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Leadership Thought #198 – Are You Doing Business With The Right Clients?

August 18, 2011

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Not every client is a good client.  Not every prospect is worth your time and effort.  I see businesses every day that spend too much time on the wrong opportunities.  I’ve often heard one or more of the following rationalizations from my clients and colleagues on why they do this:

  • We’ve done business with them in the past.
  • The business just walked in the door – it was an easy sale.
  • The logistics of targeting and selling them require less effort.
  • The business is under financial pressure, so something is perceived as better than nothing.
  • This is the new market reality that we must adjust to.
  • The prospect dangles the prospect of something bigger down the road.
  • The prospect is well connected so making them happy will lead to referrals.
  • It was a referral from another client so there is a sense of obligation.
  • It will help us develop new skills and competencies.
  • We will be able to negotiate better terms once we get our foot in the door.

Many of these explanations sound reasonable but in my experience often they don’t work out as planned.  Make sure you tread carefully.  Targeting the right prospects requires thought and effort.  Every business needs to know when to say no.  It’s easy to say yes (or at least we think it is).  Bad or mediocre clients lead to bad or mediocre outcomes – it is that simple.  Math doesn’t get better on its own.  You need to have the expectation of a reasonable return on investment and manage to certain margin thresholds.  There should also be some sense of operational synergy and a belief that you can deliver what’s expected within the expected timeframe.

I understand that it is hard to be focused and disciplined.  It’s much easier to be opportunistic and flexible and then hope for the right results.  However, time and resources are limited.  There is such a thing as opportunity cost.  Any time you spend selling and servicing the wrong clients is limiting your capacity to find the right clients and reap the economic benefits and rewards.  It also probably means you are making the slope of success for your business steeper and more difficult to scale.