How to create a relationship strategy Part 4 and 5.
Just as an investor sells losing stocks and bonds, so you should fire (gasp!) clients that come close to “nightmare” status — especially if they are unwilling to pay you for your trouble.
You might also consider firing clients if they’re giving you work that has become tedious, is holding you back from taking your capabilities to the next level, or that simply isn’t in tune with your current aspirations and goals. The fact is that every professional firm evolves over time. At some point, you have to gracefully move on — even if it means leaving behind clients that used to be good to you.
There is a right way and a wrong way to “fire” clients. Ideally, you will gracefully and gradually part company. But if that’s not possible, the right way is to sit them down, explain diplomatically why you need to move on, and suggest to them some resources that can help them. What better way to help a difficult client than by referring them to a competitor?
In the case of healthcare technology firm described earlier, the business owners found that 75% of their current clients did not come close to meeting their ideal criteria. They made a bold move, and wrapped up their consulting work with all of these clients as soon as existing contracts ran out. They only entered new contracts with these organizations if they were highly profitable.
At the same time, they dedicated the majority of their resources to strengthening relationships with core clients. This included incentives to executives who made inroads with the prospects and clients on the list. Guess what? As a result of this approach, they decreased their number of active clients by 50%, and increased revenues by about the same amount!
Step Five: Watch the Middle
The most difficult part of your list is the middle: the ones that are neither your best nor worst relationships. I suggest that you consider clients in this category to be the equivalent of a “watch and hold” stock. Serve them well, and see if you can convert them to a client that meets more of your ideal criteria. Focus your attention on your core relationships, but don’t abandon the revenue and goodwill that comes from the middle of the pack.
Apply this Methodology to ALL your Relationships
The above steps were applied to clients and prospects that could become core clients. But these steps apply to all of your business relationships. For instance:
- I’ve found that, by focusing on a few great referral sources rather than many mediocre ones, I’ve tripled my revenue from referrals. This has happened by learning how to bring more value to my referral sources and help them make more money. In return, they have rewarded me handsomely with more business.
- Some of my vendors and contractors are terrific, and some are poor. But until I systematically ranked and evaluated them, I tended to tolerate lousy service. Now I know which ones to fire, and which ones to reward with my loyalty and trust. And, because I’ve done this, the best vendors — most of whom are in demand —
respond more quickly to my requests. (Note that major companies like General Electric and Ford have implemented this strategy and found tremendous cost and quality improvements as a result).
- In the case of salespeople, maybe two or three out of ten are superstars, and the rest are mediocre or duds. The above methodology helps me to keep the superstars happy, while weeding out the others.
Start Today and Repeat Each Quarter
Big and small companies alike have benefited from this core relationship strategy. Start today by identifying your ideal and nightmare criteria, and ranking your relationships accordingly. Or, if you have trouble identifying your criteria, rank your relationships and think about what the top of your list has in common. Then, repeat this exercise every quarter. If you do, you’ll find that your marketing and sales efforts get easier, because you spend less time on a few outstanding companies.
Read more about relationship strategies:
Thank you Andrew for sharing all of the steps.