Focus on the Best Returns

                                                                                         

When most people think of leverage, they think of adding more value to what they already do. And in fact that is the most common way I help clients.

However, you can also create leverage at the opposite end of the scale, by eliminating tasks and activities that have a low return.

For example, one way to do this is to classify your clients according to the value they give you. Here's how...

1. Create an Excel spreadsheet with two columns. List all your clients in the first column, and the amount of income they generated for you in the last 12 months in the second column.
2. Sort the results, so that the highest-income-generating clients appear first.
3. Starting from the top, add up the total income until you reach 50% of your total income for the last year.

If every client was equal, you would find that half your clients generate half your income. But this is almost never the case.

When I do this exercise, I usually find that the top 20% (or less) of my clients are responsible for half of my income. At the other end of the scale, the bottom 20% of clients generates a very, very low portion of the total income for the year.

You will probably find something similar - that most of your income comes from a small number of clients. Obviously, the first step is to reward those top clients. Give them special treatment, just like the airlines do with their tiered frequent flyer programs. Make them special offers, give them additional privileges, and so on.

What about the other end of the scale?

At the other end of the scale are the clients who bring you very little income. This doesn't mean that there's anything wrong with them; it just means that they aren't the best type of client for your business.

So look at ways of addressing this issue - for example:

1. Referring them to other providers who can serve them better.
2. Raising your prices so that they give you more income (or leave).
3. Changing your mix of services.
4. Resolving not to take on any more clients of that kind.

When I went through this process with a client recently, he decided to take the last option. He was keen to continue working with his existing low-value clients, but he won't take on any more work at that level. He estimates that this decision alone will save him half a day a week, with very little impact - if any at all - on his income.

Hold the nerve.

The trick to making this process work is to hold your nerve. It's not always easy to turn away work or to refer it to a competitor. And I'm certainly not suggesting that you drastically cut a swathe through your client base, just because they don't make the top 20%.

But if you're willing to set a minimum threshold and hold firm, you will probably find it worthwhile - not just in the long run, but even in the short term.

About the author:
Gihan Perera is the author of "The Seven Fatal Mistakes That Most Web Site Owners Make - And How To Avoid Them" and "Spin: Turn One Idea Into Hundreds of Information Products". Visit GihanPerera.com and get your complimentary copies now.

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