On the heels of last week’s post – all about attracting the wrong kind of prospects – we move on to another, similar problem…
Dealing with a client roster filled with the wrong kind of clients.

Pareto’s Principle – The 80/20 Rule

Perhaps you’ve heard of Prato’s Principle, often referred to as the 80/20 rule. The equation can be applied in variety of different scenarios. But in our case, it looks something like this:
Imagine you have a client who chews up 80% of your time, but only accounts for 20% of your income.
According to Prato’s Principle this is, in effect, a bad investment. Terrible, in fact.
You’re investing an inordinate amount of time (your most valuable resource) into a project that delivers far less than optimal returns. And all to the detriment of your business as a whole.

The Solution?

Fire the over-demanding, underpaying client.
This sounds odd, huh? It’s usually the client, not the vendor that does the firing in business relationships. And if you’re like most business owners (myself definitely included), you’re loath to turn down any work. It just feels weird to refuse a paying customer. Because in the end, money in money, right?
Wrong.
Working for a client whose constant demands outpace the income they generate negatively impacts your overall business. And it takes a toll on you, personally.
When the bulk of your attention is focused on one client, you don’t have time to generate new business, and you’re not serving the rest of your clientele as well as you should.
Clearing out the dead wood, AKA axing overbearing, underpaying clients will…
-Free you up to spend more time marketing your services to attract new, better quality and higher-paying clients.
-Allow you to spend more time serving existing better quality, higher-paying clients, putting you in a stronger position to garner more repeat business and referrals.
-Reduces your stress level by eliminating the all-consuming worry over how to fulfill the client’s unreasonable demands, not to mention squashing their constant nagging.

One Bad Apple of a Whole Barrel Full?

Perhaps it’s not just one client. Maybe you’ve got a handful of clients whose expectations and demands don’t match the level of income they generate for your business.
Or maybe you have some legacy clients. They’ve been with you since you launched your business. But now they’re paying half of what you now charge new clients for your services.
It’s time to take a long, hard look at your client roster. Who do you really enjoy working with? Who is the bane of your professional existence? And who is paying half of what you now charge for your services?
Organize them into three groups. Then look over the list, and ask yourself: “How many of the clients in the ‘bane of my existence’ category can I dump, and still earn a profit?” Crunch the numbers, and then clear out as much dead wood as your balance sheet can endure.
Dealing with legacy clients is bit trickier. For those clients you genuinely enjoy working with, you might decide to just live with the status quote. But for the rest, offer them a choice: Pay a higher rate or take their business elsewhere.

What’s All of This Got to do With Marketing, Anyway?

Many business owners (I’m certainly guilty here) fall into this trap when first starting out. You’re so freaked out about earning a living; you accept any and all business that comes along. You just want to book jobs and put money in the bank. And that’s completely understandable. But as your business grows, things change.
And at some point you realize marketing isn’t just about generating business. It’s about generating the right kind of business.
Famed copywriter and uber-successful marketing consultant, Bob Bly, says it best…

“Do enough marketing so that you can turn down at least 20% of the new business you’re offered. That way you can be selective about the clients you choose to work with and projects you take on.”

This is exactly why you spend so much time carefully crafting your ideal client personas. You want to know exactly what your ideal client looks like. So when you’re weighing the pros and cons of taking on one project or another, you can zero in on the client you really want work with. Rather than just taking another job to cash the paycheck.

What About You?

How have “problem clients” impacted your business? If you’ve ever fired a client, how did the situation shake out? Drop by my Google+ page and share your experiences.