Are you and the people you do business with a good mix?
Last month, I was lucky enough to attend DCAT in New York City, home of Spider-Man and the final resting place of King Kong. RIP big man. Gone but not forgotten.
Anyway, while I was at the event – networking and being a good people person (as per my last blog) – I bumped into an old friend and former client. We got chatting for a bit, and eventually, they brought up a problem they’d gotten into with one of their clients. Apparently, they were demanding all sorts from them, outside of what’d been agreed to, and had been making a nuisance of themselves in general.
After I’d dished out a steaming bowl of sage Raman advice, I got to thinking. One of my first bosses said to me – not all clients are good clients. And the customer is not always right.
Customers are the lifeblood of our businesses, no doubt. But we could ALL use a bit of a stock check on our clients from time to time. A chance to sit down and assess exactly who you’ve got on the books; what they’re like, and what they bring to the table. As it’s spring, it’s a time for new beginnings, and fresh starts, and – I’m sorry to say – it’s also a time when a few lambs must be “taken away” (and converted into a delicious bhuna).
A common problem for many companies as they grow can be a lack of clear direction in forming your client base. Fledgling firms for example are keen to take on any type of business from any type of company, with little to no vetting going on. You only see the dollar bills and a shiny new client. I’d also argue that as business ownership evolves e.g. PE backing, the focus on sales and client acquisitions also increases. You have to constantly win new clients, whatever the weather. This can lead to compromise.
A WARNING FROM MY HISTORY
Many years ago, I was blinded by the “big city” location of a potential customer; the lure of potential future business, and the juiciest pick of network referrals.
In reality, the client had the budget for an old Toyota, but they were expecting a brand-new Ferrari. The signs were there early on, but I was blinded by the tunnel vision of opportunity. They had unrealistic demands, a minuscule budget, and expectations that were completely out of alignment with reality (at least, as you or I would perceive it). They even started calling out of office hours, and insisted on speaking to me directly as opposed to the project team.
It was a stressful time that rapidly spilled over into my home life. I reached the point where I’d had enough, and promptly transferred all their money back, wishing them all the best for their future endeavours.
To be clear: These were not horrible, bad people. Just a terrible fit.
Afterward, my team and I performed a post-mortem. We sat solemnly, unpicking everything that had gone wrong, in order. We left no stone unturned. After an honest look at our process, we saw we’d skipped the pre-qualification stage. We didn’t scope correctly, or even ask whether this was the right fit for us to begin with.
I would have you learn from my painful experience, and head these types of clients off at the pass before they terrorise you.
You need to inoculate yourself against bad business.
But how – HOW, I ask – can you possibly achieve that?
CREATE A CLIENT MATRIX
It’s time to assess your business, as it stands, right now. We do this by creating a CLIENT MATRIX.
Unlike the cult classic motion picture, our client matrix involves little to no dressing up in PVC and pretending to dodge bullets. No. Quite the opposite, in fact. The matrix here is a simple means of categorising every one of your existing clients into one of four neat and tidy boxes.
Most service-based businesses will have less than a thousand paying customers and it’s often hundreds or tens, so it should be achievable. Keep it recent and relevant, with clients from the last twelve to eighteen months.
It’ll look something like this:
NOTE: Make the box nice and generous. You’ll see exactly why in the fullness of time.
You can draw the box freehand, or use software like Miro. You can even make one in PowerPoint. Whatever works for you.
Your goal is to identify the nature of your high-profit, low-maintenance clients (in the main) as well as the low-profit, high-maintenance clients who, like an incredible succubus, drain the life force out of you.
You should expect to have a range of client types even within each of the quadrants. Some clients will be right on the edge of a quadrant, and others will be very settled in theirs. Be sure to capture those nuances as you plot.
Box 1: Low maintenance; high profit
Start with the good stuff. First, in the top left (Box 1) put the clients that cause you the minimum amount of stress while also making you good money. This should give you a real picture of your best buyers. You should adore these people. The type of client that calls and you answer your phone without hesitation.
Box 2: Low-pain; low-profit
These are often “legacy” customers who may have been with you since the early days. You probably have great relationships with them and care about their businesses. Some may stay small forever, and some have bags of potential to grow. It’s rare that they’ll leave you, and they’re often real ambassadors for your business and refer you to others. They’re certainly worth keeping.
Box 3: High maintenance; high profit
Easily the trickiest category. These clients deliver a big chunk to your bottom line (like Box 1) but do so in a painful way. There’s no obvious solution for these folks – they can and will be frustrating. Only you will know how important they are to your business and whether the pain is worth it. You can certainly try and improve the relationship. You and your team could identify the problems – for example unrealistic expectations, a lack of communication, or perhaps a personality clash somewhere along the line. Sharing those challenges with the client might help move them towards Box 1. It’s that, or plan to move them out the door – in which case you’d best have a plan to replace the revenue.
Box 4: High-maintenance; low-profit
These people make little or no contribution to your business and cause the maximum number of headaches. They’re the type of client who calls and you hide your phone so you don’t have to see their name flashing on your screen.
Plan to get rid of them.*
*Not “get rid” in the Mafia sense. More in the ‘gently let them go’ model. “It’s not you, it’s me. I hope you find someone special in your life soon.” That kind of style.
Getting out of these relationships will lift a huge weight off your shoulders. It’ll free up resources to redeploy to the clients you should be investing your energy in.
By the end, you’ll have yourself a client matrix that will resemble the one below.
You now have a handle on exactly where all your clients sit, and that might just provide some food for thought. Have YOU accidentally allowed a vampire to creep into your home, and feast upon your family?*
*Business. ** Time and resources.
MAKE IT AN ANNUAL APPOINTMENT
Generally, it’s a good idea to do this on an annual basis. That way you’re constantly reviewing clients as the situation evolves over time. People change, ownership changes, and sometimes the culture changes for the worse… It can be all sorts of things.
Whatever the case, a regular stock check will do you the world of good.
NEXT TIME: LOSS ANALYSIS! We use your – hopefully fat enough – matrix to assess where some of your “lost” clients might’ve sat. You might be surprised at how it turns out.
GET MORE OF THE GOOD STUFF
This blog is an excerpt from my #1 best-selling book, ‘The Floundering Founder’. Sign up today to receive the first chapter completely free of charge. And who knows, you might actually find it useful and want to read the rest…
