I’m starting to plan for 2011. In 2010 we took on anything and everything, chasing cash flow. We didn’t do a good job assessing if each client was right for us, and that has to change. At the same time, loosing clients is painful, and we may have to lose some if we change our criteria. Suggestions would be appreciated.
Focus on the right clients, learn how to identify them, figure out how to get enough right clients to meet the company’s growth needs. These challenges worth solving. This business owner is going to put her business on track to achieve higher profits and greater success by making improvements in the customer profile.
One company’s right client may be another company’s worst nightmare. It’s about figuring out what your company is good at. Then make sure there’s a match between what your clients value and what you do well.
Figuring out what makes a “best” client takes internal introspection. Ask these questions to help get things on track.
- What do we do best / worst
- Which clients are the easiest to manage, the most profitable
- Which clients have the greatest potential to grow future profits
- Who appropriately challenges our company to get better at what we do
- Which clients do we want to partner with
Identifying worst clients can help narrow the field. Try these questions:
- Which clients are always causing problems, costing us profits
- Which clients does everyone want to get rid of
- Which clients never appreciate what we do, no matter how hard we try
Once you’ve identified clear winners and losers, start to analyze what separates clients into each category – best and worst.
- Does client revenue or profitability make a difference
- Who gets involved in the decisions to buy and oversee purchases
- What levels of management are / are not consistently in place
- Does publicly vs. privately held ownership matter
- What kinds, or amount of products or services do good/bad clients buy
- What characteristics matter: growth orientation, quality improvement, educating employees and/or management, history of partnering with key vendors, long term planning, etc.
Come up with questions and correct / incorrect answers that differentiate best and worst customers. Try them out on your existing customer population. Here are a couple of the questions we use:
- Do you think the business has more potential (correct answer, for us = yes)
- Do you have more to learn, to get your business to the next level (absolutely)
Do the best customers always answer one way, worst the other way? If not, check whether it’s the questions, or a customer that’s currently perceived as worst but has the potential to flip into the best category.
Calculate how may clients you need to add, to hit 2011’s growth target. Add 10% – 20% to make up for eliminating worst customers. Set goals for your sales people. Check if the prospect lists are deep enough to support the new sales goals. Expect that your close ratio may go down, as your standards for what makes a good sale go up. Look at your compensation plan to insure that sales people are compensated for getting best customers, not just any customers.
Build a schedule for weeding out worst clients, as new sales come in. Set appointments with worst clients to seriously discuss where things stand. Suggest changes that could convert them into the best category. Have a list of recommendations on where they can go next, if they’re unwilling to change. Don’t be afraid to refer your worst customers to competitors – let them suffer with the problems.
As you make the shift to best customers, look for gross profit to improve. Best customers may be demanding, but they will pay for what they want. Expect employee morale to improve as customers get more appreciative and easier to manage. Look for future opportunities, as best customers look out for your interests as well as their own.
Looking for a good book? From Worst to First: Behind the Scenes of Continental’s Remarkable Comeback by Gordon Bethune.
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Andi Gray is president of Strategy Leaders Inc., www.StrategyLeaders.com, a business consulting firm that specializes in helping entrepreneurial firms grow. She can be reached by phone at 877-238-3535. Do you have a question for Andi? Please send it to her, via e-mail at AskAndi@StrategyLeaders.com or by mail to Andi Gray, Strategy Leaders Inc., 5 Crossways, Chappaqua, NY 10514.
