Got a client that sucks the life out of you? Maybe one that sends a slight chill down your spine when you see their name on caller ID? Or it could be a wonderful client that is costing you money?
Regardless, when was the last time you reviewed your client base? Do you know which clients are costing you money? Given that time is finite, shouldn’t you make sure you are spending your time with your best, most profitable clients.
You could do an 80/20 analysis and keep it very objective. Identify the clients costing you money, or those with poor profitability and move them on. Alternatively you could be more subjective and identify the clients that cause head aches and frustration in your team. One firm allows team members to nominate 2 clients each year for the ‘chopping block’. And unless they’re strategic clients, the partners have to follow through. Your people will LOVE you for it. They’re often the ones on the front line that have to deal with rude or constantly late clients.
When I was with 2020, we had a member firm that said good-bye to their largest client – more than $200k in annual billings. Interestingly, that rarely translated to $200k+ in collections. Six months later, not only are the staff members happier, but the clients are delighted too. They now have more attention from partners and managers that typically was sucked up by the departed client. Needless to say, spending more time with their other clients led to opportunities to help, which quickly replaced the revenue shortfall. It was a scary move, but time and time again, our experience shows revenue and profitability gains following a client cull.
Now that you’ve identified clients to say good-bye to, we need to strategize how to best say farewell. The two most successful strategies are:
- A letter and phone call to advise the client that due to a new strategic direction, they won’t be able to service the client and here is a list of firms in the area that can help. The letter should be straightforward, objective and rational and should leave no doubt that you are disengaging.
- Sell them to another practitioner. This typically isn’t your headache clients, but your low profitability clients. One multi-partner member firm was able to identify a sole practitioner that would look after their lower profitability clients. Multi-partner firm was happy as it freed up a ton of time to focus on more profitable clients; sole practitioner was happy because her average tax return went from $700 - $1,300; and the client was happy because they finally got face to face time with the boss.
Another popular, albeit less successful strategy, is to raise fees. This does NOT work. More often than not the client will stay, as will the headaches and they’ll complain more loudly at the higher fees. If you’re serious about freeing up you time to focus on your best clients, don’t just raise fees. Be strategic about it.
When you do say good-bye to clients, make sure you communicate with your team. Without communication, some may see the departure of clients as a departure of their billable hours which could put their paycheck and position at risk.
Saying good-bye to clients is difficult, but as a business owner you must be rational. Your ability to earn, depends on having time to serve quality clients and develop quality people. Unfortunately there are not more hours in the day, so you need to be diligent with your time. Some clients may suck the life out of you and your team, others may just not be profitable.
Take an afternoon to look at your client list, do some analysis and see how much it is really costing you. The good news is that every firm that we have helped drop the bottom 20% of their client base (or get rid of 80% of the headaches) has seen a bump in revenue and profitability.
Damien Greathead has worked with and trained thousands of accounting professionals. He specializes in marketing plan development and implementation, including social media integration, technology advising, operational reviews and performance coaching.