Building a Sustainable Client Base: Why the Right Fit Matters

Remember the film ‘Jerry Maguire’? In a late-night epiphany, Jerry writes a heartfelt mission statement about personal relationships in business, advocating for fewer clients and more attention. While he’s met with a mix of applause and scepticism, the core message is a lesson many businesses need to heed: Not every client is a good fit. Greater profit and better client retention is often the direct result of selecting the ideal client.

In recent projects, I’ve encountered businesses that, much like pre-epiphany Jerry, scramble to take on every prospect possible, only to find themselves in unsustainable and damaging situations. Recently I was faced with a business that scrambled to win any prospective client that had a heartbeat. It didn’t matter if the prospect couldn’t afford the service, understood it or even needed it. A sale was notched down as a win and cash in the bank.

Taking the Long-Term View on Client Value

This was a short-sighted sales model. Inevitably, these clients either became bad debts or realised that the service wasn’t for them. In many cases they felt like they were being duped which left a bad taste in their mouth (resulting in poor reviews). The operations department spent more time dealing with complaints and cancellations than actually delivering the service.

We redefined what the ideal client was, trained the sales team and started to be more targeted on who we onboarded. New client acquisition decreased slightly, but profit increased through greater retention and more efficiencies in providing the service. The company is now enjoying ongoing success in client acquisition and retention.

The lesson here is that if you don’t understand who your ideal client is, it can have a dramatic effect on all facets of your business from sales to operations. It can impact your reputation and client retention to a point that you are forced to be a ‘low cost’ provider relying on your sales engine to bring in cash. Sounds dramatic, but it’s a real possibility.

When targeting prospects that understand your service and are prepared to pay for it, you are creating a sustainable, tenured client base. Targeting ideal clients allows you to execute refined sales and marketing tactics which reduces your overall ‘Customer Acquisition Cost’ (CAC). Your operating costs can be reduced through less churn, not to mention your team being able to focus on delivering outcomes for your client base. A long-term view of client retention providing recurring monthly revenue certainly outweighs the vanity of short-term sales revenue.

In another example, removing a ‘not so’ ideal client had an instant impact on profit for a company I worked with. Industrial laundries have a finite capacity given the hours available to operate the equipment. This industrial laundry was predominantly servicing hospitals but had one sizable client in the hotel sector. Given hotels and hospitals were not complimentary in linen processing, the cost to service the hotel client was significantly higher with lower margins for each kilo of linen processed. Working with the hotel client, we found them a new service provider at a lower cost and exited them as our client. This opened capacity in the laundry to bring on a new hospital client which we were able to service at a lower cost and higher margins. The outcome was an increase in EBIT by 28% in less than 12 months.

Qualifying Traits to Pick the Ideal Client

 I’m going to offer some steps to check that you have your ideal client in your sights, and you are making the most of your value proposition by creating a sales model that has the benefits of recurring profit.

Every company will have a distinct set of qualifying traits to identify the types of clients they want to deal with. They keep your team focussed on retaining and adding profitable, repeat purchasing clients. You can very quickly identify clients or prospects that don’t match these traits and exclude them from your prospecting or potentially from your portfolio. The following are examples of qualifying traits that identify an ideal client:

1. The client has the capacity to pay and has a good credit rating.
2. They have a real need for your product / service.
3. They understand the true value of your product / service.
4. Their expectations are compatible with your product / service offer.
5. Their values and business practices are compatible with your own ethical standards.
6. The client’s systems and technologies are compatible with the product or service.
7. The client is in a market segment that is a strategic focus for your business.
8. You can establish clear lines of communication with the client.

It’s important to assess how much internal resources (time, personnel, and otherwise) the prospect will require and whether you can meet those needs without affecting other clients. You will need to evaluate if the prospect works with, or is in talks with your direct competitors, which might complicate your relationship. As part of your assessment, it’s often useful to estimate the total value of a client over the lifetime of your relationship and consider if the investment to acquire and maintain them is worthwhile. (Especially for large clients)

Going Beyond the Obvious

It may seem obvious that clear qualifying traits should be understood by sales teams, however if there is no direction, new clients will be onboarded, salespeople will be high fiving a record month while the service delivery division of the business will be dealing with the consequences of poor client selection. This can often be compounded by the wrong incentive and bonus schemes which promote ‘sales at all costs’.

• Understand Your Value Proposition

Whether it’s customisation, or expert knowledge, make sure your business model is supported by your value proposition. It’s one of the most important steps in focussing on your ideal client. If you cannot articulate why people should buy your service, then how will your clients? There are many great articles on how to develop your value proposition and have a clear understanding of what you do well and why people should buy from you.

• Identify Your Primary Client

Once you know your value proposition, you’ll be able to match your offer to prospects who are willing to pay for value. This is where you build your qualifying traits for your sales team to use. (Supported by appropriate training)

• Continuous Client Feedback Loop

Don’t just set and forget; keep an ongoing dialogue with your key client base. Adapt to their evolving needs and anticipate market shifts. Clients will change as will the market.

• Be Ready to Adapt and Change

The business landscape is ever-changing. Don’t be afraid to switch up your primary client or your business model when needed. The ideal client of today may not be ideal in 12 months. So much can change in a market that dictates what type of clients to acquire. This can include recent technology, new product / service offerings, a new market segment or competitor.

• Collective Decision-Making

Information should flow freely in your organisation. A unified team working with the same data can adapt more rapidly to changes. The downstream account management and operation divisions are responsible for delivering the promised value. They will often be the first to signal that the clients are less than ideal. Their involvement in decision making is imperative in maintaining the ideal client qualifiers.

Conclusion

 In much the same way Jerry Maguire realised that fewer, more meaningful relationships were the key to true success, businesses should be selective in acquiring clients that align with their value proposition and long-term strategies. It’s not about how many clients you have; it’s about having the right ones that are profitable. So, the next time you’re tempted to take on just any client who shows interest, remember as Jerry Maguire realised, sometimes ‘less is more.’ The right clients, given the right attention, yield better outcomes. In the end, this approach could lead to not just a shorter sales cycle but also more profitable, sustainable business relationships.

If your business needs greater refinement in your ideal client, Stoke Consulting is here to provide expert advice and guidance on creating and implementing an ideal client plan. Contact us to find out how we can help via team@stokeconsulting.com.au

Osman Bahemia
Stoke Consulting

Osman works with businesses to develop and implement strategies for growth and effectiveness. Osman has worked in a variety of industrial sectors including aviation, mining, asset management, transport and marketing. His skills in operational effectiveness, strategy development, leadership development and change management propel significant growth and efficiency improvements in medium to large organisations.