The Prospecting Professor

Niche Focus: Auditors

"The Graduate" was the highest grossing picture of 1968. It was nominated for seven Academy Awards. The American Film Institute ranked it #7 in its list of the greatest films of the century. It also launched the career of Dustin Hoffman.

Dustin Hoffman plays Benjamin Braddock, a 20-year-old high-achieving schulb who, upon graduation from a fancy East Coast college, flies home to LA to be greeted like a returning war hero. At a welcome home party, a smug, tipsy LA businessman takes aside a baby-faced Dustin Hoffman and declares, "I just want to say one word to you - just one word - Plastics."

If the script for "The Graduate" were written today, the line might be reworked to, "...just one word - Auditing."

Thanks to Bernie Ebbers, Dennis Koslowski, and Sarbanes-Oxley, the accounting and auditing professions are much in demand. Few are more sought after than internal auditors, whose starting salaries are up about 10% from one year ago. "They can write their own ticket," says Dave Richards, head of the Institute of Internal Auditors.

How would a financial advisor begin to network with internal auditors? Pretty simple really. Join The Institute of Internal Auditors. Membership is $115, and open to anyone interested in the auditing profession. Most of the 50 states have chapters/affiliates ...California has 11 chapters. Browse the IIA website, www.theiia.org and you'll find much good information about the profession including Internal Auditor, the bimonthly trade journal. For the very keen advisor, one could attend The IIA International Conference 2005, July 10-13 at the Hyatt Regency in Chicago.

While you're in Chicago, get a Italian Beef sandwich...in a class all by themselves. Shaved italian beef, sweet and hot peppers, seasonings, au jus...Good Stuff!

Niche Focus: Airline Pilots

Last Friday, Merrill Lynch increased the firms estimate for airline industry losses this year to $5 billion. Earlier this month, Delta talked about seeking bankruptcy protection. In 2004, Delta lost $5.2 billion, an industry record. United, which is in bankruptcy now, expects annual fuel costs to increase by $1 billion this year. Continental reports that their fuel costs are up 40% this year. Northwest Airlines is reducing its fleet by 30 planes and is talking about laying off 930 mechanics.

Bankruptcies. Layoffs. Terrorist fears. Anecdotal evidence indicates that many airline pilots have had it. If flying has lost it's "glamour" for the passengers, it has also become much less pleasant for the pilots. The headlines today say it all. As a consequence, many tenured pilots are looking to exit the industry.

In a related development, there is also pressure within the industry to raise the mandatory retirement age for pilots. At the moment, the U.S. forces commercial pilots out at age 60. Yet as pensions in the industry erode...or are canceled completely, many pilots want to extend their careers. There is a growing push to raise the retirement age to 65.

This all presents interesting opportunities for financial advisors. Many tenured pilots who have worked in the industry for their entire career, have good nest eggs built up. As they depart the industry, they will certainly need advice with regard to their retirement plan rollovers.

When an employee retires, the evidence is that they make many of their retirement decisions within a six-month window...three months before and after they retire. Most obviously, advisors who want to capture this business should establish relationships PRIOR to retirement. To begin to network with airline pilots, advisors may consider the following:

• Become familiar with the hot-button issues of the pilots by going to the website of the Airline Pilots Association. The monthly trade journal is Airline Pilot Magazine. Both of these are great informational resources.
• The Aircraft Owners and Pilots Association caters to pilots and aircraft owners. The issues discussed on this website are of interest to both communities.
• Landings is a website for all pilots. In fact, an advisor can find out all certified pilots who live in their community by accessing the Landings database. Sign on to www.landings.com and go to databases...certifications...and pilots. You will find a list of all certified pilots in your city, county, state, etc.

As with all niche focus groups, the best method to garner new accounts is through referrals. Find ONE pilot who will meet with you. Begin a relationship with them, and do a terrific job. Ask for referrals. Open more accounts. Make your business "fly".

Niche Focus: Franchisees

Many franchisees fly under the radar. They work very hard and aren't as "visible" as the CEO of a Fortune 500 company, or the estate attorney, or the neurosurgeon...and can be tough to track down. However, if a prospective client is tough for you to track down, they are hard for competing advisors to track down...and most advisors give up on a prospect after the 3rd or 4th attempt.

