If you want to grow faster,
If you want to be more profitable,
If you want to differentiate your company,
If you want to deliver exceptional service,
If you want to take the single action that would have the greatest impact on your firm,
then, you need to
Identify your IDEAL client before you do anything else.
I can already hear some of you thinking that your ideal client is anyone who has a need for one of your services and has money to buy it. Perhaps you’re a little more sophisticated and your description sounds more like this, “Our ideal client is a middle-market, privately-owned, manufacturer with 200-500 employees.” It is a good start, but it’s a far cry from what is needed to give you a fulcrum for growth.
Most “Ideal client” descriptions reflect an indistinguishable majority of a current client portfolio. What’s more, they are often the identical narratives your competitors use. Demographic client profiling offers very little, if any, help in growing your firm faster than your competition.
Why NOT identifying your ideal client hurts your growth.
6 Reasons an Ideal Client is Vital to Growth
|1. It is more client-centric.
Identifying your ideal client allows you to speak to specific needs of individuals while sustaining the efficiency of one-to-many communication.
|2. It increases profitability.
Specializing gives you economies of scale in systems, marketing spend, and services.
|3. It speeds growth.
Focusing on a specific subset of needs provides faster development and accumulation of expertise.
|4. It builds a stronger brand.
Serving an ideal client helps you to clearly demonstrate whom you serve, how you can help, and what you do.
|5. It reinforces culture.
Focusing on client needs consistent with who your company is at its core reinforces your brand and culture. It is the epitome of Simon Sinek’s Start with Why.
|6. It streamlines sales and marketing.
Focusing on a subset provides clarity of message and simplifies target selection.
Top firms have clarity about the value they offer clients and they price their services at demand equilibrium. Smart firms don’t give that value away or discount it because it throws away profit. If you are discounting your fees, a disconnect exists between your firm and the clients you have chosen to serve:
- Your services are NOT good enough to command a premium, or
- You’re selling to clients that do NOT value your services.
You don’t fully understand their issues, purchasing process, buying priorities, culture, or needs.
As a result, your go-to-market strategy is sub-optimal and you’re squandering product development, marketing, sales, client service, and brand resources trying to satisfy a client that doesn’t appreciate the value you offer.
You may be saying, “But, I am satisfied that my “unappreciative” client pays his bills.” True, cash in hand is better than no cash. But, are you subtracting the costs to your organization in terms of lost opportunity, lower morale, service modifications, wasted time, and eroded reputation? Most firms don’t.
Some firms tier clients (e.g. As, Bs, Cs, and Ds or Platinum, Gold, Silver, Lead, et al) into different service levels. Be very careful not to misconstrue sales prioritization with business strategy. I am talking about strategic business choices, not account management. Serving C clients differently from As can confuse the market about whom you serve and how you serve them. You don’t want C’s damaging your service reputation because of perceived delivery differences.
How to identify your Ideal Client in 4 simple steps:
1. Ask your people who their favorite clients are?
This gives you the important soft side of your ideal clients. Employees want to work with people they like. Clients like to work with people who are easy to do business.
2. Do a profitability assessment, not just revenue ranking of your client portfolio.
Revenue is important, but make sure you quantify “unseen” client costs. Account for consuming disproportionate resources, eating up time, demanding out-of-scope services, returning unusually high amounts of product, requiring corrections, requiring write-offs, paying late, contesting expenses, requiring special orders, changing agreements, ignoring timely actions, etc.
3. Identify overlapping clients in No. 1 and No. 2.
These profitable and likable clients are your starting point for No. 4. In addition, look for clients who may have shown potential, but have not come to fruition because of loyalty to a competitor, a gap in your service line or lack of attention on your part.
4. Develop a list of attributes that make these clients ideal.
Start with simple demographics: ownership, size, industry, geographic reach, and buyer function, then go much deeper into culture and mindset. All mid-sized manufacturers are not the same. Neither are banks, car dealers, or accounting firms. You want to identify prospects that already see the world the way your firm does.
Ask questions like:
- What is the company’s point of view on the function you serve? Is the function strategic or tactical? A cost center or a value generator?
- What is the functional buyer’s worldview on his industry, function, or issues, and your solution in general?
- What values drive the company? Profit? Shareholders? Social responsibility?
- What is the organization’s approach to outside help? Does it normally hire consultants, outsource non-core services or do everything in-house?
- Are the company’s management systems simple or complex?
- Is the operating environment risky, volatile, highly competitive or safe, staid, with little competition?
- How do buying decisions get made? Does the business unit make the decision or does a central procurement function?
- Do they treat product/service providers as partners or vendors?
- Does the organization only work with big brands or does it look for up-and-comers/specialists?
- Is their culture collaborative or autocratic?
- Do they have a risk-averse mindset or a more aggressive risk-taking mindset?
- Does the firm have a healthy workforce or experience excessively high or low turnover?
- Is the organization insular or open? Progressive or conservative?
RELATED: Understanding the Buying Cycle
When you start seeing clients through this lens, demographics become less important and your firm’s way of thinking about product development, marketing, sales, and services changes.
Now begin to build your business and products or services to meet the needs of this ideal client better than everybody else. Identify friction points in your ideal client’s own value chain and your firm’s client’s lifecycle. Where can you remove friction or irritation so that client can be more successful? Where can you make your firm easier to do business with. Look at anything that reduces costs, time to market or risk OR that enhances quality, revenue, growth, client satisfaction or reputation. Think about applying your core capabilities in new ways and focus on those things that you can control or impact.
Identifying an ideal client is the fundamental building block of a profitable, growing business.
The ideal client can be hard to find as a start-up when you are just trying to keep the doors open and make a sale—any sale. It can be just as hard for established firms to sustain clarity on an ideal client profile. Booms and busts, new leadership, retiring buyers, new competitors, and many more catalysts bombard us. However, product-market fit never goes out of style.
It is always a good time to identify your ideal client. Some companies wait until they have stopped growing and need to painfully retrench. Others do it when they are king of the hill and have the luxury of excessive demand.
It doesn’t matter when just makes sure you do it.