Sometimes it’s just not worth having small clients that are too small, so why not set a floor-limit for the minimum size of a client contract?
This is another blog in the world of no right answers and of course the context of your business will determine how relevant it is, but you can have clients that are just too small to make a profit from.
To begin with, you need a management information system that measures the revenue and profitability of clients.
Once you have identified the clients that might be too small for you to make money from, there are two things to do:
- Renegotiate prices or resign the clients
- Make sure you change your pricing structure and marketing direction so you don’t take on any new business holds you back
Resigning clients might feel counter-intuitive but think of it as “resigning losses“.
Less can be more!
A sprat to catch a mackerel or a sprat to catch a plankton?
There’s always the notion that a small client might grow and become a bigger client over time. And, for sure, this happens.
But sometimes it doesn’t and you can end up with a portfolio of clients that are no good for your bottom line.
Be upfront about your pricing
Moving forward, it’s often very helpful to indicate early on in the sales process what your prices are because it can drive away prospects who will resist the prices you want / need to charge. It’s better to have this conversation at the beginning of the process so that no one’s time is wasted.
Everyone wants to grow their business, but what really matters is to grow the bottom line and sometimes growing the top line doesn’t achieve that!
Michael – @bluedotmichael