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The ideal client: Part 2 - Losing the bad clients and qualifying your prospects

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Last editedJun 20246 min read

Cloud-based accounting firms add five times more clients than traditional firms do, mainly because of the improved efficiency, added value and greater customer satisfaction that an online accountant brings to clients.

But this value-transfer is a two-way street. To succeed, your online practice must work with clients ready to embrace the full array of benefits that cloud accounting offers.

Having switched to the cloud, you’re in a great position to start refining your client base to match the characteristics of the ‘ideal client’ – and in doing so, improve the potential value and revenues that each client brings to the firm. With this in mind, a ‘client spring clean’ programme is a proactive way to improve the impact of your portfolio.

It’s time to safeguard your valuable, highly profitable clients, root out the demanding and unprofitable ones, while learning how to qualify new prospects. That way, you can make sure every client is the best fit for you, your firm and your long-term growth strategy.

What your ideal client looks like

Increasing customer retention rates by 5% increases profits by 25% to 95%. So, hanging on to your best clients, and losing the ones that detract from your long-term strategic plans, is a vital part of practice improvement.

The starting point for any client base review is having a benchmark against which you can measure your existing clients and prospects. And that means defining in detail what your ‘ideal client’ actually looks like.

When you know the kind of businesses you get most value from, it’s far easier to attract the right clients, something that Jonathan Gaunt, MD of Bristol-based advisory practice FD Works, prioritises:

"We love working with ambitious owner-managed businesses. They're the ones that have real potential as business partners because we share the same entrepreneurial outlook. We're always incredibly careful to check for chemistry – as without that connection, the relationship just doesn't deliver the goods."

The specific attributes of this ideal client will vary across firms and specialisms. But as a general rule of thumb, an ambitious cloud practice will be looking for the following qualities.

Your ideal client will be:

  • Tech savvy – familiar with cloud technology, online accounting and business apps

  • Organised – timely with their bookkeeping and efficient with their processes

  • Fast-paying – happy to pay you on time without being chased

  • Open-minded – keen to try new ideas re improving their systems and processes

  • Progressive – someone who shares your entrepreneurial mindset

  • Appreciative – able to see the value in what you bring to their business

  • Highly profitable – delivers larger fees from high-level, value-added work

Those last two points are critical: clients who see the intrinsic value of your expertise will happily pay at a more expensive price point – and that’s vital for making the firm profitable and scalable.

How to grade your client base

The businesses who fit comfortably into this ideal template are your A-list clients – and they’re the clients you want to retain above all others. 79% of high-earning firms put their increased profitability down to adding value for existing clients and enhancing those relationships.

But not everyone on your client list will meet these high standards. That’s why grading clients is so important – if you don’t grade the apples, you won’t spot the rotten fruit at the bottom of the barrel.

  • A-list clients – Your ideal client; the ones who are are easy to service, love the additional benefits you bring to their business and bring in the top-level fees needed to stabilise and grow revenues

  • B-list clients – This type of client is almost ideal and will be pleasant and productive to work with. But due to limited budget, reduced scope of services, or the early stage they’re at in their business journey (aspirational start-up businesses, for example), they normally bring in lower fees and have less impact on growing your bottom line

  • C-list clients – These businesses have the potential to be transformed into A or B-list client, but are currently not efficient enough or profitable enough to qualify. You’ll need to seriously upsell and upgrade their services to turn a meaningful profit.

  • D-list clients – These are the demanding, time-consuming clients who eat into your fee-earning time. They’re difficult to service, hard to please and bring in low fees – and they’re usually slow or argumentative about settling their bill too.

With plenty of hard work, some great client service and a focus on improving relationships, it’s possible to turn a C-list client into a B-list one, or a B-list client into your A-list ideal client.

But if there’s a large percentage of D-list clients dragging performance and profits down, you’ll need to start looking at ways to rid the practice of the most troublesome offenders.

Losing those bad clients

Getting rid of clients doesn’t come naturally. But when bad clients are starting to have a negative impact on your fee-earning abilities, it’s time to cut your losses and look at strategies for ditching the D-list timewasters.

