As a business owner, you will know that no two clients are the same. Your clients will differ because of their business model, operations, and behaviour. When focusing on improving your business, it’s important to recognise the different types of clients you have and categorise them to maximise your efficiency and time. We recommend splitting your clients up into the following four categories:
A’s = Awesome. These clients are a pleasure to do business with. They thank you often and appreciate your hard work. They’ll also pay their invoices on time without being chased.
B’s = Basic. These clients aren’t as easy to communicate with; sometimes they are late coming back to you and are generally a little more time-consuming to work with than your A clients.
C’s = Caution. Increasingly more time-consuming and difficult to work with but could be worth the effort based on the revenue they generate. All new clients you onboard are C’s until they become A’s, B’s or D’s.
D’s = Dead. Clients that fall into this category do everything late. They don’t pay their invoice until you’ve asked them many times. They moan, gripe, want bigger discounts and want more for less.
What is your client base made up of? Knowing the amount of A’s you have compared to D’s is extremely valuable, and here’s why…
Why you need to categorise clients
D’s
You need to know which clients are D’s as they typically soak up the bulk of your time (which is time you could spend helping your A clients and working on B’s), so it’s essential to waste as little time, energy or resources on these clients and move them on!
It goes without saying that you need to end your working relationship with them as amicably as possible. If you were to end things rudely or on bad terms, they might leave a bad review or talk about you to others in a negative way – and we all know that bad news spreads further and faster than good! To professionally part ways, organise a video call or face-to-face meeting to explain to them that you don’t think you’re the right fit for their business. Don’t shift all the blame onto the client – recognise that your working methods may not suit them.
Once you’ve explained to them that you won’t be working with them anymore, it’s good practice to refer them to a business in your industry that might be able to work better with them.
It’s imperative to keep on top of recognising and removing D clients because D’s know other D’s, and they will give you referrals (which will be more clients who want more for less or discounts), and you want to avoid a client base comprising of solely D’s. It’s important not to waste any time trying to re-educate your D’s into B’s, as this won’t be possible.
C’s
Work on educating your new clients (C’s) to become B’s by finding ways of working that benefit both you and the client. Set expectations about what information you will need from them to deliver your service/product and the payment terms for invoices.
B’s
It’s worthwhile dedicating time to re-educating your B’s to become A’s. Ideally – you want all your clients to be A’s. Inform your B clients about the information you need from them (which is both timely and accurate), to ensure you can provide the best possible service/product.
A’s
Focus as much of your time as possible on your A’s. Not only are they more pleasant to work with, but it’ll reap its own rewards as they will pass you ‘A’ referrals as they will know other A’s; helping you to build a quality client base who are a pleasure to do business with and who pay their invoices on time! To find out how to ask for referrals from your clients, keep your eyes peeled for next month’s blog post.
How to categorise clients
Now you know how important it is to categorise clients, let’s address how to do it…
Step 1) Put them in order of turnover.
It’s as simple as that – open your database of clients and order them from highest to lowest turnover.
Step 2) Consider the following:
Now you have a list of your clients in order of turnover, consider for each client – how much profit do they make? Do they pay on time? Do they moan, or are they problematic? (You might want to involve your senior team in this step to get a holistic view of your entire client database).
Step 3) Start categorising.
With the turnover information and answers to the above questions, you can now start to move clients into categories. At this point, we suggest getting the whiteboard out and making some lists!
Step 4) Take action.
Depending on the results, it’s time to act. Start setting up meetings to remove your D’s; begin working with your C’s and B’s to move them higher up the ranking system and ask for more referrals from your A’s.
Need a hand categorising your clients?
Would you prefer a helping hand when categorising your clients? We can help! It’s an exercise we’ve done many times, and it’s always helpful to have a second set of eyes looking at the data and asking you questions about your clients. If you’d like to book a meeting with Bill to discuss categorising your clients, simply get in touch.
