As a professional service company (lawyers, advertising professionals, architects, accountants, financial advisers, engineers, and consultants, among others), it’s sometimes okay to evaluate your client portfolio and cut ties with some clients. Over the years, we have experienced the opposite where clients lay of service companies for various reasons but there is a rare instance where service companies decide to let a client go.
It may seem crazy but the thing is you should align your clients (demand) to your overall objectives and capacity. For instance, there are clients that put stress on your resources (human, technology, intellectual, etc) yet contribute less to your overall revenues. In fact, with a proper capacity analysis you may realize that you spend more capacity providing service to these clients compared to your major clients that contributes significantly to your overall revenue. Speaking with some businesses, I have realized that low paying clients are mostly those that make higher demands.
It is significant to build your relationship with key clients (those that contribute more to your overall revenue) as a professional service provider operating a B2B model and this requires spending extra resources.
Speaking with service companies, I realized that they mostly make a mistake of trying to service every client that comes their way thereby ending up providing poor service to all clients in their portfolio. This is due to the fact that these service companies stretch their capacity in order to meet demand hence compromising service quality. For obvious reasons, service companies’ especially new ones are eager to generate sales, secure testimonials and get referrals. These legitimate reasons make them undertake some projects that do not favour them.
To know which clients to cut off, I recommend undertaking a stakeholder analysis mainly for your clients with a key focus on power, influence and interest. This will help you analyse which clients to closely manage and which ones should be kept inform. Most importantly, you will be able to know how to allocate your resources. Kindly note that respect is fundamental hence you must treat all clients with respect.
Another way is to analyse your services (or business units) using the BCG growth matrix in order to strategize. Don’t forget that as a professional service company, you can actually brand your services into products in a way, and this can aid you to use the above matrix to analyse and understand which of your services has high market share, high market growth, low market share and low market growth. With this knowledge you can do a trade-off to determine where, how and what to invest and so on. You can also segment customers based on any index you prefer such as sales, capacity and resources required, etc. But don’t forget to use indexes that are relevant to your operation and industry and also captures every necessary data needed to make an informed decision. The idea is to get a broad image of how you utilize your capacity to service demand against the amount you generate from each customer. Beyond the aforementioned, there are other tools and ways to adopt to make sense of your customers so you make a decision.
Assuming you identify one or two customers you want to cut off, you can do that in several ways as well such as increasing price, discontinuing the service, selling the account off to another company (this is possible but depends on the client to make it fully work) and others. Don’t just rudely cut clients off. Remember I mentioned respect is fundamental when handling stakeholders.
In a nutshell, it is sometimes okay to cut ties with some clients as a professional service company and always remember to ‘Stay Informed’.