Profitable Prospects, Profitable Clients

Profitable Prospects, Profitable Clients

Wait a minute…. What do we mean “profitable” prospects and clients? Aren’t all prospects and clients profitable? Well, actually no. We believe this is a mistake many firms—new and seasoned—make all of the time. Spending time on a prospect that isn’t going to buy or that isn’t a right fit for your firm, isn’t profitable. Having clients that demand too many resources and too much cost to manage, isn’t profitable.

Our financial colleague Gary Patterson, President of FiscalDoctor in Boston, serves as Interim CFO for a wide range of companies and often sees this as a major financial problem firms face. He tells us he has stopped being amazed at how few firms really know who their “top ten” clients are. Clients have told him, “If you can tell us who you think the most profitable clients are, we’d like to compare your list to our list to ensure we are visiting the right ones!”

What’s going on? It seems like a simple problem to fix. Don’t spend time on things you can’t close or shouldn’t close, and ask clients to leave that don’t carry their weight and allow the firm (as well as the client) to benefit from the relationship.

There are a couple of things at work here—salespeople are often asked to focus on quantity, not quality. This is a big problem we often find when looking at sales practices in a firm. Having the “thick pipeline report” hasn’t proven—in our experience—to translate into more sales than having a well-qualified shorter list. Asking the tough questions of the prospect is key and sometimes coming to the conclusion that not all business is good business is imperative.

The problem starts at the prospecting stage but if a firm doesn’t focus on qualifying, or is eager to “get any business” for revenue purposes, many times a book of business is built on non-profitable business. While hard to do, it is crucial to examine the client base carefully and understand where real revenue is found. The old 80/20 rule where 80% of your profits come from 20% of your customers probably holds true. While you can’t eliminate all unprofitable business, understanding why that business was closed and looking for ways to make it more profitable is a key business management strategy.

As a first step, take some time to understand the profile of a “profitable client” for your firm. Then, take some more time to review your sales process to understand what you really are looking for at the prospecting stage. Look for ways to make those unprofitable clients more profitable and you’ll find money and revenue that you didn’t know you already had!