A-D Based Client Development

Analysing Your Clients

Not all clients are the same.  Look at the table below:

Profit

We are going to use this to analysis the client base.  The x-axis represents the financial value that the client has to your firm, the further along the axis the more profitable they are.  The y-axis measures the intangible, how much you enjoy having them as a client.  The further up the scale, the more they are nice people with an interesting business and a respect for your firm.

Now categorise your clients.

Those in Box A are your best clients, very profitable for you and enjoyable to work with.

Those in Box B are the bread and butter clients.  They are perfectly pleasant to work with but don’t make as much profit for you as you would wish.  These tend to be compliance focused clients.  Within this group are the B+’s.  These are businesses that you earmark as having potential.  They don’t spend enough with you yet but, given the right handling, they could become A clients.  They maybe start-ups or businesses going through a period of change.

Box C holds an odd breed.  Profitable as a client but unpleasant to deal with.  These are the people who everyone dreads picking up the phone to.  The one’s who make your heart sink when you send the bill out because you know what’s coming next – the complaint.  In some cases they may be polite and friendly with you but bully your team.

Box D is even worse.  Not only are they nasty to deal with but you don’t make enough money on them either!

In most firms, Box B is the most heavily populated with an, hopefully, reasonable number in Box A.  Box C may have the odd one with any number lurking in Box D.

The problem with this set-up, is that those in boxes C & D, whilst numerically in the minority, demand an unwarranted amount of your resources.  Their demands, lack of support and cooperation, complaints and general negativity drain your time and profit.  As a result, the ‘nice’ people in B and A, who don’t jump up and down and pester you, are in danger of getting neglected.  The focus of the firm ends up too much on those below the line.

The solution is to treat each box differently.  Let me show you what I mean.

Managing Your Clients

Let’s start with Box D.  You don’t like them, they don’t like you and you’re not happy with the fees they eventually pay.  Why are they still in your business?  Having identified them we can now remove them.  But, like any cull, this should be a controlled process that works to your advantage.  Decide who goes when to minimise the impact on your cash-flow.  If you have a batch then consider selling them to a firm more suitable for their needs.  Ensure that any ‘firing’ letters are inoffensive and diplomatic to avoid the wrong message getting out in the market place.

Crucially though, commit to removing all D clients.

Remember that the only difference between C and D clients is the profit that you make.  That, at least, earns C clients the chance of a reprieve.  Meet with them, explain why the relationship isn’t working for you and try to get to the root of the problem.  Satisfactory resolution could mean another A client.  No resolution means another D client to be handled out of the firm.  No one stays in the C box.

How different does the firm look now that we only have A and B clients to look after.  We’ve raised morale and freed up a significant amount of time.  Now we can look after our clients properly.

Partners can now focus their time on their best, A, clients, ensuring their retention, increasing referrals and maximising the client value.  In addition they can work with the B+’s, nurturing their growth.

Let’s not forget that the B clients are in the majority and, whilst nice people and easy clients to manage, they are not as profitable as we would wish.  The answer therefore is to ensure that they are predominantly looked after by a systemised process that meets their compliance needs and is more effective at the fee level they’re budget allows.  The partners and managers control the system rather than trying to ad-hoc service the client.  Much more profitable but, of course, with partners still in the background for support and handholding as required.  It remains personal but much more effective.