Generally, franchising has seen very good growth over the past 3 years, and this growth is projected to continue for the near term. Franchised businesses now account for 10% of the GDP in the US, and 14% of the private sector workforce. The service economy and service businesses lends itself very well to franchising...with automotive, children's and business services being the top three franchising service sectors.

The demographics for franchising are also favorable. Franchising is attracting the attention of the younger, college-aged crowd...as the pool or available capital (from private and public sources) for start-up investment is quite large. Additionally, the older baby-boomer group is moving into franchising in a big way...retirees looking for a second career, or those that are simply tired of the corporate grind.

According to Entrepreneur magazine, the top franchises are: Subway, Curves, Quizno's, Jackson Hewitt Tax Service, and the UPS store. There are now more than 17,000 independently owned Subway locations in the US. Start-up costs for a Subway are $90,000-210,000. McDonald's is still the venerable #1 franchise in the eyes of many. They've been franchising since 1955. There are more than 11,600 McDonald's franchises in the US. Start-up costs are $500,000-1.6 million. 82% of McDonald's franchisees own more than 1 unit.

If you are interested in taking a run at the franchisee market, here are some good resources to refer to. Entrepreneur magazine covers the industry. Refer to them for capsule insights on all franchises. The International Franchising Association is the trade association, with Franchising World the most prominent industry trade journal. Also, many franchisees have their specific organizations. The North American Association of Subway Franchisees covers Subway. The National Operator Leadership Council covers McDonald's. (As an aside, some of the more mature franchises see considerable friction between the franchisee and franchisor. McDonald's is a good example. Check out www.licenseenews.com for the inside scoop on McDonald's franchisees)

For those advisors who enjoy targeting niche markets, franchisees are a natural place to consider. However, advisors who want to penetrate this market effectively, can't do so with half-efforts. Optimal effectiveness will come from immersion in the needs, concerns, and hot-buttons of the franchisees.

Niche Focus: Inventors and Patent Attorneys

Ultimately, this discussion will lead to a focus on Inventors and Patent Attorneys. First...a digression.

Yesterday was Albert Einstein's birthday. He first became interested in science as a young boy when his father gave him a compass. He spent hours watching the needle by itself, and realized that "something deeply hidden had to be behind things."

Albert was home schooled early, and when he finally did go to school his teachers thought him to be developmentally disabled. He refused to study any subject that he didn't find interesting...the only two topics that grabbed his mind were math and philosophy. In high school, one teacher tried to expel him because all he did was sit in the back of the room smiling.

He applied to a technical college in Zurich, yet flunked the entrance exam on all the subjects except math. He began working on a PhD in physics, constantly questioned his professors, missed classes, and only passed the final exam because his friend let him borrow his lecture notes. Upon graduation, he was the only member of his class not to receive an assistant professorship. Desperately looking for work, he applied to every scientific position that he could find and was offered only one position...at the Swiss patent office. This was completely fortuitous...during the day he evaluated patent applications and determined whether they would actually work...during the evening he was free to work on his revolutionary ideas on the laws of physics.

The area of intellectual property, patent law, and invention is a surprisingly large field. For those financial advisors who want to focus on the professionals in this area, there is a veritable plethora of resources to refer to. The American Society of Inventors, American Intellectual Property Law Association, Intellectual Property Owners Association, and Journal of the Patent and Trademark Office Society are great resources to begin from.

For a list of patent and intellectual property attorneys, the best source is Martindale. Using the lawyer locator, choose the tab that finds attorneys by the area of practice. In the county that I reside in (Hennepin County in Minnesota) I find 567 listings for attorneys who specialize in this practice.

Start with a few of the resources listed above. Learn which trends and buzzwords are driving this profession. Make a few low-level calls to test your knowledge and effectiveness. Gradually, you can immerse yourself in the topic. By applying your energy, technique and ingenuity, you will become as knowledgeable...and as visible...as you want to be.

Niche Focus: Car Dealers

At the recent annual convention for NADA (National Association for Auto Dealers), chief economist Paul Taylor predicted that sales of new cars and light trucks will gain momentum in 2005. He believes that sales will reach 16.9 million units...helped by manufacturers incentives, high-quality new products and a growing economy. He also foresees a healthy increase of used car sales at new car dealerships...used car sales are helped by employment gains as used car buyers get back to work.

