The world is a risky place and so an offer that reduces risk is attractive.
What is It?
Risk reduction can be internal or external.
External risk reduction may be easiest to understand. Your offer addresses some inherently risky aspect of life. An accountant prepares accounts for tax purposes and reduces risk for the business-owner who otherwise prepares their own accounts. An Independent Financial Advisor manages investments and so reduces risk for the asset owner.
For any professional service, this Element of Value is crucial. State risk clearly because the prospect may not immediately see the need for protection. However, risk reduction alone may not be enough, where the prospect considers more than one provider.
Internal risk reduction usually takes the form of a guarantee. So, the accountant might guarantee accounts prepared properly and submitted to the authorities on time. If the accountant fails, the guarantee indicates the compensation the prospect can expect.
It is easy to see the power of an offer that reduces both external and internal risk.
Value to the Client
Internal risk reduction is primarily reassurance. We all know things go wrong from time to time. Guarantees simply recognise that fact. The prospect has faith in the professional provider and the guarantee covers the unlikely possibility something might go wrong.
External risk reduction offers more advantages to the client and opens up more possibilities for professional service.
You might keep accounts of equal accuracy and reliability to the professional provider. So, why consider taking on their services?
There is the time you save. If you use the time it takes to prepare accounts to generate more income, professional assistance might be attractive. The chances are professionals produce accounts as good as or better than yours in less time, because they do it all the time.
They can do more. Accountants produce management accounts and offer advice about financial arrangements for their client’s business. They may be able to save their client money. OK, you may be clever enough to work all this out for yourself but do you know that for certain? They take responsibility for the risks you take when you do it yourself.
How to Get There
Do you really control risk? A risk is an external threat. It is there whatever the prospect does about it. Internal threats are weaknesses the prospect has some control over should they choose to exercise it.
Do non-professional businesses control risk? A gymnasium might reduce risk of ill-health. If it trains soldiers to fight in wars, maybe it reduces risk. Similarly, nutritionists deal mainly with weaknesses, problems prospects can address themselves.
Both of these claim to constrol risk of ill-health. These are problems prospects address themselves and can be solved only if they do so. Their client may need help to develop a plan and stick to it but the risk is internal. Guarantees support the offer through reassurance but work only where the client co-operates.
For professional firms threats are external and so the client’s co-operation is less critical. Changes in tax law or falls on the stock exchange are external and the accountant or IFA addresses them without interventions from the client. All the client does is make regular contributions, eg by submitting income and expenditure for the month.
Your Offer
Consider whether the threat is internal or external. Shape your offer, being clear about the expectations of your clients. Consider whether you need a guarantee.
Your clients need to understand about the risks they expect you to tackle and what your expectations are of them.
This is the twenty-first of 31 posts about elements of value. Make sure you don’t miss any by signing up for the offer below. The posts in this sequence can be accessed below:
- Social impact: Self-transcendence
- Life Changing: Provide Hope, Self-Actualisation, Motivation, Heirloom, Affiliation and Belonging
- Emotional: Reduces Anxiety, Rewards Me, Nostalgia, Design / Aesthetics, Badge Value, Wellness, Therapeutic Value, Fun / Entertainment, Attractiveness, Provides Access
- Functional: Saves Time, Simplifies, Makes Money, Reduces Risk
Next: Organises + 9 more