Here are a few practical approaches for losing those bad clients:

  • Schedule a meeting to talk through the issues – if a client is teetering between being a D or a C, there may be potential to improve their performance. Get a face-to-face meeting in the diary and see if you can turn them around. If resolving their problems sounds achievable, you may be able to school them into becoming a C-list client.

  • Increase your prices beyond their means – raising prices to a point that low spenders can’t afford is a sure-fire way to lose their business. By moving your lowest package price to a higher price point, you automatically filter out the businesses without the required budget – but take care not to alienate any valued C or B-list clients who may be on that same low-level package.

  • Suggest an alternative adviser – sometimes honesty is the best policy. If a client simply doesn’t fit then it’s best to suggest they swap to an adviser who’s more suited to their needs. For D and C-list clients, maybe a different type of practice will forge a more productive working relationship.

  • Formally sack them – this will usually be a last option, but sometimes you’ve got to be cruel to be kind. When a problematic client really is affecting your fee-earning capacity, it’s time to send out a disengagement letter. This allows you to formally end your business relationship, tie up the loose ends and start seeing the positive impact on your productivity.

How to qualify your prospects

Benchmarking your clients doesn’t just apply to your existing customer base, of course. It’s equally important to qualify prospective clients and to vet your lead pipeline from the very start of the business development process.

Peter Czapp, of cloud accounting specialists The Wow Company, believes this open, honest approach to qualifying prospects is vital:

“We believe in building long-term relationships with our clients, so it's really important to ensure that we share the same values right from the outset. We take the time to really understand their business and what makes them tick, and then share our philosophy and approach to business to ensure it's a good fit. Taking the time to do it right means we create much more than just a client relationship – it's a true partnership.”

Having defined how your ideal A-list client fits into the wider practice ideology, you’ve got to filter any new prospects to make they’re going to add value for the firm. Taking on every business that approaches you isn’t a sensible or productive strategy – and sets a bad precedent.

  • Benchmark prospects against A-list clients – Channel your ideal client model and measure any new leads against this template. The closer they fit the ideal, the more potential there is for turning them into a valued, long-term client.

  • Make marketing highly targeted – tailor your marketing to attract a specific niche audience. By moving your marketing away from a generic audience, you zero in on the kinds of business owners and industry sectors who will prove most profitable. A focused client referral programme can be a great way to appeal to your A-list clients and bring in like-minded and pre-qualified new business owners to work with.

  • Look for the best chemistry – Understand the mindset of the clients you love and enjoy working with and consider if there’s a similar connection with new prospects. A free initial meeting is a good way to check if there’s real chemistry in the relationship.

  • Check their tech credentials – Make sure prospects are up to speed with cloud tech and are ready to utilise it fully. If you’re spending time explaining cloud principles and use of online tools, you’re not focused on the profitable advisory work.

  • Push for fast payment options – Explain the cardless and payment gateway options you use and the benefits of these to their business. If they’re open to using a Direct Debit solution like GoCardless, you’ll quickly feel the improvement in your cash-flow pipeline.

  • Do your background checks – do your research, check them out as a business and speak to their previous advisers – are there any issues? Any unpaid debts? Any tangible reasons why you shouldn’t work with them?

  • Look for profit potential – Weigh up the work you know you can offer to this client, the fees these services attract and the time it would take to deliver – is it profitable? Do you have the people available to deliver?

  • Check your capacity – Ensure you can provide the depth of service this client demands and still maintain your agreed customer satisfaction level. If you don’t have the capacity then don’t accept the engagement, as failing to meet expectations is bad for your brand.

By applying these simple checks and filters, you qualify your prospects and begin to build a portfolio of A and B-list clients that will build the foundations of your practice growth.

A more streamlined, profitable practice

As every gym and diet book will tell you, you’ll feel so much better once you’ve lost some of the surplus weight. And getting rid of your demanding and unproductive clients will definitely make your firm leaner, fitter and more able to respond to the energetic demands of the market.

As a practice, you’ll spend less time on avoidable issues or chasing late submissions and can put more effort into building fruitful working relationships with people you connect with.

Your core focus will be on higher-level advisory work that attracts larger fees, bringing in better revenues and improving cash flow through the use of fast, efficient payment gateways.

Your practice is more productive, your revenues are healthy and you’re enjoying your work more than ever– and who wouldn’t want that?

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