Car dealerships are actually five smaller businesses going on at once, which create an enterprise that is fairly recession-resistant. The "front-end" businesses are new-car sales, used-car sales, and the business office. The "back-end" businesses are the service department, the parts department, and in some cases a body shop. The business office makes money from commissions on financing, sales of extended warranties and insurance sold in conjunction with financing. Back-end revenue comes from parts department sales to the service department and to the public. An owner can shift emphasis to adapt to fluctuations in the economy. When unemployment is higher, dealers promote and sell smaller cars, for example. In a healthy dealership, the revenue "pie" is divided along these lines: 50-60% of gross from new car sales, 30-35% from used car sales, and the rest from parts, service and the business office. The profit margin on a new car is 6%...and dealerships can withstand economic downturns when two of the five revenue streams are profitable.

Getting up to speed. Here are a number of great resources should you want to familiarize yourself with this niche. Ward's Dealer Business is a very good trade journal to begin to get the inside perspective. For example, in the latest issue car salespersons are coached to avoid certain questions in an article entitled, "Questions to Avoid". Never say, "If I can make the price right, will you buy today?" Instead say, "Under the right circumstances, is this a car you'd like to own?" The website for the National Automobile Dealers Association (NADA, pronounced NAY-da) has extensive information about the industry and the current issues affecting it. Automotive Executive is the NADA's monthly trade magazine, and very informative as well. Two more publications are: Automotive News and Auto Week. Finally, state, regional, and local automobile dealers associations are good resources as well as offering networking possibilities. To locate the appropriate associations, ask your dealer...or do a Google search, e.g. "Minnesota Auto Dealers Association".

Entry points. Given their visibility, the dealers themselves may be difficult to reach without a referral. An alternative route may be through the office manager (also known as the business manager, accounting manager, controller, or CFO). Not surprisingly, the office manager knows everything. It may be worthwhile to get to know the office manager by taking them out to lunch, or by buying them a cup of real coffee (Have you ever had a cup of coffee out of the dealer showroom? What do you think it's made of?)

Final thought. Car dealers probably get hit upon a lot by advisors...especially via the superficial, cold-call, telephone route. However, my guess is that few advisors immerse themselves in the car business and get to know it from the inside-out.

Using SmallTalk with Roofing Contractors

When financial advisors engage prospects, SmallTalk can be your secret weapon. People like to do business with other people who they know, like and trust. SmallTalk searches for areas of mutual interest, or common ground. SmallTalk begins to build a foundation of trust, upon which more important issues can be discussed. Let's talk about the type of Smalltalk that an advisor can use with Roofing Contractors.

In the first place, there are more than 22,000 contractors in the US. Although they can be concentrated in the more populous states (California with 2400+), even the sparsely populated areas have good representations (Wyoming-58, Delaware-74). Generally, the past few years have been good for roofers, with a strong construction and home remodeling market. 57% of all roofing contractors report that 2004 was more profitable than 2003...and 60% foresee that 2005 will be even better. The national association for the industry is the National Roofing Contractors Association. Their website is a good source of information on the industry: industry news, a member directory, and access to Professional Roofing magazine.

Another great resource is the trade journal, RSI Mag (Roofing, Siding, Insulation). In the most recent edition, you will find State of the Industry 2005, a report on the hot-button issues of roofing contractors. For example, the #1 problem for roofing contractors is the cost of insurance. 80% report premium increases, with premiums up 24% on average. The #2 issues for roofing contractors is "labor issues", or the ability to find good crews and managers who can deliver high-quality service. Another hot topic is the increasing costs of materials. In the past few years, plywood is up 115%, nails up 55%, copper sheeting up 55%.

If an advisor has a client who is a roofing contractor, it would behoove the advisor to know something about these hot-button issues. Moreover, the advisor can use knowledge of these issues to their advantage, by asking simple questions like, "So...I was reading that the cost of insurance is the #1 concern of roofing contractors like yourself. Is that true in your case?" or "How has the rising cost of materials affected your business?" If nothing else, these questions will get the prospect engaged in a dialogue. This is a great starting point for building a rapport that will lead to fruitful investment conversations.

Niche Focus: Dermatologists

Have you been to a dermatologists office lately? If you have, it has most likely been busy. Nationally, the waiting time for new appointments for dermatologists is 36 days. In larger cities, it's even worse. In Boston, the waiting time is six months.

