get” a sale if they want it bad enough. That’s not to say that they are getting the sale the right way—it is to say that if salespeople make enough calls, bang on enough doors, and do a good enough job of begging that some poor soul will eventually feel sorry for them and give them business. It’s no wonder so many salespeople hate their jobs.

I don’t tell you all that to depress you, but rather to show you that often the main difference between the mediocre salesperson and the high trust sales professional is how they treat their clients after a sale. The mediocre salesperson immediately moves on to the next victim after a sale, leaving the relationship with his last client to wither and eventually die. On the other hand, high trust salespeople know that the most profitable relationships are a result of a time-honored investment, and they therefore take the steps necessary to retain their best clients for as long as possible—the longer the relationship, the more lucrative it can be. And you must do the same if you desire to reach your potential.

To be successful in high trust selling you must always have a balance of prospects who are being converted to first-time clients and first-time clients who are being converted to lifetime clients. And while the percentage of time that you spend on securing new clients will probably decrease as your relationships with existing clients mature, the Law of Incubation ensures that every client with whom you do business becomes and remains a client for life.

The most obvious long-term impact of the incubation strategy is client profitability—getting the most business possible from those with whom you do business. The less obvious—but equally significant—long-term benefit of incubation has to do with long-term client referrals. A relationship founded on mutual trust that is fostered over time through a consistent value-adding strategy is the most profitable kind of relationship that a sales professional can ever have. And besides, why would you want to invest in a relationship and not reap the full benefit? Once you’ve done the legwork up front to determine that the relationship is worth the effort, it makes sense to see it through to complete maturity. To not do so is the equivalent of pursuing, dating, and courting a person only to call the relationship off the day before the wedding. And no one wants the effects of that.

SECURING YOUR FAIR SHARE

Often, salespeople measure their success through the market share numbers that their companies post. And while I think market share is an important gauge of a company’s success, “client share” is the truest measure of a salesperson’s relationship success.

The easiest way to understand the client share concept is to think of market share as a horizontal concept and client share as a vertical concept.

Let’s say that over the course of a month, there are one hundred sales in your given territory that are available to you and your competitors. If you landed five of those available sales then you’d end up with a 5 percent market share for the month. Generally speaking, to maximize your market share you must sell as much of your product to as many clients as you possibly can. In essence, you must spread yourself out as wide as possible—the greater the number of clients, the greater the number of sales. And after all is said and done, if you ended up averaging a 7 percent market share per month, you’d probably be doing pretty well in most sales markets. But the problem is that usually means spending a lot less time with a lot more people. In effect, to increase your market share numbers you generally have to spread yourself thinner, which results in shallower, untapped relationships and a very unstable business foundation.

On the other hand, if you were striving to increase your client share, you would focus on fostering deeper relationships with fewer people—spreading yourself thicker, so to speak. Using the example as above: If in the same thirty days you focused on only one client who offered the potential of ten sales (directly through the client herself or indirectly through her referrals), and you secured half of them, you would end up with a 50 percent client share. And here’s the beauty in this strategy: While you still end up with the same net amount of sales (five), there is much more room to improve, because working with only one client takes much less time and effort. In fact, your average client share can actually decrease while your revenues increase. Here’s how.

Let’s say that in the next month you managed to finish with a 60 percent client share with your original client but only managed a 30 percent client share with another client whom you took on, closing only three of the ten potential sales that client offered. While your average client share for the month decreased to 45 percent, you still managed to close a total of nine sales, nearly doubling your production from the month before. I don’t know about you, but spending less time on fewer clients to make more money sounds much better than pounding the pavement or the phone pad unendingly for the purpose of dealing with more and more clients who don’t know me from Adam. I have a sense you feel the same way.

Focusing on client share is about increasing the potential of each sales relationship without increasing your time on the job. Essentially, the difference between a market-share mentality and a client-share strategy is the difference between shooting a shotgun and shooting an arrow. The first tends to be messy with low accuracy; the second is efficient with acute accuracy. The truth of the matter is that if you are careful to put the Law of Incubation into practice regularly, fostering the bull’s-eye relationships you’ve established using the HTSS, you will find that selling doesn’t have to be stressful at all and can actually be very fulfilling on a daily basis, because in the end it’s all about initiating and preserving loyal relationships.

LOWER COSTS, HIGHER POTENTIAL

To follow the Law of Incubation you must strive to increase client share instead of market share. It all comes down to acquisition costs versus retention costs.

