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

August 18, 2011

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

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Not every customer 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 effortless sale.
  • The logistics of targeting and selling to 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 holds out the promise 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.
  • This will enable us to acquire new skills and competencies.
  • Once we establish our presence, we will have the ability to negotiate more favorable terms.

Many of these explanations sound reasonable, but in my experience, they often 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’s 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 can be challenging to remain focused and disciplined. It’s much easier to be opportunistic and flexible and then hope for the right results. However, we have limited time and resources. There is such a thing as opportunity cost. Any time you spend selling to and servicing the wrong clients is limiting your capacity to find the right ones 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.

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