Do you have that ONE client you dread picking up the phone to? The one client you seem to spend most of your time on? The one client you are constantly firefighting?
The reality is, this one client is probably not profitable, in fact not even close. If you are like most businesses, 80% of your profit will only ever come from 20% of your client base. I’ll bet you any money you’re doing loads of extra firefighting generating a lot of stress, for a client that doesn’t actually make you any money.
There’s an exercise you can do to determine where you are with your clients – but I warn you its not for the faint hearted. Accountants, IFAs, Solicitors laugh when I tell them what I am about to tell you. They say ‘No way can we do that!’ or ‘Do you know how much money we’ll lose?’, but the truth is, the exact opposite happens. So if you are willing: Strap yourselves in!
The first thing to understand is this formula:
Infinite Retention and Referrals = Relationship x Results
If you have a great relationship with your clients, and you get great results for your client, they will obviously want to stay with you and tell all of their friends about you, in other words, you will have created a raving fan.
Make a list of all your clients on a piece of paper and next to them, have two columns: One saying relationship and one saying results. If you have a fantastic 10/10 relationship with your client, a green tick goes into that column next to their name, same for results. If you are getting amazing results for your client, put a green tick in that column. If however, your relationship could be better or there is something wrong with the results they are getting, put a red cross. Anybody with a red cross next to their name, you need to give a phone call to and find out what’s going wrong. Why aren’t they getting results? Why isn’t the relationship so great? What can we do about it? How can we learn and change?
The next thing I want you to do, is grade your clients. Grade them as A, B, C or D clients. You’re a grade ones are the ones that pay on time, you don’t get any hassle from, they make referrals and so on. Your D grade clients are the ones that never pay on time, you’re constantly chasing for more information, they’re constantly ringing you up with problems and you’re constantly firefighting.
Here’s what you do next: All your D grade clients, sack them. You read that correctly. Get rid of them. They are no good to you and they’re generating no business for you, and making you stressed, so get rid of them. You should now be left with A,B and C grade clients. Think of ways you can now promote your clients so they are all a level up. Can you charge them more by offering a higher perceived value? Can you add services? Can you get referrals from them? Can you upsell or cross sell?
What you have just done is lightened your load, and you’re making more money – what’s not to like? When you gin new clients, your future business relationship is by positioning really, really well. Someone once told me that positioning isn’t everything, it’s the only thing. Once you position well, all of your clients will understand where they stand, and how you operate. Things like payment terms, prices, time etc need to be off the table from the very start, so take it off the table straight away by being open and honest and upfront with your new clients. That’s how you replace bad clients with new ones.
Have you found this helpful? Get in touch the direct messaging me to set up a chat if you think we re a good fit and could work together.