Generally, market share increases by acquisition. The more clients you acquire in your given territory, the greater your market share. On the other hand, client share mainly increases by retention. The greater your client retention the greater your number of sales from each client, and hence the greater your client share. Now consider the costs of acquisition versus retention. Which would you say costs more in terms of effort, time, and money: to secure a new sale from a new client or secure a repeat sale from an existing client? Obviously, getting repeat sales costs much less, because the acquisition costs no longer exist. On the other hand, continually landing new sales from new clients means continually taking on more acquisition costs, which research shows are about five to seven times higher than retention costs. Put it this way: When you focus on increasing client share (retention), your costs always decrease the longer each client remains. And if you stay with this strategy, you will ultimately get to the place where your acquisition costs are at a minimum because the majority of your business flows from those clients whom you’ve retained through high trust relationships.

REAPING YOUR HARVEST

Shallow relationships or deep relationships? It’s your call. If you go shallow, you will constantly be digging and planting to keep your sales career alive. This means a constant infusion of new prospects will be the absolute requirement for you to continue to survive in the sales profession. That’s hard work. But if you go deep with your best relationships, planting then growing trust one client at a time, you will not have to plant very often. Rather, like a dependable harvest, you will spend your time reaping the fruits of your labor through repeat business and expanded referrals.

In charting the courses of thousands of sales students over the years, one thing I’ve found that acts as a significant catalyst for making a commitment to following the Law of Incubation is determining the lifetime monetary value of clients. Understanding the long-term value that a client can add to your business usually impacts most salespeople dramatically because they can tangibly see the huge rewards that lie in store if the relationship matures.

Following are several examples of the long-term value that a client can bring to a sales business (including my company) that will show the significance of applying the Law of Incubation.

The Duncan Group Client Value Model (Products)

A. The average transaction amount	$250
B. Number of sales per year	2
C. Revenue per year (A x B)	$500
D. Client Life Cycle	5 years
E. Client Cycle Value	$2,500
Indirect/Word-of-mouth value
F. High trust client tells ten others. (E x 10)	$25,000
G. Referral Revenue @ 25 percent	$6,250
Total Lifetime Value of a Client (G+E)	$8,750
The Office Computer Supplier
A. The average transaction amount	$3,500
B. Number of sales per year	5
C. Revenue per year (A x B)	$17,500
D. Client Life Cycle	5 years
E. Client Cycle Value	$87,500
Indirect/Word-of-mouth value
F. High trust client tells ten others. (E x 10)	$875,000
G. Referral Revenue @ 25 percent	$218,750
Total Lifetime Value of a Client (G+E)	$306,250
The Mercedes Benz Dealership
A. The average transaction amount	$70,000
B. Number of sales every three years per buyer	1/3
C. Revenue per year (A x B)	$23,300
D. Client Life Cycle	20 years
E. Client Cycle Value	$466,000
Indirect/Word-of-mouth value
F. High trust client tells ten others. (E x 10)	$4,660,000
G. Referral Revenue @ 25 percent	$1,165,000
Total Lifetime Value of a Client (G+E)	$1,631,000

As you can see, once you know how much a high trust relationship is worth to you and your company, you’ll want to retain it as long as you can. When you take a look at the Lifetime Value Models above, it’s easy to see that there is substantial value in long-term client retention. It increases profitability, fosters loyalty, expands referrals, and secures cash flow. In short, it’s the first step to securing the most out of every sales relationship. And generally speaking, when it comes to retaining the best clients, you need to remember one simple truth: You must do more to keep a client than you did to get the client. That doesn’t mean you have to continually win a client’s trust over and over. It simply means that high trust relationships must be continuously nurtured if they are to reap a full harvest. As in any relationship, once trust is earned, it is then matured over time though consistency and integrity.

You must do more to keep a client than you did to get the client.

In short, to best retain the high trust clients you have acquired, you must move the relationship over time from a professional level to a partnership level. I’m not telling you to sacrifice your level of professionalism and take on some sort of buddy-buddy, sit-on-the-couch-and-eat-chips-together mentality. I am saying that for your high trust relationships to mature you must move them beyond the boundaries of the seller/buyer affiliation to a place of partnership governed by give-and-take.

It’s simple: If you want to maximize the relationships you’ve formed, you cannot be the only one giving. While you will always continue to add value to your high trust clients, your relationships will not reach their potential until your clients also give back to you in the form of both repeat and referral business. That’s the culmination of following the Law of Incubation. However, as you most certainly know from your nonsales relationships, give-and-take never happens accidentally. Your clients’ motivation to give you more business and to stay connected to you is largely a function of your initiation and leadership. In other words, you must be strategic about both forming and fostering productive partnerships.

Essentially, forming a strategic partnership is purposefully seeking agreeable terms for a mutually beneficial relationship. And that’s what you must do with each of your newly acquired high trust clients if you desire to reach your potential. Two of my clients, Tim Braheem and Terry Moerler, understand this very well.

