You’ve got a list of clients that you work with. You’ve most likely built your agency off the back of inbound leads and doing great things for your initial group of clients.
You know that some clients are more profitable than others but having unprofitable clients is just a ‘part of business’.
Or is it?
What if you could strategically build your business to aim towards having an ideal client base, where your clients respect and value what you do, your team is motivated to do great work AND you make the profits that you deserve as a result.
Here’s how to make a start:
#1 Crunch The Numbers
There’s no getting away from it; you’re going to need to look at existing data as a start. Hopefully, you’re using a time-tracking software to keep a record of client work completed as well as internal time.
From this, you’ll be able to analyse the time spent on clients vs their fees over the same period. This will get you to an analysis of Profitability by Client.
From this analysis, you need to look at trends. Are you spending a disproportionate amount of time on clients who pay you fewer fees than your bigger clients? Are there certain clients who require additional time from yourself or your senior management team for no increase in fees? Are there certain clients where you’ve agreed to a reduced rate previously?
Then look at the other end of the scale. Who are your most profitable clients? Are there any trends with these in terms of services, industry etc? Who are the clients that your team most enjoy working with and do the numbers tie up with how much the team enjoys working with them (you’d be amazed at how often your ‘favourite’ clients are also the most profitable!).
#2 Grade Your Client Base
You’ve now analysed a few trends in your current client base. The next step is to create a grading system to easily categorise your clients. Be honest about this process. You can create a system that most suits you but we tend to find that annual spend is a great way to start.
So, for example, £10k or less would be tier 3, between £10k – £50k tier 2 and £50k+ tier 1. You might even want a 4th tier for any clients that you definitely don’t want to be working within 12 months.
Grading your clients will give you a little more clarity on the key clients for your agency AND by updating this analysis quarterly you will hopefully start to see an increase in Tier 1 and Tier 2 clients. What get measured gets managed!
You could also adjust the grading system for any ‘fast-growth’ clients who you believe will be key to you in the next couple of years, effectively moving them up the grading system in advance of them spending more with you.
#3 Focus Your Marketing & Make Tough Calls
So you know who your most profitable clients are, who you work best with and you’ve graded your client base. You now need to focus on getting more of your ideal clients. Whether it’s that you’ve pinpointed a certain industry, service-requirement or ‘type’ of business (e.g. owner managed), you now need to go out to the market and find these people.
Relying on inbound leads will rarely get you these ideal clients so you need to focus your marketing efforts on finding them and convincing them that YOU and only you are their marketing solution. Can you put together a list of specific businesses that you would love to work with and plan how you’re going to get in front of them?
You also need to make some tough calls about your existing client base. You’ve now highlighted certain Tier 3 or even Tier 4 clients that aren’t key to your agency moving forwards. Now you need to plan to strategically exit these clients at certain points in next future without crippling your agency from a profit & cash perspective.
Having a live forecast in place will massively help this process and give you the confidence to do this whilst also outlining the new business you need to sign to replace outgoing clients.
Do you want to take the first step to get your ideal client base?
Give us a call on 0161 711 0810 or book a discovery call here to arrange a Mapping session with our team.