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This episode of the Entrepreneur’s Journey Podcast (RSS Feed) features a discussion with my friend Will Swayne from Marketing Results in Brisbane on the topic of client culling.
Client culling is a process a business goes through to isolate the right type of clients. Culling the resource intensive clients and actively seeking the “best fit” ideal clients that benefit from what the business offers without causing friction to the business systems, is what client culling is all about. During the early start-up phase when cashflow is tight business owners are willing to take on any work no matter if the job requirements don’t quite match what the business is focused on or working towards. This results in poor resource utilization and inefficient work practices that often coincide with underdeveloped systems. In a lot of ways this is part of a teething process as the business “grows up”.
As cashflow stabilizes and systems are developed business owners gain clarity regarding exactly what their business should present to the marketplace and what type of clients should be sought. With a better understanding of the ideal client and service or product positioning it becomes easier for business owners to spot a “bad client”, one that will consume more resources than the output will justify. These clients are then rejected with a clear conscious. Furthermore, business owners can look in their existing clientbase and pinpoint ongoing contracts with clients that are resource intensive and cull these customers from their books. Over time systematization and refinement create a system that attracts and satisfies ideal clients creating a significant profit margin through efficient use of resources.
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It sounds so simple – but it’s very true.
I agree. However, I believe the process is necessary.
In the beginning, when a business is “growing up”, like you said, cash-flow is tight. Since there is a minimal amount of income, it is almost mandatory to take the jobs which at a later point you eventually wouldn’t. Also, it is only during this time where you can figure out, essentially, “right from wrong” in respect to clients (which ones to aim for, keep, drop or deny) and the services your company will provide.
This doesn’t mean to try and build houses when you and your company’s specialty is accounting, however if you don’t want to do taxes for someone (let’s just say your preference is only logging transactions for a company, etc – for example and clarity sake) you most likely will have to, to get income.
Being less picky in the beginning is also a way to start networking. Networking yourself and your business to others, etc.
Hey Yaro,
you’re completely right here. It’s necessary to ‘fire’ those bad clients and focus on the good ones. Just the 80/20 principle in work.
But when you’re small, you can be dependent on those bad clients. Sometimes, when you have really bad luck, your first client will be one. In that case you might have a failure right at the start.
I see a lot of freelancers and IM’ers giving up because their first project was a failure, or their ‘employer’ didn’t pay. But it’s about persistency. Without it you won’t succeed in business.
Well, here’s to getting better clients!
-Dave