Do you accept any new client who walks through the door? If you’re operating this way, it could be impacting your growth and profitability. Today we are talking about your existing customers, analyzing revenue per client, and asking strategic questions about your clients that will help you get (and keep) the kind of high-quality clients you want in order to continue increasing revenue. We are speaking today with Jami Johnson, Partner at PJS & Co CPAs and expert business advisor who assists clients in elevating their businesses with proven strategies for growth and profitability.
Holiday Break Message
We want to mention that we will be taking a brief holiday break in our podcast publishing in order to spend some time with family. Normally we would post a new episode bimonthly, but today’s episode will be the final one for this year and will air our first episode of the new year on January 17th, 2022. Keep an eye out for fresh content in January, and if you have any questions in the meantime, you can email us at firstname.lastname@example.org, or call us at 844-475-7272.
What we cover in this episode:
- 03:20 – Strategic discussions for the new year
- 07:04 – How does working with everyone negatively impact your business?
- 12:14 – How do you analyze, streamline and refine your client list to increase revenue?
- 21:18 – How can you get better clients and serve them right?
Strategic discussions for the new year
Why are we talking specifically about your client list in relation to revenue? Taking time to analyze this part of your business can create essential visibility around the potential need to refine your services, raise prices, review your revenue streams, and more that could ultimately lead to an increase in revenue and value in your business. The awareness this discussion can create regarding business operations on a whole is revealing. You should be spending time analyzing what this currently looks like and considering if you need to take action to correct anything that could potentially be holding you back.
So where do you start, and what should you be thinking about when it comes to revisiting your client list? The answer really lies in your motivation of what it is that you want to accomplish with your business. There are different motivations that drive people and business owners to do what they do, but being purposeful and intentional in your selection of clients can make a huge difference in your growth and profitability.
Do you accept any new client that walks through your door? Are you able to find clients who feed into your motivation and your reason for being in business? Do you need to say “no” to some of them in order to reach your personal and professional goals? For many people, it is difficult to turn clients away, especially if they can genuinely help them. Sometimes we all have to take a step back and re-evaluate. In saying “yes” to everything, are you in effect saying “no” to the other opportunities that may be on the table, or sacrificing your own personal health or your family’s well-being?
There are so many benefits of being purposeful and intentional in your selection of the clients you serve. The decisions you make affect not only your clients, and not only your business but also yourself and your family. Assessing your client list and making sure that you’re serving the right type of clients for your business and for your services, will help focus your priorities, and help you make the best decisions that align with your motivation and goals for yourself and your business.
How does working with everyone negatively impact your business?
As a business owner, it’s hard to say no to any client who wants to work with you, and it’s hard to turn down money. Jami stated, “I think that when you’re transparent and you’re honest with somebody in saying no, you show you are not driven by money per se, even though money is always a very important factor in how we operate our business.” Jami continued, “I think you also generate a lot of respect when you are transparent, and if you recognize that something’s outside of your wheelhouse, because that person may be talking to your next lead.”
There is an eye-opening statistic that we wanted to share with you regarding how working with everyone and saying yes to everyone who walks through the door can have a direct negative impact on your business. It was a Customer Analysis survey asking customers how they feel during an experience, and 71% of customers feel frustrated when a shopping experience feels impersonal. This can happen if you are trying to help everyone and be all things to every client.
Customer service and attention to detail could suffer if you are going for quantity rather than quality. The bottom line is that your expertise goes further, and you make the most of your time if you’re able to focus on a specific niche. It turns out your clients will win too.
How do you analyze, streamline and refine your client list to increase revenue?
We recommend starting with an analysis based on your client revenue and the hours worked per client. When we do this for our own firm, we begin by analyzing where our time is spent compared to the revenue brought in per client. This analysis helps to reveal trends and will further shape over time as you learn. You’ll want it to look like an upside-down triangle, because the client that is bringing in the most money should also have the most hours associated with that revenue. You’re looking at the profitability of each client, and asking yourself if they fit into the niche of services that you offer without taking away from your focus of servicing your other clients.
During this customer analysis you need to get back to basics and identify who your clients are, and have an understanding of what makes your customers tick so you can cater to their needs. You should discover their needs and pain points, and even group like customers according to similar traits and behaviors. Creating a profile of your ideal customer, also known as a client avatar, can help you in your analysis and help your team focus on your goals.
