The initial steps in determining your client capacity are based on understanding the amount of time you want to dedicate to your business. Your next step is to determine how much time you spend on client management, which includes client meetings and events.

Once you have all of these numbers, says Julie Littlechild, founder of Advisor Impact Inc. in Toronto, you can them into a calculation that should tell you how many top clients should be in your client base.

Below are the steps to calculating your ideal number of top clients:

1. Evaluate the amount of time spent with various clients
Look at your client base using a tiered system. Consider three or four levels, with your most profitable and best clients landing in Group “A” while other clients will make their home in Group “B,” “C” or “D.”

Consider the time you spend on each group looking at the following factors:

  • frequency of contact;
  • length of meetings, including preparation and any follow-up;
  • events for the purpose of client education or client appreciation;
  • time invested in working on the client’s account outside of meetings.

If you had previously incorporated a client-segmentation process into your practice — which would have incorporated those factors — figuring out these numbers will be easier.

If you have not segmented your clients based on factors such as profitability and personality fit, you may find you are treating everyone equally, which would be to your business’s detriment.

“Not only could you over-invest time in your small clients,” Littlechild says. “But that could mean you’re under-investing in your biggest clients and putting those relationships at risk.”

For this calculation, let’s say you spend about 25 hours per year for each top client household (your number may be different).

2. Calculate your top-client capacity
You can now plug your numbers into the system.

Start with the number of weeks for proactive client contact. Yesterday’s example stated 44 weeks (your numbers will vary). Multiply that number by the number of hours per week you will work, which we decided for the purposes of this example would be 45. That brings you to a total of 1,980 (44 x 45).

Now, take the number of weeks you will work and multiply it by the number of hours per week designated for business development (as suggested in yesterday’s column). So, you are multiplying 44 by 5, which brings you to a total of 220.

Subtract the latter number (220) from the total of the first calculation. In this case, you are subtracting 220 (annual hours of business development) from 1,980 (total hours at work, excluding RRSP rush), leaving a remainder of 1,760 (hours available for client service).

Finally, divide 1,760 by the number of hours you spend on each client household per year — which we determined in Step 1 to be 25.

Your final answer is approximately 70; that is, you should be working with 70 top-client families, according to this calculation.

If you actually classify 100 of your clients to be “A” clients, and also have “B” and “C” clients, you are probably overextending yourself. It would be worthwhile, then, to consider organizing your clients in such a way that you can provide premium service to no more than 70 members of your “A” group.

This is the second part in a two-part series on client capacity.

Click here for part one.