You can read about these national trends in an article in the February issue of Dermatology Times, entitled "Today's Dermatologist Workforce". Dermatology Times is the leading newsmagazine for the dermatology profession and is published monthly.

The busy workload of dermatologists is a classic case of supply and demand. On the supply side, the number of graduating residents has not increased in 20 years. On the demand side, there are three big factors: an aging population, the skin cancer epidemic, and the broadened scope of dermatology practices to include surgical and cosmetic procedures.

Other trends...dermatologists are working fewer hours, retiring earlier, and there is a significant geographic misdistribution towards the larger cities away from rural areas. Also, 60% of graduating residents in 2004 were women.

The challenge of marketing to dermatologists is getting their attention. Given their demands, the likelihood of getting them on the phone at their office during normal work hours is minimal, nonexistent, and counterproductive. Why not a seminar that recognizes the trend within the profession to want to retire early, entitled "What Do You Need to Retire Early?" It should be noted that many physicians have a dollar amount in their head where they would become "bulletproof"...and able to chuck all the hassle and pressure...to retire, or wind down, their careers. However, given the pressing workload of dermatologists, they may not have given this calculation adequate analysis and attention.

The main point here is that, dermatologists, like many niche focus groups...have their specific needs, concerns, and hot-buttons. Financial advisors should use whatever resources they have at their disposal, like Dermatology Times, to better understand this target market.

Niche Focus: Garbage Collection

When I was in production, one of my larger clients was a garbageman. He was the quintessential Horatio Alger story. He started with one truck...and drove it himself. By the time I met him, he was retired but still went to the office daily. He drove a Cadillac, yet his favorite jacket was a faded VFW windbreaker. When we went to lunch, he would never come downtown to my office. We met at a burger joint close to his office. He passed away a number of years ago. Although he had a significant amount of money with me, I was shocked to read in his obituary that he left an estate of $100 million.

Waste collection is a good business. It is one of those industries that is fairly resistant to the vagaries of the economy. Ben Franklin said, "In this world, nothing is certain but death and taxes." Today, he might note the ability of our societies to produce refuse. However, "Nothing is certain but death, taxes and garbage collection" doesn't have quite the same ring.

Nationally, there are about 7500 privately-owned solid waste collection companies. The SIC code is (4953). The association that many of them belong to is, the Solid Waste Association of North America. The trade journal of the industry is Waste Age. If you go to the Waste Age website, you will also be able to sign up for two e-newsletters. Waste Age Wire is a weekly newsletter that provides the solid waste industry with a quick view of news, events, and upcoming magazine topics. Waste Age Insider comes out monthly, and includes information on collection, processing, disposal, and general business trends. The big annual conference is Waste Expo, in Las Vegas May 2-5.

If you wanted to focus on the solid waste collection industry, how would you begin? As a start, I would go to the Waste Age link, and click on all the articles of the current publication. I would also sign up for the two e-newsletters. After doing this, you will have much fodder for 'small talk' when you engage business owners in the industry. How do you find garbagemen (or garbagewomen)? Reference USA is a very good resource. Most public library systems subscribe to Reference USA. Mine does, in fact I can access them online. The one hassle with Reference USA is that one can only download a limited number of entries per session (usually 25). Using the SIC code for garbage collection (4953), you can select all of the companies by city, county or state.

If you do not know anyone in the waste collection business, the first call that I'd make is to the company that collects your own trash. Identify yourself as a client of theirs...and get an appointment. Don't do a cold-call rap on them...and don't settle for anything less than an appointment. Plan to visit them in their place of business...at a time that is convenient to them. Use the 'small talk' info that you have gathered to engage them in dialogue. If you are meeting with a business-owner, be very curious about their business...and ask good questions. Typically, entrepreneurs love talking about their business. Remember, the objective on this first call is quite simple...to build some rapport such that you can call the prospect again. The only thing that you are selling...is yourself.

Niche Focus: Air Conditioning Contractors

In my view, the single-best way for an advisor to make a mark is to target...and dominate...a prospect niche. With more than 660,000 advisors out there, you need to find a way to position yourself as distinctive. Prospect niche dominance does this.

Where do you start? How do you find a prospect niche to target? Presumably, that's why you've clicked on to The Prospecting Professor. Looking for ideas? How about Air Conditioning Contractors?