In looking at your existing clients, you need to be intentional about what you’re offering in your services going forward. Do you need to make changes? And how do you transition and implement those changes? Do your clients really fit your target market? Those are all big questions that you will want to answer when you do your analysis. Jami stated, “I think it’s really important to know that this is an evolving process. But this is also not a process that needs revamping every three months because you think of something else. I think we really need to make sure that you’re solid on what you want, who you want to serve, and how you want to operate your business.”
We also want to bring in a few other numbers and indicators from a marketing perspective. If you’re an established business, you can use your historical data and gather some calculations to help you identify your most valuable clients. The first is called the customer lifetime value (CLV), which is the average amount of money that a customer will spend with you during the lifetime that they’re with your company. Second is your customer retention rate, which indicates the number of customers who give you return business. These metrics can be a good indicator of your most profitable customers and give you valuable information about who you may be able to target for new business as well.
The Pareto Principle, also known as the 80/20 rule, specifies that 80% of consequences come from 20% of the causes, asserting an unequal relationship between inputs and outputs. This can be true of businesses as well, where 80% of their business is typically coming from about 20% of customers.
It can be a shocking stat to look at if you analyze your customers and see that your business is unbalanced and fits that 80/20 pattern. What happens if 20% of those customers go away? What happens if 15% of them go away? It can be a huge hit to your business. So to combat that, you can diversify your client base and maximize your value. Then if a client does leave, it’s not such a huge loss for your business operations. You can also take that 80/20 rule and analyze your clients in another way. What makes that 20% special, and how can you use that information for other potential clients?
How can you get better clients and serve them right?
Talk to your clients! Having data is great, but actually speaking with your clients and having conversations one on one will give you the insights that numbers cannot. Customers appreciate that conversation, as well as the education that they get from those conversations. One of the best things that you can do is talk to your clients, ask them questions, and discover what they enjoy about your services. Listening to what your clients say in those conversations helps you understand the deeper meanings and motivations behind their actions and decisions. Listening and understanding will help you relate to their position and find out what their pain points are so you can better serve them and help them. Getting honest feedback can be invaluable to a business owner.
As a service provider, a large part of our business is based on relationships and communication, and then taking action on those things that you discuss. And we have to understand the deeper meanings and motivations that are behind why those business owners are taking those actions. Because based on that, we can use that to build a buyer persona. A buyer persona is basically just a document that you put together, where you put a face and a name to your ideal client. We actually have a freebie that we offered back in Episode #05: Strategic Planning – Digging Deeper – Sales & Marketing, that can help you develop this buyer persona, and where we discussed this topic quite a bit and you can revisit and take advantage of that resource.
Monthly surveys are another way you can track your progress. We send out monthly surveys requesting feedback from our clients. Sometimes it can be hard to ask for something when you are not sure of the outcome. We’ve used all of our feedback to develop and make changes when necessary. Customer Thermometer is an easy tool you can use to get regular customer feedback. You want to understand your clients and open the door for any type of feedback.
Coming from a client experience perspective, asking for feedback and having these conversations not only gives you insight but also improves client relations. You can develop these deeper, more meaningful connections with your clients when you’re working with the ones who truly appreciate, value, and understand your services. This feedback process may also help them further understand how you work and increase their overall satisfaction in the process of working with you.
We’ve shared some of the items which we believe should be revisited on an annual basis in our previous 2 episodes, #84: Budgeting – Putting your Business Plan into Figures, and #85: Financial Modeling and related KPIs, and this topic of revisiting your client list is another topic we think should be part of your strategic discussions and revisited from time to time.
Awareness of the type of clients you are servicing, and what your ideal client should be in order to match your business goals should be a topic you revisit on occasion in your strategic business discussions. The benefits you receive from revisiting your client list can help you focus your offerings, and propel you towards success, ultimately impacting your growth and profitability.
It may be hard to say no to clients who walk through your door, but having the knowledge of what you’re best suited for, and knowing you can do your best work if you stay within your niche of expertise, can build trust with your clients and allow you to provide the best possible experience for them. Being intentional when selecting the clients you want to work with creates a win-win situation for everyone.
We thank you all for joining us today, and we appreciate each one of you listening in – we’re so very thankful! We wish you all a happy holiday season and wish you a Happy New Year. We are looking forward to a fantastic 2022, and join us again in January for the next episode of Cultivating Business Growth.