Tuesday, June 03, 2008

Do You Target Clients?

There are a couple of ways to define targeted clients.

First, there's Dun and Bradstreet. To quote our marketing plan, our ideal client fits the following profile:
  • Physical Metro Area = Sacramento, CA

  • Industry SIC Codes = 60-67 (Finance, Insurance, Real Estate) and 70-89 (Services). Due to current economic issues, we are eliminating clients in real estate, construction and automobiles. And, of course, we're not targeting technology firms.

  • Employees Total: 25 - 249

  • Annual Sales: $5.0 - 99.9 million

  • With "A" credit ratings.


Second, there's the "softer" side of business. Once we start screening clients, we look for people who are used to signing service agreements. We also look for people who are nice to work with and who value long-term relationships.

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Those aren't our only clients. But that's our ideal client. In a perfect world, every new client would fit in this model.

The money side determines who gets on our short list. The personal side determines who we actively seek as our next client.

And we're looking for . . . four new clients per year. We don't want to grow too fast because we want to maintain good response times and a high level of customer service.

We also need to balance the resources needed to support the new clients with the resources we gain from passing off certain clients to other consultants.

On the topic of weeding your client garden, see http://smallbizthoughts.blogspot.com/2007/08/weeding-your-business-garden-part-2.html

We firmly believe that the never-ending pursuit of every available new client leads many a consulting company to ruin. Or, at a minimum, it wastes so many resources on un-focused activity that reliable profit is nearly impossible to achieve or maintain.

You do not need every nickel you find on the street. You do not need every client that shows up at your door. And if you add ideal clients on one hand, you should seriously consider weeding out less desirable clients on the other hand.

It is possible that you will add clients and not drop any. But from time to time you should at least evaluate the clients you are keeping, and justify to yourself that you should keep them.

Ideally, you have only the clients you want.

But just make sure.

Criteria

If you haven't wandered over to D&B's web site for building mailing lists (Zap Data), go check that out. Yeah, you gotta register. Get over it: That's the cost of "free" stuff.

Once you get to Zap Data, start building a list. The key variables (IMHO) are those listed above.

Think about the criteria you have for your clients.

The good thing about this exercise is that it makes you make some hard decisions that you've ignore.
  • You have to limit your geography. Start within 30 or 50 miles from your office.

  • You may need to learn about SIC codes. At a minimum, you realize that you should focus on "someone" rather than "everyone."

  • Size matters. When you start building a mailing list, will you really focus on clients with 1-2 PCs?

  • Size really matters. Do you want clients who only make $100,000 a year? No. How can they have enough profit to spend an extra $10K or $20K on technical support? Why would they even need it?

  • And for a few extra pennies, you can be sure your prospective clients can pay their bills.


The process of defining and narrowing down this list will teach you many things, even if you did it just a few months ago. When you make your first list, you might have 20,000 hits, or maybe only 2,000. In all likelihood, it will be high.

Once you consider doing a mailing to these folks at $.25 to $.50 each (USD), times three or four mailings, you see the cost approaching $1 per prospect for an ad campaign. Now it starts to look expensive just to do the basic marketing.

So you find yourself in a situation where you can't "focus" on everyone.

Perfect.

Now that you have to focus on someone as your client, who will it be?

Squeeze in a few miles. Drop the one-person tree-pruning companies. Don't go after "under five" PCs or "over 1,000,000" PCs. Squeeze in as needed. etc.

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If you started out extremely small -- as one person -- then you've built your business on recommendations, word of mouth, and taking every job that came your way.

You were not discriminating. You took every nickel you found.

But when it's time to intentionally grow your buiness in a direction you choose, you begin to make choices.

So when you finally narrow down your list to a managable, affordable size, you're done with targeting the list.

Now you have to figure out the hard stuff: finding really good people that you want to work with for the next ten years.

3 comments:

  1. Karl,

    This is a wonderful article, especially to those just starting down the path to running smarter Managed Services companies.

    You're such an asset to this community, keep doing all you do. In fact, please do more.

    I kid. I know you have a few other business to run...

    ReplyDelete
  2. Do more. :-0

    Last night I posted here. This morning I posted here. This morning I hosted the SMB Conference Call. Then some user group leader business.

    Tonight I'm taking the wife to Phantom of the Opera.

    And tomorrow I fly all day to DC for the ICCA conference (preday event plus a seminar). Oh, and SMB Books is sponsoring that event.

    I get back home Monday night.

    Maybe I'll do more then.

    Thank you for the positive comments.

    ReplyDelete
  3. That's a long flight to DC, I think you could pound out a few more blog posts on those flights.


    But seriously, I meant no offense, I really do appreciate all that I've learned from you and those that you have introduced me too.

    Enjoy your night off with the wife.

    ReplyDelete

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