All clients are not created equal. We all know that. It's time to stop living with bad clients, and take a systematic approach to culling the wheat from the chaff. We introduced the idea of firing clients in an earlier post, Good Clients. Bad Clients. Former Clients. Here's a view from a colleague in the U.K.
[Editor's note: Today’s guest post is by Joe Reevy, Director of U.K.-based Best Practices Online.]
One of the first pieces of research I did on going into legal practice management was to see if the Pareto principle - more commonly called the 80:20 rule, applied to our practice's clients. It did; 8% of our clients cost us money to work for and another 15% produced hardly any contribution to profit at all.
You all know this type of client. They moan constantly. They demand you prioritise their work. They plague you with phone calls. When it comes to paying, they are even worse trouble. They’re the Clients From Hell (CFH).
The real problem with the CFH is that they waste huge quantities of time that you could have spent dealing profitably with the affairs of another client, who likes what you do and will pay your bill. The reduction in stress from not dealing with the CFH is a bonus. If only you could get rid of your worst 10% or so of clients, you would get your life back, have more fun and make a better income. But how?
One easy strategy involves identifying prime (“A”) clients and concentrating your marketing and service delivery on them and culling out your worst (“D”) clients, thus improving your life and profits. “D” clients are liabilities, not assets. They impair the progress of the firm. Taking on more “D” clients is bad for business and bad for your best (“A”) clients.
How to do it
Grade your clients. Sit down with your client list and grade them from A to D according to the following criteria:
- Do they pay their bills on time without complaining?
- Are they enjoyable to deal with?
- Do they recommend others to the firm?
- Is their work profitable?
Clients that meet all four criteria are A clients.
Clients that meet three are B clients.
Clients that meet one or two are C clients.
Clients that meet none are D clients.
Put in a client care system that ensures the "A" clients receive brilliant service, are kept up to date regularly, have communications dealt with fast and so on. Spend time on them. Get to know them, uncover the work they need done, and cross sell. “A” clients are as valuable to you as your partners are. Systematically ask them for referrals: the chances are they mix with a number of other potential “A” clients and, with brilliant service, they should be more than willing to recommend you.
"B" and "C" clients need care, too, but the idea is to lift Bs to As and Cs to Bs. Identify the criteria on which these clients fail. Can they be brought round? Give them an appropriate level of care, but look to move them up the scale.
Get rid of your "D" clients.
This doesn’t mean closing files in midstream, but making sure you don’t accept new matters from Ds and setting up procedures to ensure you don’t take on new D clients. The best time to ditch them is as early as possible (at the first interview is ideal). Let them become some other firm's problem.
One clue is that they will almost always bring price up as a big issue for them early in the conversation, and may well make a point of telling you that they’re talking to other firms.
The client who thinks the price/value equation is all about price is a good one to let go elsewhere. You'll never make them happy or deliver a service at a cost low enough to be seen as good value by them.
Once you have gone through this process a few times, you'll find it becomes second nature...and profits per client will rise as your stress level falls.
Joe Reevy is the CEO of MyInfoNet.com, the market-leading web marketing and communications management platform in the cloud. The company also is the leading provider of marketing material (www.words4business.com) and web marketing systems (www.legalrss.co.uk) to the legal profession in Britain.
+44 (0) 1392 423607 firstname.lastname@example.org http://uk.linkedin.com/in/joereevy
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