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Cull Your Client Base In Order To Grow
07 March 2011
More is not always more'
This may sound a bit harsh, but it's not about the client as a person, it's about their value to your business. Just as you grow your business, you need to work with clients who are also in growth mode, or who have the potential to do so.
In the very early days of starting my business, there was a specific period of time when we were totally focused on our marketing activities. We targeted network groups and local business groups and had a lot of success with our marketing activities. I'd focused on speaking engagements and writing articles for business and other publications as a primary marketing activity. Every event or article produced inquiries that led to meetings for business owners wanting help with growth.
However, what we didn't do was put any boundaries around the types of clients we'd engage with. Many of the business owners who responded to our marketing messages were not in a position to engage a consultant, but I wanted to still help them in some way - because I could, and because they needed and wanted help. I offered 'cut down' offerings at a fraction of the usual fee because I didn't want to send them away. That year I acquired many new clients as a result of my decision to help anyone who came to me. A client is a client, no?
Absolutely not! That mistake resulted in a downward spiral in fees, the acquisition of clients who were becoming smaller and smaller (not physically, but in value!), and increasing dissatisfaction on my part with the sort of consulting work I was doing. These businesses were not the right match for my business and as a result I wasn't the right match for their businesses.
The next year, I 'culled' 60% of the new clients from the previous year.
I didn't actually 'do' anything to them except advise them that I couldn't assist them any further but that I could provide ad hoc tips and advice through this newsletter.
Of the remaining 40% of those new clients, the smallest client grew in value the next year. They were in growth mode, had reached a level of growth where they needed to make some decisions regarding future direction and their business model, and they wanted support. Their first year working with me was a test - could we work together, could I provide the support they required, and more importantly for them at the time, could I help them achieve the outcomes they wanted.
That client has grown over 3000% in the intervening years.
I've had the satisfaction and enjoyment of being part of that organisation's growth and helping to drive it.
Other clients typically grow 200-500% over a few years, on their first year value.
Importantly, 'selected culling' of clients that aren't the right fit for my business enables both my company and my clients' companies to grow because:
- I ultimately have more time, attention and availability for the clients I want to work with
- I am able to focus solely on those clients, and help develop solutions that will take away their challenges and barriers and help them grow
- Being able to say 'no' gives me the freedom to choose to work with people I like and whose values resonate with my own
A very useful exercise in helping you to cull your client base in order to grow it, is to categorise your clients into value tiers.
A client of mine, when we first started working together, had over 80% of their client base with a value one hundred times smaller than their largest client. I've seen this type of situation many times, where the multitudes of small clients are retained, at the expense of not going after more of the A-Grade high value clients.
Your largest clients this year, or in the last financial year, may be your top tier now, but aim to grow them to higher levels in the next 12 months. Your lowest tier today shouldn't exist in 12 months - hence, culling your client base.
Get to work on your client base:
a Reactivate inactive clients
a Cull the small clients that you know aren't going to grow (because you've qualified them and done the background work)
a Focus on growing strategic clients that represent real opportunities for your business up into the next value tier.
Your business could be any size to follow these strategies. I've had clients who literally have hundreds of clients and customers, and are completely unaware of the value that's been neglected in their existing client base, the wasted energy that's been expended in acquiring new clients that are too small or don't fit their ideal client profile, and the resources that are diverted managing the low value clients to the exclusion of growing and nurturing bigger clients.
Why add more account managers or consultants to your team, to manage a growing client base, if the clients that need managing are low value? That's a very inefficient use of resources.
There's great value to your business in critically assessing your client base, and the potential value it holds.
Some time today, or this week, go through your client list and be ruthless! If you gave up, say, 10% of clients that weren't contributing to the growth of your business, what could you do for your top 10%?
Jenny Stilwell is the Managing Director of BOSSMENTOR®, a consultancy providing advice on strategy and business growth for professional, lifestyle-oriented owners of service-based businesses who want to grow their businesses and ultimately spend less time in them. Bossmentor® provides mentoring programs, consulting services, and a range of resources for business owners wanting to grow. Visit http://www.bossmentor.com.au