Today is client cleanup day for me. What do I mean by this?
We all have clients that are unproductive, in one way or another. Perhaps they haven’t paid their bill to you in 6 months. Perhaps, like in my case, they are tax resolution clients and they’ve refused to become compliant with filing and FTD requirements for three quarters in a row. Or, perhaps they are an active client, but use up three times more staff resources than the revenue they pay you.
Basically, these are clients that need to go elsewhere.
I’ve written extensively about the Pareto Principle before, the 80/20 rule. This states that 80% of your profits come from roughly 20% of your clients. The converse is also true: 80%, or even more, of your headaches comes from 20% (often even less) of your clients.
So, even though it’s summer, I think this is a good time to be doing “spring cleaning” of your client lists, especially since we’re just coming out of tax season still. Here are some questions to consider for deciding who to cut.
1. Do you have old clients that you mail and call every year, but haven’t seen them in 10 years for their tax preparation?
2. Do you have active clients that are straight up unprofitable? (You should constantly be tracking this, by the way). No client is worth LOSING money on.
3. Do you have a small handful of clients that are simply a major pain in the ass, and you’re just sick and tired of dealing with them?
4. Do you have absolute deadbeat tax resolution clients that are going nowhere because of they consistently miss RO deadlines, refuse to make FTDs, can’t get you financials, etc? (Historically, I will cut off my tax resolution clients after 3 consecutive quarters of additional accrual — 9 months is enough time to make a human being, so it’s more than long enough for a small business to get their act together, particularly with professional guidance at their disposal).
5. Do you have clients that are consistently on your accounts receivable list?
If you have unprofitable clients, lazy clients, clients that aggravate you and you hate dealing with, clients that are constantly paying you late…These are the people that need to go.
Once you fire your worst clients, life will be much happier. Your bottom line will most likely instantly improve, you’ll sleep better, your staff will probably be happier, and unicorns will frolic under waterfalls of glistening diamonds.
OK, maybe not the unicorns, but life at your firm will definitely be easier on everybody. So get to it, look over all your clients, and fire the worst of the lot.