How to Identify Your Least Profitable Clients and What to Do About it

In my experience, it’s much more valuable to know who is not your customer or client than who is. Why? This journey led me down a road that is long-winding and has many different pathways. In the end – and thanks to the fact that experience is the best teacher – I  concluded that no matter what I believe about my contribution or my knowledge base, our value is determined by the client. When you speak to a prospective client, you have the opportunity to glean a lot of wisdom.

I love the word “glean.” Look it up. Words have meaning and weight, especially when used in the appropriate context. Merriam-Webster defines it as something to collect gradually, bit by bit. What does glean  have to do with identifying your least profitable clients?

I have never done one of those analyses or even the Pareto principle’s 80/20 rule where you segment your clients, figure out where you spend the most time and compare the results to revenues to determine the marginal utility of working with those clients who are a drain on your profits. Have you done this, and if so, did it change the way you saw your clients, or better yet, how they saw you?

Maybe … maybe not. However, in order to develop more profitable relationships with our clients, we have to get them to see us a certain way. We have to overcome the inevitable concerns/objections and achieve three objectives:

1. We know them and understand them; we demonstrate empathy from the get-go, and dare I say, we learn to love our clients – it works, try it!
2. We know and understand their business with regard to what they do; what they make, buy and sell; and their basic revenue and financial model. We’ve already connected with the key decision makers in their company.
3. We know the key drivers to profitability, or lack thereof, in their business; we have a strong basis on which to review and discuss how they make money in their business.

I’ll add one more – and this one’s the kicker: we have a plan to improve profitability, communicate the plan clearly and succinctly, and have a program in mind. Moreover, we speak as someone who believes 100 percent that the outcome can be achieved.

The amazing reality is that all of this is quite achievable, and there are many business people who want to engage with tax and accounting professionals through this firm model. Our firm uses Intuit® ProConnect™ Tax Online and QuickBooks® Online Accountant, and as a result, we developed a platform for financial literacy. We convey and teach important business and financial principles when we can display and demonstrate the data in their world. It’s super powerful, and it is happening today all around you.

Our financial literacy model explains what we already know about their business using common-sense language through the numbers. Think about it; there is already a streamlined process to capture relevant financial data using QuickBooks Online bank feeds, bank rules and batch reclassification tools. We’re able to rapidly explain, in a matter of hours, not days, the key operational strengths and weaknesses of a company using objective data and common sense language. Business owners are desperate to receive this type of wisdom and partner with professionals who have the necessary acumen to deliver these types of services. How do we know this? Our clients tell us!

Since we’ve made this shift in the way we operate, and even more importantly, communicate the value conversation, our business is now clearly able to attract the right type of clients who value informed communications on a daily, weekly and recurring basis. In short, identifying your least profitable clients isn’t about some complicated algorithm or even the 80/20 discussion. Instead, the focus is working with clients who value our services and use the insights we give them to improve their businesses.