One of the best strategies to employ while seeking to increase your business net income can be summed up as "water your roses and pull the weeds." That is a nice way of
saying you have to evaluate your client base, put those clients into
various categories and take action.
Here's how to get started on this concept:
Things You Will Need
Get your client listing and financial report and assign each
client to one of four categories. If you have QuickBooks, the Job
Profitability Summary report may be a good starting point. These
client categories can be described as
(a) Profitable Key Clients - those who closely match your service/product offerings and core competencies, who are also profitable to your company.
(b) Non-profitable Key Clients - as described above, but for some reason are not profitable.
(c) Profitable Non-key Clients
- those clients who are profitable to your company, but what you are
providing may not closely match your service/product offerings. In
other words, you probably provide something to them outside of your
normal business activity because you know it is profitable.
(d) Non-profitable, Non-key Clients
- face it, you might really like these folks but what you provide
doesn't match what your business offers, and darn it, you're not making
any income either.
Guess which client you need to focus on first? If you guessed the
client in group d, you are correct. This group of clients should be
referred to someone else. There are reasons for this beyond just
boosting your net income. First of all, if they're outside of your
normal business activity AND you aren't making an income, you're not
likely to provide them with the service that they really deserve. It's
not fair to them and it's not good for your business.
Here's how to handle the situation. Find a service or product provider
more in line with what that client needs. Make sure that provider is
reliable and someone you would feel comfortable doing business with.
Then refer your client to that provider and do what you can to
facilitate the transition. Now you've done something nice for your
(now ex) client. You immediately increased your net profit by
restructuring your client base. You also helped someone else build
their business by referring a good match for them. Hopefully both
parties will reciprocate and refer clients back to you.
From here, most of your energy should be focused on your clients in
group a. This is already working well, so you want to take good care
of those 'roses'. Look at those clients in group b and find out why
they aren't profitable for you. Make adjustments as needed to move
them into group a. What makes the group a clients profitable and not
group b? Once you've gotten that figured out, you are well positioned
to get your group b folks into the "A-Game".
Now for group c. As long as this group of clients isn't keeping you
from servicing your other two groups, you can continue to serve this
sector. Ideally, you should review the group and see if you can adjust
their services to more closely match your core offerings, but there are
only so many hours in the day!
Tips & Warnings
The clients you are referring to another provider don't have to know they weren't profitable for you. Use tact and care with this transfer.