Young business man inspector in financial report of secretary making and counting calculator in office at home.
In business we must periodically seek the ideal client by assessing all projects for what brings the best returns versus the most investment of time, money, and resource allocation as well as the payment speed and the amount of stresss or aggravation.
We must try to move more and more toward the things that pay up front and/or on time and that are most profitable and least aggravating and stressful. But for all that, we must seek the ideal client until most or all projects are being done with these ideal clients.
When a certain class of clients or types of business tend to be the most unfruitful and burdensome, and also not very profitable, then is the time to begin a shift away from them, even if the profit margin is better.
A profitable project may not necessarily be the greatest profit margin but, rather, the biggest volume and least stress and aggravation. So, a $100,000 project with only $15,000 profit over a 30 day period but which costs include paying staff and/or contractors to do almost all the work is more profitable than a $45,000 project with $15,000 profit over 6 months that requires you to do more than, say, 30% of the work and which is more stressful and aggravating.
I have found that lower end clients do not understand marketing near as much as higher end clients, which often means the lower end client wants more direct attributable results than can be calculated and cannot see an uptick in overall business or donors or whatever as being fed by your efforts. This is especially true when that client uses diverse channels and means.
I should add, in my own experience the failure to set expectations can be mine, but that’s not always the case as some clients hear what they want to hear and discard what they don’t want to hear.
As an example, an ad campaign to get online sign-ups will necessarily impact other channels, such as emails or phone calls and even foot traffic. The sophisticated client knows this, but the less sophisticated does not equate anything to your credit outside of a trackable outcome, not understanding how various forms of marketing leverage each other.
As an example, the web form your digital marketing may have led to being filled out was likely assisted by a TV or radio ad. In this case, the client’s customers may prefer anonymous online forms to a phone call where they will feel pressured. The reverse can be true also: the client’s customers may prefer a personal touch and don’t want to submit information in a web form, so they may see digital ads urging them to fill out an online form but still call the client instead.
There are many examples.
I use marketing because it’s what I do.
You have to consider who your ideal client is: the most overall profit (even if a lower profit margin), the least stress and aggravation, and you as an owner/principal having to do the least heavy lifting because your team is quite able to proficiently do the work.
Even if you only profited $7,500 over six months from a $45,000 contract but your team did the work and the client understands what you are delivering, thus making it so it’s not stressful and aggravating, you will still profit by signing up lots of such clients.
As a rule of thumb: a smaller project ought to have a higher profit margin but a larger project with a lower profit margin ought to produce more profit in dollars than a smaller project.
A highly aggravting client with extremely high profit in overall dollars, especially if also a high profit margin, would be held longer than an easy-going client with a low total profitability and profit margin.
It needs to be noted that higher profit margins mean you have cushion in case of a problem, you can pay your team more and attract higher quality, and you can both invest in your core infrastructure and in business growth.
No business is perfectly “there” and the drive to obtain such steady profitability through an ideal clientele can be offset by a cash flow need that means you must accept less profitable and more stressful projects that demand more of you just to keep the lights on. This is the reality of business but it shouldn’t stop you from seeking the ideal business client for most to all of our projects.
Every 90 days your team should evaluate your project list and describe each as ideal to less than ideal and be able to state both the profit margin and profit in total dollars for each. The least ideal overall should eventually be let go as more ideal clients can be obtained.
