Model Your Prospects After Your Most Profitable Clients
This article was originally published in Chauffeur Driven Magazine. A version of this article appears below.
The key to success in any business is being able to grow by acquiring new customers. In order to grow, you must determine which types of potential clients to go after and understand where to find those target groups.
Before you start prospecting for new clients, one of the most important things you can do is to identify the most profitable customers currently doing business with you. This will help you to develop a profile of your target clients and understand where to find those prospects.
Identifying Your Most Profitable Clients
To begin, review your books over the last three years and identify your top 20 clients based on annual spend. Evaluate each of these accounts to gain a year-over-year perspective of their spend with you. This is important to realize whether the client's spend is consistent, declining, or increasing.
If the spend of a particular client is increasing then you need to identify why and continue to replicate what is working. If the spend is decreasing for a client, then there are opportunities to identify new solutions and recapture lost spend.
Evaluate the strength of your relationship with each of these top 20 accounts, on a scale of 1-10. Consider how happy the client is with your products or services, as well as the personal relationship you have with the individuals on these accounts.
Take Other Expenses Into Account
Once you have identified your top spending clients, look at the services they use most often to identify which products or services you offer are the most profitable. Understanding profitability will provide long-term growth opportunities, instead of focusing solely on increasing revenue.
To understand profitability you will need to know:
hard costs associated with the types of services you are providing to the client
costs associated with phone calls, emails and other account management efforts
insurance and labor costs for employees
I think you may be surprised that the clients you think are the most profitable may not be. The point of this exercise is to allow you to focus on the profitable customer types moving forward as you prospect for new business.
Many companies will take on any new client, but they may fail to factor in how many phone calls are taken (labor), edits or changes to work are needed (labor), additional projects requested which may not be billed for, profit margin, etc. These are all important factors to consider when targeting new clients.
Profitability + Relationship = Growth
Your existing clients with the most profitability and the strongest relationships are the ones that you want to target for new customer acquisition. These clients are also the ones you want to leverage for warm introductions to other prospects and for data mining similar prospects.
When you have identified your most profitable existing clients, you can use this list to develop your Hot List of new targets.
Your decisions to leverage these client relationships is determined based on the client’s profit value combined with the strength of your relationship. You must be 100% honest with yourself regarding the relationship. Remember, you never want to harm an existing relationship in the pursuit of new business.
Modeling your prospects after your current profitable clients will keep you focused on growing in the right direction, instead of spending valuable time and resources chasing potential business that does not align with your growth goals.
Once you have identified your target prospects, work with your sales team to develop lead nurturing and lead scoring opportunities to systematically pursue these business opportunities.