Tim knew about Terry for some time before the two became partners. Terry had a wonderful reputation for being one of the best sales professionals in her industry. And as Tim saw it first, there was tremendous potential for both of them to increase their profits dramatically if a strategic relationship was formed. There was only one problem: Terry had a seven-year relationship with another salesperson in Tim’s industry and was very loyal to that individual—something Tim respected very much. She referred business to that salesperson and received business back. It seemed to be working well; nevertheless, Tim waited for the right opportunity to meet Terry. He knew that any long-term business relationship with her would have to start with a friendship built on trust. And before long, an opportunity arose to meet her.

In that first meeting between the two, Tim did nothing but get to know Terry—something that made a lasting impression on her. The meeting that was supposed to be less than an hour lasted nearly two hours and was focused entirely on conveying ideas and building a friendship—but not on getting business from each other. That would come later. For several months, the two continued to meet on a regular basis to catch up and bounce ideas off each other that they could apply to their existing relationships in their respective industries. During this time, Tim was fostering the relationship to maturity, which he knew would take some time. Then, after several months of meeting, one day it happened. Terry had become increasingly dissatisfied with the partner she had been using in Tim’s industry, and she brought up the idea of forming a new strategic partnership with him. Of course, Tim was already prepared for this, so he shared with her his thoughts on the matter. And that day Tim and Terry took their trust relationship to the next level.

Today, Tim and Terry’s relationship is still maturing. The two still meet once a month for two hours to make sure they are doing everything they can to meet each other’s needs and maximize the value of the relationship. And even though the relationship has yet to realize its full potential, it certainly has produced much fruit over the last few years. In fact, last year Terry referred Tim over $18 million in sales. And this year, Tim’s referrals alone will make Terry over $100,000 in income. That’s the kind of valuable relationship that results from following the Law of Incubation.

For your clients to become partners and remain your partners for good, you must continually share a vested interest in each other’s success—like Tim and Terry do. In fact, there are four steps that you should take in order to consistently add value to your clients and maximize the potential of your relationships. As you consider each of these steps, understand that once this system is in place, it is meant to be sustained throughout your sales career.

Incubation Step 1: Develop a three-tier ranking of your clients. Clearly, for Tim and Terry, they ranked at the top of each other’s client list. Terry referred Tim as much or more than any of his other partners, and Tim did the same for Terry. Which clients are your most valuable? Which produce the highest percentage of sales? Which are more likely to refer you more business? Which clients have the most potential to you and your firm? When you answer these questions you can establish your ranking system. (Remember from the Law of the Hourglass that the smallest population of your clients probably produces the greatest revenue for your business).

Here’s an example:

Client Ranking	# of Clients	% of Sales
Level One: VIP	5	60
Level Two: Premier	60	25
Level Three: Standard	35	15

Incubation Step 2: Commit to a specific investment for each prospect and/or client. For example, if I know that a loyal client for our firm is worth $500 dollars a year, then I need to answer the question: “How much do we want to regularly invest in that client to ensure high loyalty?” I generally tell students that they should come up with three investment levels. For example, for Level One clients (those with whom you have established a high trust relationship and who can be the most profitable), invest 15 percent of their value back into them. For Level Two clients (those with whom you’ve just begun to do business), invest 10 percent of their value back into them. And for Level Three clients (those with whom you intend to do business at some point in the future), invest 5 percent back into them. Ultimately, you decide the amounts you will invest back into clients to retain them, but there is no magic to it. Like any investment, you want to measure your return. Simply invest more where there is more high trust and more potential for business. That’s why Tim and Terry continue to invest in each other. Invest the least where clients’ value and trust are not yet established. Note that this step also applies to your investment of time.

Incubation Step 3: For each tier, decide your annual contact plan. For Tim and Terry this means meeting formally at least 12 times a year. Like them, you should have an annual contact management plan for each one of your clients. At the end of this chapter, I will show you how to use contact management to master the follow-up procedure with each client. Here however, you need to simply understand that you must plan to have more contact with your best customers than you will with your marginal customers. Here is a sample of a pace of contact over the course of a year for three sample groups.

CLIENT CONTACT PLAN

Level One: VIP clients receive thirteen contacts per year.

Level Two: Premier clients receive nine contacts per year.

Level Three: Standard clients receive five contacts per year.

These points of contact do not include necessary calls or meetings that must be made to discuss or generate sales. They are strictly to create loyalty and build trust.

The goal of Step 3 is to structure relationships with VIP clients, grow relationships with Premier clients, and maintain relationships with Standard clients/prospects that offer future potential.

