Stage 1: Selecting the clients you want to work for

Stage 1: Selecting the clients you want to work for AL RI TE 1.1 Your client portfolio Stage 1 1.2 MA A strategy 1.3 Effort versus reward Stage 2 1.4 Lifetime value of clients ED 1.5 Picking your moment 1.6 Creating a pipeline HT Stage 3 IG Stage 7 R Stage 4 PY CO Stage 5 Stage 6 1 2 Marketing & Selling Professional Services Stage 1: Selecting the clients you want to work for 1.1 Your client portfolio Many books on selling professional services only concentrate on targeting new opportunities. This would ignore the easiest work to win, which is from existing and past clients. Assuming you have provided a good service and your current and past clients still have work to commission, then this should be your main priority. Obviously you still need to, at the same time, target new oppor- tunities so that you are gradually building up your portfolio and replenishing where current clients have come to the end of their commissioning period. Examine current portfolio Before deciding a campaign of action to secure more work, it will be useful to examine your current and past work so that you can get an indication of the following: ❑ Who were your best and worst clients, and why? ❑ What kind of work was most profitable? ❑ What sectors gave you the most work? ❑ What skills were being commissioned? It makes sense to focus most marketing and sales efforts towards those clients who are going to continue to give you profitable work. There is little point in spending a lot of time and effort trying to ‘win’ work from clients who do not value your work, pay below the market rate and have no interest in a long-term relationship. So the first task is to divide your current and past clients into three categories, which we will refer to as gold, silver and bronze. Fig 1.1 Stage 1: Selecting the clients you want to work for 3 Gold • Provide large proportion of your profit • They are very satisfied with your service Top 20% • They are loyal, profitable and pay on time • Will usually negotiate new contracts Silver • Not fully satisfied with your service Middle 60% • Open to competitor poaching • You give them discounts • You don’t win all their business • Try to convert to Gold Bottom 20% Bronze • Large proportion of your effort on clients you wish you never had • They steal your time and energy • They give no real profit • Will always go out to tender for new project • Avoid these clients or try to convert to Silver Figure 1.1 Gold, silver, and bronze client criteria for a typical client portfolio. shows the criteria for each category. If you are a large organisation then this can be carried out for each office, each department or each major skill set. You may find this quite revealing because you just might find that ❑ the clients who give you the most turnover might not be gold clients but could turn out to be bronze; ❑ the same clients may appear as gold in one office or department and a bronze or silver in another office or department; ❑ large blue chip clients might be more demanding and less profitable than smaller not so well-known clients. Take this analysis one step further and work out what the total amount of fee income is for each category and the proportion of clients falling within each category. Table 1.1 shows the top clients, by fee income, for 1 year for a fictitious firm of architects called Wren & Barry. The table shows that nearly 80% of the fee income is generated by just six clients. These 4 Table 1.1 Top clients by annual fee income Top clients by fee income for Wren & Barr Sector I:Industry C:Commercial G:Gold Annual L:Leisure S:Silver fee Rank Client H:Health B:Bronze income % of total Cumulative total Cumulative % 1 Brown & Jones C G 188k 25.1 188 25.1 2 City Builders I B 135k 18.0 323 43.1 3 Midshire Leisure L G 90k 12.0 413 55.1 4 Barker & Conlan C G 88k 11.7 501 66.8 5 Allan & Parker C S 45k 6.0 546 72.8 6 Healthlands I B 40k 5.3 586 78.1 Developments Ltd 7 SE Health Trust H B 32k 4.3 618 82.4 8 Drake Pearson C S 27k 3.6 645 86.0 9 Spruce & Willow C B 12k 1.6 657 87.6 10 Crow Machines Ltd I B 9k 1.2 666 88.8 11 Bells & Whistles I B 6k 0.8 672 89.6 12 Drake Pearson C B 4k 0.5 676 90.1 13 Others (20 No) G(2No) 7k 0.9 S(6No) 22k 3.0 B(12No) 45k 6.0 750 100 Total 750k 100 Stage 1: Selecting the clients you want to work for 5 six clients account for almost 20% of the total number of clients that the firm is currently working for and three are classified as gold clients. If you were to repeat this exercise every year, you would see how different clients may feature in different years. This emphasises that you need a good spread of clients to give a continuous stream of income and not be reliant on just a few good clients. This also underlines the need to add to your client portfolio, which we will be looking at later. Also in Table 1.1 we can examine the mix of gold, silver and bronze clients within the portfolio and how much fee each client type contributes, again using our fictitious firm Wren & Barry. Fig 1.2 shows the analysis of client and fee income for the firm. From experience, you may find that your results might follow the Pareto rule, which states that for many events 80% of the results come from 20% of the outcomes. The rule was named after an Italian economist Vilfredo Pareto, who discovered that 80% of the income in Italy went to 20% of the population. The rule has now found a home within business and it is often said that ❑ of your sales, 80% comes from 20% of your clients, and ❑ the least profitable 20% of your clients will probably take up 80% of your spare management time as they will be more troublesome and demanding. These will also be typically bronze clients. Gold Silver Bronze 16% 25% 59% Proportion of gold, silver and bronze clients Gold Silver Bronze 49% 14% 37% Percentage of total fee income from gold, silver and bronze clients Figure 1.2 Analysis of clients and fee income for Wren & Barry. 6 Marketing & Selling Professional Services Therefore, in an ideal world, you want to increase your share of gold clients. This can be achieved by converting the bronze to silver and the silver to gold. You will probably find that many of the bronze clients have approached you, perhaps having previously employed your competitors and fallen out with them. There is a good chance that your gold clients were clients you had previously targeted or who came to you through recommendation. Gold and silver clients tend to value quality of service where bronze clients tend to be focused mainly on the cost of delivering that service. In our Wren & Barry example, we can see the following from Table 1.1 and Fig 1.2: ❑ Of the fee income, 49% comes from the gold clients who account for only 16% of the client portfolio. ❑ Over 80% of the fee income comes from seven clients (just over 20% of the total number of clients). ❑ From the top 12 clients, who account for over 90% of the fees, we see that the commercial sector brings in 48.5% of the total fees, and industry 25.3%, leisure 12% and health 4.3%.