There is a very simple rule that can be used when taking a look at your clients. This is known as The Pareto Principle or more widely know as the 80/20 rule. Simply put, 80 percent of your revenue comes from 20 percent of your clients.
The same can be used in reverse, 80 percent of your problems will likely arise from 20 percent of your clients. It is recommended to take a look at each of these and determine if there are clients that are not worth the trouble and others that possibly need more attention.
It is a very good idea to rank your clients, but before you can do this you need to have a crystal clear picture of what your ideal client is. Take some time and think hard about the clients that you like to work with and the types of work you really enjoy doing.
Your ideal clients should allow you to do the things you like to do with people you actually like doing it for.
At some point your business is going to reach a limit where it will no longer be able to take on any new clients. This is the time when you can start to eliminate the clients that are either causing you the issues or nowhere near your ideal clients.
Ranking your clients will give you a quick overview of your ideal clients and also the less than ideal. Jeff Borschowa has put together a very simple four stage ranking system.
Four Stage Ranking System:
- “A” clients – ideal clients that you enjoy working with, they possess all of the characteristics that you value in a client.
- “B” clients – these have most of your characteristics, but not all. They are still good clients but they may need some coaching in order to become “A” clients.
- “C” clients – clients have deficiencies and they do not meet the majority of your characteristics. Again, they have the potential to become “A” clients, but only if you work to educate them.
- “D” clients – clients are missing the vast majority of your characteristics. They are easy to identify as they are usually the ones that every staff member in your business complains about. You know the type, they bring doom and gloom to your team just by entering the office.
The reality is that “D” clients are very likely complaining about you to their network and this causes more damage to your businesses reputation than firing them would.
The next step is to get rid of one “D” client, make it your least favorite client. Just about every firm will have one that is universally disliked. Eliminating the first client is always the hardest, but after that first one it becomes much easier.
After the first one however, I don’t recommend going in and eliminating all “D” clients. Allow some time to bring in new “A” clients. Once the new clients are bringing in work you can start to eliminate more “D” Clients. You can generally eliminate several “D” clients for every “A” you bring in.
This practice will help your firm to become more profitable, and will also make coming to work every day more enjoyable. Keep in mind that it is your firm and you need to do what is best for you and the firm. Getting back to doing the things that you enjoy with people you enjoying doing it will inevitable make everyone a lot more happy.