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Increase your profits – Fire some clients / staff

It sounds counterintuitive at first but one way to increase your profits is to fire trouble clients or staff.  Mike Michalowicz wrote a book called the pumpkin plan where they discuss coming up with the criteria for determining your best clients and focusing on those.  For us we have a checklist of red flags or warning signs we listen for in the sales calls and if any potential clients look like they are going to be trouble we tell them we are at capacity or double our prices so that they will most likely look somewhere else.  But the other step is to look at the profitability of each client and then look at how much you enjoy working with them and you may find some clients that will end up helping you grow your company if you get rid of the clients that just wear you or your staff out.

How does getting rid of clients help me grow?

If you have any clients that you are making lower margins on or that are wearing you or staff out and you are able to replace those clients with better margin or friendly easy clients to work with then your firm will be much better off.  Your staff will be happier and will do a better job.  You won’t be putting out fires with trouble clients and will have more time to do an amazing job with our existing clients.

Make your luck

You can call it destiny or something else but I find that when we have extra capacity (either form firing clients or from hiring amazing staff) then opportunities seem to show up.  Maybe the sales are easier because I can picture the person that would be great to staff on the client instead of selling the job and then having to hire the person.  Whatever you call it you will be amazed at how it magically works out if you fire a bad client

Some Criteria to consider

  1. Profitability – you may not know this when you start but after a few months you will know
  2. Responsiveness – When you send an email or schedule a meeting do they seem to value your time. We test this out during the sales process – how easy is it get the sales call scheduled and do they show up on time?
  3. Urgent fire drills – do they send request after hours that need to be urgently fixed, do they respect your time when you are on vacation, do they plan ahead and communicate deadlines so you can plan accordingly?
  4. Don’t pay on time / negotiate contract very hard
  5. Been through 3 providers in the last year – people mention this in the sales calls and it requires me to try to figure out what happened and if the company that is potentially hiring us might have some issues
  6. Are they nice / thankful?

What about staff?

It is so hard when you are short staffed to potentially think about letting anyone go but bad staff will eventually cause you to lose clients and probably other staff that don’t like working with them.  You can do a gradual phase out if you are really worried but your firm will be better off if you let underperforming staff go.  You should give them feedback and see if they can improve – especially if they are a cultural fit but if they are not making improvements and are wasting your time or other staffs time then it will help position you for growth to get rid of them.  When we had bad staff it caused clients to ask for discounts which hurt profits and we ultimately lost some customers as well.  It is not a risk worth taking once you understand the issues.

Prevention is the best

After you are able find some clients and staff to peacefuly part ways with then you can start to look for trends.  What are the reasons they did not work out?  Is there a way you can test future customers / staff during sales calls and interviews?  Can you talk to the last firm they worked with or get a reference?  No one gets it right at first but if you keep making progress and come up with better checklists then you can start to work with great staff and clients and increase your profit!

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