How do you cull your client base?

[bluepenguin]

Hey there,

As much as I hate business management 101 cliches, the 80/20 rule is pretty spot on for most businesses. I spend far more energy than I should on the clients that bring me very little or no reward.

When you start a business from scratch, you may not have the luxury of turning down work, so you take everything that you get. But when the business grows and you can afford to be a little more fussy it can be hard to leave that mindset.

Plus, when you've been working with people for several years, it's not so easy to turn around and tell them you no longer want to work with them.

Does anyone have any advice on how to free your energy for that 20%?

[Trastas]

Have you considered just outsourcing the work and taking a cut?

[yourvirtualboard]

A great position to be in and spending more time effort on the 20% will return a better yield.

Grade them in A,B,C & D or 1,2,3 & 4

With A/1 being your most prized or the bulk of the 20%, B/2 is those that if you put the effort in could convert to A/1's

C/3's are those that you don't mind having as the 80% because they pay on time etc. but are not as big spenders as A/1 & B/2

D/4's are the ones you don't really want anymore (whatever the reason) and these I would recommend raising the prices to a point where they no longer want you to supply, it then becomes their decision to pay the premium or leave.

[Khalid Adam]

raise your prices and add more tangible value to those who are willing to pay it. alternatively, inform the bottom 10% that you cannot serve them because of specific reasons. most will get their act together and you will replace those who leave pretty quickly.

[ABC]

Agree with putting the clients into buckets - focus on the 20%. The remainder 80%, just work on reordering system (not sure if your business is on goods or services) and raise the prices.

Worth considering a conversation with the ones that you think has the potential to be in the 20% around your need to focus.

[AgentMail]

Oh Steve,

I feel your pain. For the last 2 years, my customers have not heard the word no! No matter what they wanted, the answer was always yes, often at the cost of time and money to the business.

I have smartened up, and have managed to cull a few of my customers. What I did first did cost me a little more time. I basically found some other businesses, whose entigrity and service levels matched mine. I then talked them through my ideas, and my pricing model, and checked if they were interested in assisting with some of my clients.

I then discussed with my clients, and explained that we were trying to focus on our core service offering (or you could use something else if this doesn't suit) and have found an excellent company for them to use, who will be able to continue catering to their needs more than we can as we refocus the company.

This way, they actually really felt considered, rather than dropped like a lead balloon. Reputation in tact, and clients off loaded, plus some new business connections with the new supplier that have generated some business back the other way. Win-win-win

[bluepenguin]

Thanks for your helpful advice everyone. I'll take it all on board.

It's tricky, because my success is largely due to how well I look after all my clients - but it may be a little unsustainable and foolish to give everyone this treatment in a growing business.

[tonyk]

Refer them onto other people in your industry, and take a referral fee.

[Mrs Fox]

I would never say no to customers who are just making the most out of the terms
I offer. It's better to set their expectations right as early as possible and let them
decide if my product is worth their money. But I am more likely to be as flexible as my close
competitors.

[Burgo]

Originally Posted by Khalid Adam

raise your prices and add more tangible value to those who are willing to pay it. alternatively, inform the bottom 10% that you cannot serve them because of specific reasons. most will get their act together and you will replace those who leave pretty quickly.

Thats what I have done on numerous occassions.
I inreased my prices. The first time I did it I lost a few lower end customers. The second time I did it, same thing happened. Third time I did it several that I had previously lost came back. Last time I did it I actually gained more customers, and so started to farm customers off to others in the industry that I knew would give as good a service as I did.

As my business grew I did end up with a team of 10, which I concidered just the right size and mix for our business and then farmed off those customer I either didnt want or couldnt service