Divide and Conquer

How Strategically Segmenting Your Client Base Can Fuel Company Growth

It’s okay to play favorites. In fact, it’s advisable.

If we take the time to step back and evaluate all of our client relationships, it becomes readily apparent that not all clients look alike. There are clients who bring us joy, and there are clients who cause us stress. There are clients that are easy to serve, and there are others that are arduous to satisfy.

How we spend our days and professional careers is a matter of our own making, should we make the conscious decision to purposefully build our client portfolios that enrich our lives, remove toxicity or duress, and increase profitability and productivity alike.

Be Subjective and Objective

In the book The Supernova Multiplier, author Rob Knapp lays out criteria through which to sort or classify clients of a professional services provider, and only some of them are objective criteria like profitability and revenue generation. 

If you’re unfamiliar with the book and concepts behind it, I highly recommend that you pick it up.

The Supernova Multiplier provides expert guidance to the revolutionary model that has transformed the lives and businesses of finance professionals worldwide. The innovative Supernova method enables [professional service providers] to rapidly grow their business, efficiently manage time, and maximize client satisfaction.

Though his process was specifically formulated for financial advisors, I believe the principles to be universal to other service providers, such as accounting firms, insurance agencies and other professional service firms. 

Knapp advised that we rate all of our clients along criteria that are both subjective and objective.

Objective criteria might include some intuitive considerations, such as:

  • How much revenue does the client account for?
  • How profitable is that gross revenue generation?
  • How many products or services do they currently have with our firm?
  • Is the client squarely in our defined target market niche?

But other criteria that might not be so obvious and intuitive are just as important, and perhaps more so. These are subjective criteria such as:

  • Does the client cause us pleasure or pain, on a regular basis?
  • Does the client take our advice, or resist our recommendations?
  • Does the client refer us to friends, family and colleagues?
  • Do we look forward to spending time with this client, both professionally and personally—in and outside of the office?
  • Is the client easy to service, or difficult?
  • Has the client relationship evolved to that of a genuine trusted business advisor partnership?

The subjective criteria bear hidden costs or negative impacts that might not be so obvious as hard numbers like revenue. If a client is difficult, that stress and duress takes a real, but often intangible, toll on the business and its team members. Not only do these clients sap productivity and team morale, they often hide productivity liabilities, as the team works harder and longer to achieve the client satisfaction that this client is resistant to.

Choose Your Future

Once you’ve scored each and every client along these criteria, segment the entire client base into quadrants. You might call them A, B, C or D clients for shorthand, or you may refer to them  as:

  1. Ideal Clients
  2. Great Clients
  3. Good Clients
  4. Clients

Understanding where each client sits among those quadrants allows you to apply and benefit from the 80/20 rule, which suggests that 80% of your revenue will come from 20% of your client base—usually, the A clients.

Once you see this spelled out in black and white, both the benefit and the course of action it proscribes become obvious. Spend more of your time in service of ideal clients than you do “D clients,” as those are the people who will bring you joy, trust, affirmation, revenue, referrals and all-around life enrichment. The D clients are likely net drags on productivity, profitability and morale, and they should be replaced over time by A clients.

Next, design your business development strategy specifically and purposefully around attracting and retaining only A clients, or ideal fits for your organization. As you continue to reap and sow for ideal clients and discard poor-fit clients, your A clients become even more “ideal,” and even your D clients start to look like “good” clients, perhaps not needing pruning at all!

A note of caution: Resist whatever temptation you might encounter to assess clients situationally. Everybody has a bad day or imperfect encounter. Look at clients holistically and evaluate them not only career-to-date, but against their potential for lifelong success or lack thereof going forward in perpetuity. Perhaps a small client now has the ability to become a large client over time as they grow and continue to ask for additional support from you. Or perhaps a small client is a central source of many referrals to large, profitable clients, or enough “ideal” or “great” clients in great numbers, regardless of the individual profitability of each.

On the other hand, if a small, non-profitable, difficult client has no potential to grow or inclination to change, perhaps they belong on a short list to be pared and replaced with a better fit for your organization.

If you stay disciplined to adhere to this process, everything should become easier. Clients should become bigger, more profitable, easier to work with, and a fountain of ongoing referral business; while poor fits, productivity drains, and morale killers will slowly but surely disappear from existence.

Remember, you are not only building a business, you are creating a life and lifestyle for yourself and your family. That should be of your choosing, not anyone else’s. You do have the power to shape the future—for yourself, your team, your business and your family. Take it.

As another great author, Greg McKeown, writes in the book Essentialism, “If you don’t prioritize your life, someone else will.”