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Solving ‘Too Many Clients – Not Enough Profit'

Written by: Steve Leach

Article Overview: Steve Leach teaches us how 20% of clients provide 80% of your profits and how to solve the challenge.

Solving ‘Too Many Clients – Not Enough Profit'

You see, Pareto’s principle states that 80% of your business comes from 20% of your clients. The other 80% of your clients are probably costing you money… Most business owners can reel off names of clients who consistently complain about how long they take, how much they charge, want to return goods because they ordered the wrong ‘widget’, then take months to pay.

Many business owners tell us, “its hard to get good clients.” It’s not hard, its just that nobody ever taught you how to attract the right type. After all, how many hours do YOU spend a year, learning about technical issues. Now how many hours do you spend, learning about better selling and marketing and smarter running of your business? If it’s not about half/half, you’ll probably find your potential for success, limited by your ‘personal exertion’ and your ‘creativity’ is copying ideas from your competitors.

Here’s how you can progress down the path to attracting better clients…

Define Your Clients…
The definition of your clients involves working out what makes a client profitable and at what point they become a cost. Many businesses put up with clients that consistently pay late, change their minds or appointments, expect miracles in terms of timing, insist and haggle over discounts and are just downright stressful to work with. It should be a privilege to do business with you; not a right. Clients that are not profitable should be ‘fired’ or at least discouraged from using your service or buying your product. The first step to doing this, is to define at what point a client stops being profitable.

Firstly, your clients can be classed from A to D, with As and Bs being profitable and Cs & Ds being a cost. Start by looking at your most profitable and ideal clients, what do they do; what characteristics do they have? Then look at your worst clients and list their typical traits. As a rule of thumb, you should end up with about 20% of your client base being ‘A’ grade, about 30% being ‘B’, 30% being ‘C’ and 20% being ‘D’ grade.

Once your clients have been defined into 4 classes, the As & Bs should receive a letter of appreciation telling them, they are your best clients and encouraging their custom. It will make all the difference. The Cs & Ds should be sent a letter explaining the situation and encouraging them to become A and B clients, by making it clear what you expect from them, in return for your products or services. If there is no change from a C or D client after a couple more contacts, you should cease doing business with them; refer them to your competition! They are costing you money!

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Article Tags: appointments, business owners, creativity, exertion, marketing, miracles, money, principle states, privilege, rule of thumb, typical traits, widget



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