Oh my… why would a Sales Consultant recommend that you “Fire” your clients? You should be helping me find new ones!! Dern Bob… you must not be very good!
Let me explain. When the market is “down” my clients hire me to help them with new business development (revenue) and when it is “up” they feel that they don’t need a “Sales Consultant”. Yet I am busy in “down” as well us “up” markets. Why? Because there is opportunity all the time!
In a solid market like we are experiencing now, why not work on new business development AND work even harder on increasing margins? This is why I say it’s time to consider “Firing” some clients.
Here is how you might do that.
- Create a simple spreadsheet with the following columns
- 2015 Revenue
- 2015 Gross Profit Margin
- Average Aged Receivables
- “Hassle” Factor – On a scale of 1 (low) to 5 (high) how difficult are they to deal with i.e. heavy customer service support, tough to deal with, hard on employees, are not cooperative, tight turns, unreasonable demands, returns, etc.
- Sort the columns and take a good look at it. Sort it a number of ways. Take another good look. You will see the clients that are best served by your competition!
- Take another look with them out of your spreadsheet replaced with a “clone “of one or some of your midrange revenue but higher margin accounts and look how that effects your total gross margin. Fuss with it.
- On the identified clients start to raise their prices to where it would be “worth-while” for you to have them on your balance sheet. You can do it incrementally if you like, but raise your price.
- Now turn your attention to building new business opportunities with better potential.
- If this scares you, consider raising your prices a ½ -1% per month every month on a grouping of lower ranked clients. You will see incremental margin improvement and lower the risk of a lower revenue number, should that be a specific concern.
It doesn’t cost you anything but some time to take a look. You might be surprised at what you see. This is why I stay busy. If you can increase margin and build a pipeline of “better” customers your business will be more profitable, stronger, worth more and more fun with potentially lower operating costs!
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