We have a huge fear of losing clients. Sometimes it paralyzes us. We’re afraid to stand up to bullies. We don’t raise prices. We’re not clear which clients we really need. We’re unsure if complaints are well deserved or just noise. And we’re not making enough money. This is messed up and we need to fix it. Any suggestions?
THOUGHTS OF THE DAY: When building a business, it’s not just about growing revenue, it’s about growing profits. Review client acquisition and retention practices. Build your list of ways to improve customer profitability and retain the best clients.
Profits come from profitable clients. Focus most efforts on the best clients. When responding to squeaky wheels consciously decide whether or not that client is profitable enough to merit the effort.
Create a way to predict prospects’ profit performance. After you’ve gained a few months of experience go back and test your predictions. Do an annual review of all clients to ensure they remain profitable. Include the cost of selling, implementing and managing each client.
Take a look at sales over the past several years. How many clients were profitable right from the start? How many clients became profitable with a little bit of work? How many clients deteriorated in value over time? What trends do you see and where do you need to focus effort to deal with those trends?
Here are 10 suggestions for improving customer profitability.
1. Figure out what work your company does that generates the greatest profit and focus on selling more of that.
2. Build a model that describes the attributes of your best clients; use it to help identify other high profit opportunities.
3. Assign two or more people to going after a list of high-quality targets.
4. Set a goal for the number of clients you can add each year without overly stressing the company.
5. Contact 10 times as many companies as you need to sell each year.
6. Give your best clients awards and publish the results for all to see; make others want to join that group.
7. Make a list of the least profitable accounts and figure out what needs to change; approach those clients to suggest changes and decide if you keep them based on how well they respond.
8. Get rid of 5 percent of your least profitable volume each year. At the same time implement a plan to add and grow profitable accounts by 10 percent to 20 percent.
9. Raise prices annually, at least enough to keep ahead of GDP growth.
10.Let go of risky opportunities that have low probability of turning around.
And here are six suggestions for retaining the best clients.
1. Look for partnership opportunities with your best clients, things that will tie those clients more closely to your company.
2. At least once a year, tell each high-profit account how much you appreciate their business.
3. Find out where your best clients are going next and develop solutions that will help them get there.
4. Assign your best people to your best accounts.
5.Ask management to get to know their counterparts personally, including the people in finance, operations, sales, marketing, human resources, research and other important positions.
6. Have a monthly meeting to review results and plans for top accounts, making those accounts the company’s priority.
When things go wrong and you lose a good client, don’t panic. Stuff happens in this world. Do a quick check on how much of the loss might stem from actions your company did or didn’t take and decide what changes to implement. Check to find out if you can get the client back. Then move on, knowing that turnover is a fact of life. Get even by making a concerted effort to get the next great client.
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Andi Gray is president of Strategy Leaders Inc. in Stamford, a business consulting firm that teaches companies how to double revenue and triple profits in repetitive growth cycles. Call or email for a free consultation & diagnostics: 877-238-3535, AskAndi@StrategyLeaders.com.