Service providers, whether they be accountants, bookkeepers or lawyers know the impact bad clients have on their team and their costs. And, although the problem clients are widely known, their actual impact is not quantified. Chances are those who are taking up all your time do not like paying your fees. And they ask for discounts or ‘freebies’. Moreover, clients that helped get you to your current level may not be the clients that will help you sustain success and remain future-ready (relevant).
It is widely accepted that the 80-20 rule (Pareto’s Law) is at play; it says 20 percent of your clients produce 80 percent of your revenue. Imagine if you could whisk away ‘bad’ clients to free up your time to focus on acquiring the right clients? The potential gains cannot be ignored.
Should we be approaching prospective clients or working harder with existing clients?
We might think networking, social media for prospects. Yet the number one long-term success factor is developing personal relationships over time. There has to be a follow-on to any contact. Yet, how do you then demonstrate that you have that service line expertise? Only time will tell. But know that clients want you to be that trusted adviser.
Your largest prospecting pool is your pool of exciting clients: this is where offering additional services can be so fertile. Positioning yourself as the trusted advisor opens you up to a lot of opportunity to add revenue.
Finding your sweet spot
You may not be able to do a total transformation of your client base but it may be worth looking for the ‘sweet spot’ for your service.
New services and new technologies should be implemented first and foremost to retain existing clients and upsell them on your new capabilities, such as business productivity tools. How unique/common is your service? How valuable is your current service offering? A shift towards specialisation can be the sweet spot for your firm.
Hourly pricing does not work with non-compliance services for multiple reasons. Upfront conversations with potential clients are necessary. Using a pricing matrix (or a menu of services) can provide guidance with regard to scope of services, target clients, staffing requirements and pricing. Performance, payroll, advisory can be fixed costs or value-based and greatly benefit the client. There is a benefit in larger clients who utilize multiple services. Time has a perceived value, but value is determined by the customer and not the provider of services. Price by the customer, rather than the service.
A matrix may help you start the conversation; take responsibility for your current situation and change it. Pricing upfront is the key to winning the right clients: your clients will appreciate you have removed the uncertainty around fees and you will become more efficient in your firm.