How do you spot a profitable client in a line up? It’s a tough question but an important one.
Your most profitable clients are about more than billings – they value what you do. They also pay you on time, and they pay you what you charge (willingly). If you can find and keep profitable clients, you can make more money per project and enjoy a consistent stream of work, almost year-round.
In the early stages of business ownership those clients aren’t easy to spot. You’re eager to take on new clients, perhaps you cast your net wide and are super excited if someone expresses an interest in your services. But not every customer is a profitable one, regardless of the potential billings. Some may not even be worth your time at all (believe me you get to know the signs) and it’s worth having an exit strategy up your sleeve.
However, as your business grows, it becomes more critical that you start to understand what your most profitable clients look like so that you can keep nurturing those and go after similar accounts.
Start by taking a look at your existing customers, this will help you get a sense of where your sweet spot is and how you bring value. For the most part, you’ll quickly deduce that the 80/20 rule applies and that most of your profits come from 20% of your clients.
What makes those 20% uniquely special? You could consider demographic fundamentals such as their industry, size, the types of services you provide them with, etc. However, there are other unique characteristics that come into play that can help justify your premium pricing and, ultimately, enhance your profitability. These include:
- How well they pay versus the market rate/your preferred rate.
- Whether they refer you or, recommend your services.
- Their track record of paying on time. Cash flow is king don’t forget. You can have profitable clients, but if they don’t pay you on time, you’re in trouble.
- Are you their “go-to” service provider? For example; You’re apart of a stable of providers that they pick and choose from based on who knows what criteria.
- They take full advantage of the range of services you offer. Meaning they are well aware of your entire skillset and service portfolio and put it to use.
- They are great to work with. We all take on work that we sometimes would rather not, but for every “ordinary” or “problem” client, you likely have a counterpoint client who treats you with respect, values your time, pays promptly, doesn’t strong arm you into deadlines, and so on.
- Your interactions are pleasant. Say no more, we all want to get along!
Now, I can’t help you find your ideal client, but going through the above exercise will help you narrow down the characteristics of the ideal and most profitable customer profile.
Basically, it’s all about understanding why your clients buy from you and what motivates them to refer you. This knowledge gives you an advantage because you can continue to attract more business from that client (remember the 80/20 rule), and attract more like them.
Check out these other blogs for more tips on building your existing client base, dealing with troublesome clients, and being paid what you’re worth:
- 4 Ways Your Business Can Achieve Recurring Revenues
- How to Win and Secure a Great Retainer Agreement
- What’s the Difference Between Small Business Profits and Cash Flow?
- How to Handle a Client Who Won’t Pay What You’re Worth
- How to Turn Down Work Properly and Profitably
- How to Avoid the Common Trap of Underpricing Your Services
- How to Set Your Freelance Rates, So That Everyone is Happy