Ditching the 15%

It’s a new year, and I’m starting off with a bang!

I recently realized a five-year goal, and I couldn’t be happier.  I feel refreshed, invigorated, and oh so eager to tackle this year!

I’ve been reading a fantastic book the past few weeks (as time allows!) entitled The Ultimate Sales Machine, by Chet Holmes (2007, Penguin Group).  One of the ideas he presents is to fire the bottom 15% of your customers.  As a small business, that seems incredibly radical.  I mean, can you live on less money?  But the principle behind that is solid.  That bottom 15% of your customers is wasting your time.  You could be spending that time on developing bigger better clients, or just taking care of your own business.

I dropped the bottom 15% of my clients between November and December.  One refused to let me do my job – I was strictly doing bank reconciliations.  Don’t get me wrong, I am the last person to tell you those are unimportant, but if that’s all I’m doing, I’m really not doing you the most good, right?  I’m not helping you maximize your sales and profits; I’m not helping you find hidden leaks in your expenses….. I’m really of no benefit to you if that’s all I do.  It was a mutual parting, but it gave me a few extra hours a month to focus on developing bigger, better clients.

Another refused to pay.  I love helping small businesses, and I have never charged for answering quick questions on the phone or via e-mail with my clients.  There’s no value in nickel & diming like that.  However, if I’ve created works of accounting art (like recreating an entire 2011 income and expense history in one weekend), I deserve to be paid for that work.  As soon as I got an inkling they weren’t going to pay, I dropped them from future work.

Those seem like no brainer bottom clients.  But as a business owner, you have to look at your time and worth seriously.  Dropping that bottom 15% will enable you to focus more of your work time on 1) networking with new others and developing a greater group of contacts and potential business associates and clients.  2) focus more time on marketing your business through advertising, social media, or other avenues.  3) focus more time on your business in general.  Maybe use that time to brainstorm new services or products that will enhance your current offerings?

This isn’t necessarily geared toward service industries either.  If you are in retail or manufacturing, what would happen if you dropped the bottom 15% of your product mix?  The under-performers, the slow sellers, those you aren’t making as good of a profit on?  Would that allow you the time and resources to grow existing channels and products that you make a good profit on or are fast sellers?  What if you analyzed the time your store is open and closed for the 15% that you historically are open but never make sales?  How would that improve your life (and your payroll margins) if you opened at 9am instead of 8am, or if you closed at 6pm instead of 7pm?  Wouldn’t your family be happier having you home during that time?  What could you do with that time that you currently spending at work not being productive?

I dropped my bottom 15% of clients, but I expect to at least double my gross income this year.  Gaining that 5 or so hours a week will enable me to focus on my big fish existing clients, allowing me to serve them better, as well as allowing me the time to actively market & network my business and attract new clientele.

What are you going to do?  Do the same in 2013 that you did in 2012, or are you going to make it a better year?