How to Create a Relationship Strategy, Andrew Neitlich, wrote about relationship strategies.
We all have our own ways of doing this..it’s another perspective.
This will be broken up into into four different posts, as they are too long for one.
We all have relationships that work for us and some that don’t or who are outside our own Social Circle. Do we want to include them in our Social Circle or are they someone we like to know about and not do business with or what category are you putting them? Sometimes, they are just people that we really don’t know that well.
“Business will stay and continue to stay where it is appreciated and valued”
This quote is something I really believe to be true. I am sure you want to be valued and appreciated by people whether it you are in business with them or not, you will be appreciated when you are working with the right people.
Andrew created this idea of a Relationship Strategy – I call it a Social Circle –
A core relationship strategy allows you to focus 80% of your time on the few (20%) relationships that can help you reach 80% of your financial goals. It also means that you systematically move past — or even gracefully “fire” — the clients and referral sources that take up too much of your time, for too few returns.
To many readers, this strategy may seem counter-intuitive. Why would you focus primarily on only 20% of your business relationships? Isn’t any client or referral source valuable?
The answer, for anyone who has been in business for a while, is a resounding “No!” Not all business relationships are created equal. Some generate huge revenues without much work on your part. Others make you feel like you’re squeezing water from a stone, and require enormous nurturing and work to extract even a small amount of value.
You’ll be much more successful when you learn to evaluate different types of business relationships, and then focus effectively on those that offer the highest potential, whether it’s about your sales, referrals or connections just to help you in some direction.
Here are the reasons why the 80/20/80 rule makes sense:
- You spend less time to earn more money, because you focus in on your highest-potential relationships and stop wasting time on the ones that won’t help you as much.
- You develop deeper relationships with your strongest clients and referral sources, and will likely get more satisfaction from your work as a result.
- You’ll find that you have been leaving money on the table with many clients, and that a bit more attention will net you significantly more revenue per client.
- You become a trusted, strategic advisor to your clients instead of a mere vendor, so they share information and problems with you before tendering projects out to others.
- You work with your most desirable clients, while gradually eliminating the “troublemakers.”
- You get the satisfaction of sending your most annoying clients to the competition!
This strategy may not be appropriate in a couple of situations. When you first start out, and have plenty of room in your pipeline for new clients and relationships, a core relationship strategy may not seem to make sense. Even as Artists or people that sell art they are products.. and that’s how you got to think of it as.
This is especially true if you are hungry for cash to pay the bills. However, the sooner you can learn to separate high-potential relationships from low-potential ones, the faster you will grow a profitable business.
Also, this strategy applies specifically to professional service firms. If you sell products primarily, you still want to know who your best customers are. But different techniques, outside the scope of this article (e.g. reward programs, sophisticated database analysis, applications to personalize offerings a la amazon.com), will apply to keep them loyal.
A Five-Step Process
We’ll start with Step 1.
Develop criteria for ideal and nightmare business relationships. The first step is to develop a set of criteria to define your ideal and nightmare client (or referral source, or other business relationship). Here are some common criteria to help you do this:
• Short-term revenue and profit potential (within one year).
• Long-term revenue and profit potential (beyond one year).
• Fit with your personality style.
• Fit with your target market.
• A budget for your services, and willingness to pay.
• Fit of their needs with your skills and capabilities.
• Their willingness to push the envelope and do interesting work.
• Risk to you if a project fails.
• Upside to you if a project goes well.
• Visibility of the client and their projects.
• Opportunity for you to develop new skills.
• Opportunity for you to develop a new, marketable product or service.
The above list is not comprehensive, and you should think hard about your own criteria. When you complete the criteria, get as specific as you can. That way, it will be easier for you to identify high-potential clients, and rank your client list. For instance, your ideal client criteria might look something like this:
• Short-term profit potential of $15,000.
• Long-term profit potential of $100,000.
• Company matches my values of hard work, risk taking, and creative thinking.
• Company is an emerging technology venture.
• Company understands the value of a dynamic Website, with cutting edge ecommerce functionality.
• If a project fails, the company takes their share of the blame, is unlikely to take legal action, and the media will not report the story.
• If the project succeeds, it will be widely written about in the industry press, lead to speaking engagements, and the client will provide numerous referrals within and
outside the company.
• The client will challenge me to remain on the leading edge of Website design techniques and tools.
• Working with the client will allow me to develop an ecommerce platform that I can market to others.
You can do the same exercise for your nightmare client. In this case, when you think about short-term and long-term profit potential, ask a different question:
What is the minimum amount of profit (or revenue) I would need to earn in order work with this type of client?
That way, you will be in a position to negotiate the kind of income you want in order to make such a client worth your trouble — or to simply say, “No, thank you.”
Note that it is rare to find a client that meets all of your ideal (or all of your nightmare!) criteria. Therefore, it is also important for you to identify the criteria you value most.
For instance, I am at a point in my life where making money is key for me. Also, I have learned a lot about how to work with difficult clients by setting boundaries and being flexible and resilient.
And I’m focusing primarily on with people who are heart-centered or socially conscious,, which by definition excite and challenge me.
You could rank clients with only one criteria: how much money they can bring me in one year’s time?
If money isn’t your primary motivator, you may have to take more time to weigh the trade-offs of different criteria.
P.S. Keep reading for the next step in the process.