80% of the effects come from 20% of the causes – Joseph M. Juran

If you are like me one of your biggest challenges is not having enough time to accomplish everything you want to get done.  I do numerous things to work more efficiently.  But during my time in business I found something worse than needlessly time consuming projects: handling needlessly time consuming matters for people who were ungrateful and emotionally draining.

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The Pareto Principle, as Juran called it, applies to business just like everything else. According to Richard Koch in Living Life the 80/20 Way:

  • 80% of a company's profits come from 20% of its customers
  • 80% of a company's complaints come from 20% of its customers
  • 80% of a company's profits come from 20% of the time its staff spend
  • 80% of a company's sales come from 20% of its products
  • 80% of a company's sales are made by 20% of its sales staff

I would add to this list that 80% of your daily emotional grind comes from 20% of your clients.  Is it coincidence that they seem to be the same ones who negotiated the hardest and won the largest price concessions?

Free up a tremendous amount of time and mental energy by firing such clients

You need to be intentional about the process of weeding out your worst clients, otherwise the tendency might be to fire the ones with whom you most recently had a problem even though over the long run they were profitable and reasonable. Here is my process:

  1. Make a list of your clients and the fees they paid during the previous period (for example every six months) as well as the average annual fees they paid since becoming a client.  Rank them with the highest being 1 and then on down from there.
  2. Next, determine the time you spend servicing their accounts.  Rank this aspect with 1 being the least time consuming and again on down from there.
  3. Assess the amount of emotional energy it takes to work with the each one.  Think back over the previous period and quantify the number of times each client treated you or your staff inappropriately, made outrageous time demands, and did other things that unduly tasked your patience.  Once you have done this assessment rank them like you did with time, where the least emotionally taxing is 1 and then on down.
  4. Add up the score for the three issues.  Those clients with the highest scores are the candidates for firing.

If you set up your assessment on a spreadsheet like Excel you can more quickly re-assess when the need arises.

Note I called them candidates.  You highest scorer may also be your largest source of income.  In that case you may have to replace some or all of this income before you fire the client.  Nonetheless, one by one you need to get rid of the worst clients so you can replace them with higher quality ones.

If you conclude that you do not need to fire any of your clients, this may be an indication that you are not being aggressive enough in going after business.  You are not stretching your capability in dealing with challenging people.  Aim for striking a balance.

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Another benefit of this exercise is you will create a profile of your ideal client.  When you prospect for new business you can interview prospects to determine how well they fit this profile.

If you have a retail business, rather than assessing individual clients, develop customer profiles, each of which you assess as if it were a client.  Identifying the qualities of your best customers will reduce the time you waste on chasing prospects that in the end take up too much of your time and emotional energy relative to purchases they make.

While this process will not repeal the 80/20 rule, it will improve your overall work experience and reduce your mental burden.

What other ways do you assess the quality of your clients?

You can leave a comment on this question or ask another question below

© , Kevin S. Bemel, All Rights Reserved

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