Is every business a potential client? The answer depends on who you ask and where you are in your business evolution.
Thinking back to my humble beginning . . . every business was a potential client. If they were moving I went after them! There was no target market. There was no ideal size, industry or appropriate corporate culture.
With experience, maturity and increased business acumen, it became apparent that all clients are not created equal.
Intuitively we know that some clients are more enjoyable to work with and are more profitable. Profitability is not defined as the client that pays us the greatest commission, but rather determining the resources expended per dollar of revenue generated. Some clients are a resource drain, while others provide a more appropriate balance.
Is it nice to niche or is one better to be a generalist? That’s for you to decide. How does one make that determination? I would suggest you do a detailed client analysis. This would consist of the following:
Categorize your clients by industry group, employee size, and gross annual revenue.
Analyze the time and effort expended to service the client.
If you have the tracking capabilities from your CRM, generate a report indicating the number and complexity of the service issues, phone calls and client meetings during the year.
Request feedback from your support staff as to their level of satisfaction working with each client. Are you viewed as a vendor or strategic partner?
Do you enjoy working with the client?
What you may find is that you are allocating too many resources to clients that generate too little revenue. You may also determine that you have your greatest success with a particular group size, industry or culture.
This exercise demonstrated to us the following:
Our greatest success was with middle market, entrepreneurial service companies.
Our least profitable, most difficult clients were manufacturing, retail and blue collar companies that tended not value their human capital.
The exercise was enlightening, but the challenge was how to grow and expand the target market clients and what to do with the legacy clients that no longer fit our business model. Next month I will share how we dealt with these challenges.
To niche or not? For us the answer was a definite yes.
Torelli, CLU, ChFC, MSFS is president of Newport Beach, Calif.-based e3 Financial.
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