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Tuesday, November 23, 2010

Choosing the Right Clients and Customers for Your Business

Especially in a struggling economy, it can seem like a profitable idea to jump at every business opportunity that comes your way — but resist the temptation. Just as your clients are shopping around for the best company to suit their needs, so should you be examining the type of clientele that is going to benefit your business.

In this instance, let's put the old adage "quality over quantity" to use. If your business is supported by revenue from only the best-fitting clients, let's call them "A Clients," your likely hitting your sales goals in a very efficient manner. However, if your client base is crammed with overly demanding customers who don't generate high revenue, your company could be at a standstill.

Being wary about turning away clients is a natural reaction, but modifying the Pareto Principle to apply the business world will help to reinforce the idea. The Pareto Principal states that 20 percent of the input generates 80 percent of the results. In business terms, this means that 20 percent of your clientele will result in 80 percent of your revenue. Those top tier customers are you’re "A Clients."

Segmenting Your Clients

Take a look at your client base and rank each of them into A, B, C, and D clients:
  • A Clients value your work and are willing to pay for it — on time. These are the clients who work best with your team and have a need for your specific business niche. They're high volume customers whose needs are likely to continue growing.

  • B Clients have most of the same qualities as A Clients, but fall short of perfection here and there.

  • C Clients leave a lot to be desired, but are still relatively profitable. They're a bit unreliable in terms of business and payment and their needs may not fit perfectly with the products and services your business offers.

  • D Clients should be avoided. They're overly needy, eat up your time and efforts and don't work well with your team.
Managing Your Clientele — the Good, the Bad and the Ugly

Determine which of your current clients are your A Clients and do everything you can to keep them satisfied. This relationship is a win-win situation so, maintaining these clients shouldn't be extremely difficult.

Because not all business pairings can be a perfect match, it's also necessary to keep a firm grip on the business provided by your B Clients. Pinpoint exactly which characteristics are holding them back from A Client status and see if you can make any adjustments on your end to make your business relationship run more smoothly.

As for the C and D Clients? If you can afford it, drop these clients all together. While you may be able to boost the client rating of some of these imperfect matchups — in which case, you should do so — the majority of these customers are probably hurting your business as opposed to helping your business grow. Here are the adverse effects of hanging on to bad clients:

  • You are who you work with: Your clients are a reflection on your business. Working with customers and other businesses with bad reputations can mean your own rep is in jeopardy.

  • Bad clients siphon off your time and resources: Spending your time working on accounts for C and D Clients means that you have less time to focus on your A and B clients. Since these are the customers that keep your business running, you want to avoid putting those relationships at risk.

  • C and D clients might put undue stress on your team: Often, these are the clients that can never be pleased. If your team continues to be negatively impacted, you might find that your valuable employees will search for less-stressful jobs elsewhere.
While it's easy to snatch up any and every potential client that walks through your doors, remember what your mama told you: "You better shop around."

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posted by Tiger Leasing @ 2:14 PM

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