Determining Key Accounts And Unprofitable Business Relationships
As the new year begins, it's an excellent time to evaluate existing business relationships. This will allow you to determine what clients you should end service with, continue serving or make extra efforts to retain. A variety of business records can help you accomplish this. You can look at receipts, invoices, correspondence and notes. At the same time, it's also important to consider less precise elements of each customer's influence on your firm's success and productivity.
Business gurus often highlight the principle that four-fifths of a company's earnings come from 20 percent of its customers. While the exact figures may vary, this remains true for a wide range of businesses and independent contractors. You can often recognize important patrons by looking for accounts that generate the most net revenue. However, it's also possible for someone to become a key client by referring valuable customers or helping you in other ways.
After identifying these clients, think about taking steps to retain and show appreciation for them. Consider sending personalized gifts, holiday cards or free bonuses that will make them feel special. If you have the capacity to serve more customers, you can also look for ways to gain similar accounts. Try to determine what features, advertising techniques or offers attracted these clients to your business in the first place.
On the other hand, many businesses have clients that use up a lot of time or resources and yield comparatively little revenue. These people may be individuals who constantly make special requests, demand immediate service or complain about minor problems. They might also disturb other customers or behave in ways that harm your company's reputation. Such clients can actually produce net losses if they prevent you from serving others in a timely manner.
Before you take steps to end unprofitable business relationships, keep an open mind and think about ways to improve them. Perhaps there's a new technique that you could use to meet these clients' needs more efficiently. You might also benefit from adding a fee for special requests that demand extra effort or force you to use more resources. At the same time, be careful not to alienate any loyal customers with these changes. Always pay attention to feedback.
If you can't find an equitable way to satisfy problematic clients, politely decline to work for them or discourage them from using your service. You might accomplish this by insisting on a rate that you know they won't pay or saying that you don't have time for their projects. In some types of businesses, you may have little choice but to be assertive and directly let clients know you’re not a good fit anymore.
Although these two groups of accounts have the greatest impact on your firm, at least half of your clients probably don't fit in either category. You can expand the company by working to encourage them to become consistent, loyal clients. If you take appropriate action, the process of identifying key patrons and undesirable accounts can help your business be more profitable and efficient each year. It may also make your job less difficult or free up time for other important tasks.
This is a key step in giving yourself the space to become clear and focused on serving the right people in your business.