A savvy business owner knows which business connections are worth his time and energy and which ones are not. But unfortunately, many others don’t take the time to prune dead-end or troublesome clients simply because they can’t bring themselves to cut the cord for fear of creating an income drought. When was the last time you took an objective look at your client list with an eye to weed out the ones who are more trouble than they are worth, or don’t fit into your profile of an ideal client?
Culling your client list is an important business strategy. It is not personal. It is about their value to your business. According to Anthony Davis, a New York-based partner with Hinshaw & Culbertson LLP, “…this strategy works.” Furthermore he advises,
“Being selective is key. I choose only those clients who meet my predetermined criteria in regards to the type of work and fee-paying capacity.”
Another professional service firm who stays on top of its client’s list and culls it when needed is Deutsche Bank. It has begun to close accounts for customers whose investable assets have fallen below new thresholds. Along with human capital, these professional services firms recognize customer selection and retention criteria as the most important aspect of crafting their firm’s success.
To actively seek the right type of clients and isolating them as “best fit” for your business is what client culling is all about. As a result, you will have a rationalized client base which can free up valuable internal resources to service your current clients better and up-sell more value-add services to them. In addition more budget can be redirected from account managing poor-fit clients and be put into finding more “best fit” clients. In fact the effect will not only improve your profit but make your work more enjoyable.
Dropping a client is not easy. You can take an approach of just fazing them out gently and gradually. This involves not telling them flat-out that you won’t be working with them anymore. With any luck, they won’t even notice that you’re no longer pursuing business with them. By using this gentle touch solution, you get the best of both worlds – you’re no longer spending time courting sales that just won’t happen, and you haven’t insulted contacts that then might bad mouth you.
However, the above approach may take way too long and may never get rid of some your worst clients. A far more proactive and focused approach is to find an alternative accountant that would serve their needs. So if your ideal client is a high-growth business client, then refer a low value, simple “ITR client” to a high street accounting firm used to doing the high volume 20-minute tax returns. Better still strike a deal with the high street firm for a referral fee.
To do this I suggest you send a letter explaining that your business is going through a change and your service offering has been remodeled and now you only focus on business clients. Then provide them with your recommendation of the most suited firm for their needs. Send the letter a couple of months before the busy tax time. The secret is to explain politely how the (unwanted) client would be better served by another firm and that you no longer think that you would be the ideal provider for them. Then ideally have an alternative provider in mind so that the unwanted client still feels looked after.
Your criteria for an ideal client may include many things but here are some as food for thought:
- In business for at least three years
- Pleasant, outgoing personality
- Willing to listen to advice
- Positive disposition
- Technically competent
- Business is profitable
- Business is not chronically under capitalized
- Business is not dominated by a small number of customers or suppliers
- Clearly established demand for the product or service
- Business has a scope for product or service differentiation through innovative marketing
- Business has scope for improved productivity through innovative management planning and control
- Business has a strategic plan
It is also helpful to add to the list above the following traditional client selection criteria:
- Prompt payment history
- Amount of annual revenue
- Potential for growth
- Your customers are your business. They define what you do, how you operate, your character, your profitability, etc. Be wise, be savvy. Know when it’s time to let go.