Air Conditioning Contractors have had a good couple of years. Their fortunes have been closely linked to the US economy's construction boom...and most have been very busy. (It always helps to call upon prospects who are making $$$. As a general rule, wealthy clients are better than poor clients.) For example, last week Watsco Corp. (NYSE:WSO), the largest distributor of air conditioning and heating products reported a record quarter...EPS  up 34%. Moreover, with the insidious reality of global warming, the world is not getting colder any time soon.

In order to dominate a prospect group, it greatly helps to become very knowledgeable on what's going on in the industry. Fortunately, online resources make it rather easy to immerse oneself in the comings-and-goings of any industry in a short period of time. Here are some resources for Air Conditioning Contractors (SIC code: 1711).

The Air Conditioning Contractors of America, www.acca.org, is the nationwide association of the HVACR (Heating, Ventilation, Air Conditioning, Refrigeration) industry. The American Society of Heating, Refrigerating, and Air Conditioning Engineers, www.ashrae.org is an association that is more engineer focused. The Sheet Metal and Air Conditioning Contractors National Association, www.smacna.org includes sheet metal contractors as well as the a/c folks. Finally, the Air Conditioning and Refrigeration Institute, www.ari.org is the trade association representing the manufacturers of air-conditioning and commercial refrigeration equipment.

The most obvious place to begin your "industry immersion" is by browsing each of the websites above. You will find newsletters, trade journals, press releases, etc. In fact, the Air Conditioning Contractors have a pretty good weblog...that is updated daily with inside news and tips, ACCA Buzz. A great source for smalltalk. Also, the Sheet Metal Contractors site has a very good member director online that will provide names of the contractors in your area.

If you are full of chutzpah and brio, you can attend the ACCA Convention and Indoor Air Expo in two weeks...March 9-12 in Austin Texas. The keynote speaker is futurist/economist Lowell Catlett, Ph.D., a professor at New Mexico State. He spoke at the conference two years ago and is back by popular demand. He will talk about new "trends for a/c contractors to explore, and provide tips that will assist contractors to stay at the top of their game" (That's what the ACCA press release says.) Also speaking at the conference is Terrell Jones, founder and ex-CEO of Travelocity. His topic will be how the "wired generation" is changing the way people buy HVAC services and products.

Here's a wacky idea. Why don't you call every a/c contractor in your area, and ask if you could meet them for a cup of coffee (or your other favorite beverage) at the conference in two weeks? Even if they can't meet you, or aren't going to the conference themselves...I bet they remember your call!

Lastly, if you are a member of Horsesmouth, enter "niche" into the keyword search and you'll find a number of very good articles that will get you started, including: "How Niche Practitioners Connect With Clients" and "How to Dominate a Niche in 12 Months".

Prospect Obscure Niches

Most financial advisors seem to grow their business in concentric circles. They begin with friends, family and acquaintances...and build outwards from there, with referrals as the best method to make introductions.

At some point, many advisors decide to focus on a niche market. This approach makes infinite sense. However, many advisors aren't terribly creative when they select the niche. They tend to gravitate towards those niches that project an aura of wealth...those professions that our parents wanted us to become, e.g. doctors, dentists, attorneys, accountants, etc. The end result is that the "white-collar professional" crowd is way over-prospected.

An alternative is to uncover a niche that is relatively obscure, and under-prospected.The advantage of under-prospected niches is that the initial sales cycle is shorter...and under-prospected investors are more loyal once they become clients.

Here are some examples of under-prospected niches, and the associations that they belong to. These are just a few examples of thousands of niches that business owners or professionals belong to. By the way, every niche has their respective association. Most of these associations can be found online. Many of them have member directories online too.

The American Land Title Association www.alta.org, the Coin Laundry Association www.coinlaundry.org, the National Association of Truckstop Operators www.natso.com, the National Association of Waste Transporters www.nawt.org, and the Retail Tobacco Dealers Association www.rtda.org.

One final, and obvious, point. If you focus on a niche, referrals are the best way to get introductions. Many advisors arrive upon a niche where they know at least one member...and use this contact as the embarkation point. However, it is completely possible to select a niche where you don't know a soul...yet. The key is to select a niche where you have a strong inkling that you will "like" the members...or at least understand and value the contributions of that industry.