5 Growth Success Factors Your Business Must Have To Make More Money
Know Your Clients - The 80/20 Rule
13th March 2008
We all know our clients. We know their names and their businesses, and we often know something about their lives outside of work. Usually we have lists of who our clients are. However, what many small business owners usually don’t know is what’s happening in the mix of their client base.
When you analyse your client base, and you should, you need to identify the following indicators:
- What are the broad client categories by dollar spend – eg: up to $1,000 per annum, $1001-$3,000 etc. You will obviously select categories which have more meaning to your business.
- What is the average client dollar spend by category, and how do they compare
- Overall, which clients generate most of your revenue – eg: the top 20% may generate 80% of your turnover, or close to that, or your top 10 clients may generate 80% of your revenue. The objective here is to identify those clients which are vital to your business in terms of revenue.
- What products or services are your clients buying? All, some, a mix? Is it changing?
- Is the average dollar spend by category increasing or declining over previous periods?
- Which clients have been active (purchasing) over the longest period of time?
- Which clients have become inactive (not spending) and why?
When you’ve identified this information, you need to look at what you’ve discovered:
- Who are the most valuable clients?
- How many clients add little value, or cost money to service?
- What is the profile of the preferred high value clients?
- What products or services are not really selling? Which are selling well?
- What is the risk identified by your 80/20 analysis? Do you have all or most of your eggs in one or just a few client baskets?
- If you were to lose any high value clients, you know what the impact to your business would be.
What actions can you take from there?
Ø Make sure your most valuable clients are well looked after and serviced.
Ø Revisit your product or service range and make changes where necessary (delete items from your range, look at developing new products, proactively promote some products or services more than others, etc.)
Ø Assess the structure of your sales team – you may have a direct sales team (or advisors, or consultants, or technicians, or whatever is appropriate to your business) manage the top clients on a one on one basis, you may have a set number of your team sharing the management of the next tier of clients, and you may consider a telesales or telemarketing person or team to manage all of the small clients. They may also be managed via a website interface, for example.
Ø Now that you know the profile of your preferred type of client, you need to ensure that you focus on this profile when attracting new clients. This will spread the risk of having most of your revenue generated by just a few clients, and will build your business in the right direction.
Ø Finally, don’t forget about building the value of your clients: ask them what they think, what they want, what they may want to see changed, and what else you can do for them. Now you have them, and you know them well, build on that to build your business.
WANT TO SEE MORE ARTICLES LIKE THIS ONE?
See the BOSSMENTOR® Article Archive: Business Articles
Jenny Stilwell is the creator of BOSSMENTOR® Business, a FREE ezine for professional, lifestyle oriented business owners wanting to confidently increase the value of their service business, ultimately spending less time in it. You’ll get proven strategies, tips and resources designed to help you achieve success. To receive your free e-book information, and sign up for how-to articles on creating and managing business growth, visit www.bossgroup.com.au