Incubation Step 4: Collaborate regularly. The greatest advantage you have over your competition is knowing your clients better than they do. While you don’t need to constantly revisit the high trust interview process (from the Law of Courtship), you must get in the habit of continually interviewing your clients through weekly or monthly partnership planning sessions in which you both ascertain existing needs and seek to discover new needs; and also through annual client reviews in which you both revisit your progress for the previous year and determine if there are any ways to improve the productivity of the relationship. Along with their formal meetings every month, Tim and Terry talk on the phone several times a week in order to both exchange business and ensure top-quality service to each other’s clients.

As in any relationship, the better in tune you are with your partner’s needs, the more easily you can meet that person’s needs.

There are no perfect formulas for employing an ongoing-needs discovery routine with your clients. The goal is simple: As in any relationship, the better in tune you are with your partner’s needs, the more easily you can meet that person’s needs.

This type of partnership strategy continually boosts your relationships forward and ensures that your first order from a client is not the only order you take. It helps you remain in touch with your clients in order to avoid any gaps in meeting their needs. It also helps you know what to expect from your clients in terms of repeat and referral business. If you recall, in Chapter 10 (the Law of the Scale) I shared with you about a client named Tim Broadhurst whose $80 million a year in sales comes from the repeat and referral business of only twelve clients. (Not to mention that it affords him and his family the luxury of about three months of vacation a year!) His results are a function of his keen ability to continually foster his key high trust relationships, adding value to his partners and thus maximizing the potential they add to his business. And the same can be true of you if you are careful to follow the Law of Incubation in your business.

IF YOU FOLLOW UP WITH THEM,
THEY WILL FOLLOW THROUGH WITH YOU

There is no greater discipline in the high trust selling process than adding value. A regular dose of value decreases the likelihood that your clients will be wooed by your competitors, and therefore increases the stability of your business. In fact, when you consistently add significant value to your clients over time, they will eventually come to a point at which they cannot imagine doing business with, or referring business to, anyone else. That’s when you know you’ve secured a profitable, productive client-for-life.

The truth is that, from beginning to end, the high trust selling process is about adding value to take the relationship to the next level, and the next, and so on. Take a look at how it works:

The fundamental application of the Law of Incubation is following up with every prospect and client you want to retain for life so that they follow through with repeat and referral business for you, for life. This cycle begins when you start practicing the High Trust Selling System and continues as long as you are a sales professional, whether you are acquiring or retaining high trust clients. Ultimately, consistent, value-adding follow-up with both your prospects and clients will set you apart from the majority of all salespeople.

CREATING CUSTOMER LOYALTY

By now you should know that the key to selling success is building loyal, lucrative relationships by consistently learning and satisfying the needs of your clients. And the better you know your clients the more you can satisfy their needs and create more loyalty. But I want you to be clear on something: The only thing that guarantees client loyalty is high trust cultivated by consistent, value-rich follow-up.

As you can see, client loyalty is a function of both high trust and follow- up over time. High trust by itself will raise the probability of client loyalty in your business, but without actions to back it up, its potential will never be tapped. This is what happens so often when salespeople do a great job of establishing trust with a client for one sale, but have trouble securing a second sale with the same client because they did nothing to validate the client’s trust between sales. You can’t have loyalty without high trust; and trusting clients will not remain loyal unless you have follow-up systems. If you’re going to spend the time finding prospects and converting them to high trust clients, I’m sure you want to keep them. This is accomplished through the daily discipline of contact management.

You can’t have loyalty without high trust; and trusting clients will not remain loyal unless you have follow-up systems.

STAYING IN CLOSE CONTACT

The simple truth is that you can’t add value efficiently today without maintaining an accurate bank of information on your clients. Getting this information, using it respectfully, and keeping it updated is necessary for staying in close enough contact with your high trust clients to consistently add value to their lives.

In the grand scheme of high trust selling, the role of a contact management system is to effectively record and efficiently utilize client information for the purpose of increasing and securing client loyalty—such information as the name of the person who originally referred the client to you, the client’s core values, his or her most important needs, buying strategy, expectation for the relationship, birthday and that of his or her immediate family members, anniversary if the client is married, and any other pertinent information that you would consider helpful for meeting your client’s needs and maintaining a fruitful relationship. Consider your client data as a long-term economic asset that must be managed well in the short term. The more you know about your clients—what they need and want, and how to most efficiently meet those desires—the more valuable that asset becomes and the easier it will be for you to maximize the earning potential of each relationship.

In the end, however, it’s not the sophistication of your contact management system that will determine if you’ve built a high trust sales business. It’s what you do with the information that you’ve gained. It’s whether you consistently and relevantly add value to you best clients over time. Remember that adding value is the only way to secure long-term loyalty and trust. The more you do, the more business you will get.

That’s why, in the end, it’s all about service.