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Small is not always beautiful, let alone profitable

Sometimes it’s just not worth having a client that’s too small, so why not set a floor-limit for the minimum size of a client contract?

This is another blog in the world of no right answers and of course the context of your business will determine how relevant it is, but you can have clients that are just too small to make a profit from.

To begin with, you need a management information system that measures the revenue and profitability of clients.

Once you have identified the clients that might be too small for you to make money from, there are two things to do:

  • Renegotiate prices or resign the clients
  • Make sure you change your pricing structure so you don’t take on any new clients that are too small

Resigning clients might feel counter-intuitive but think of it as “resigning losses“.

Less can be more!

Moving forward, it’s often very helpful to indicate early on in the sales process what your prices are because it can drive away prospects who will resist the prices you want / need to charge. It’s better to have this conversation at the beginning of the process so that no one’s time is wasted.

Everyone wants to grow their business, but what really matters is to grow the bottom line and sometimes growing the top line doesn’t achieve that!

 

Michael
@diaryofanomb