Five Users and Above? Ten?

 Five Users and Above? - Lessons Learned, Episode 43

Last time, we talked about identifying your ideal client, and what kind of "minimums" make sense. Remember, these are very time-bound decisions. Just because you decided something last year does not mean that has to be your policy next year.
(See last week's episode: https://blog.smallbizthoughts.com/2025/09/weeding-your-client-garden.html)

Once we settled on avoiding the smallest, lowest-paying clients, our revenue improved. In large part, this was because we now were only taking on clients who signed contracts for ongoing maintenance. They made a commitment to us. No client who pays you $500 per year can put any claims on your time or attention. But someone who pays you something every month can.

The next step in our evolution was to look at the size of the client's office. Let's face it, offices that have or need a network will provide more work and maintenance going forward than one-person shops or two people who sit across from each other.

We looked at our client list and realized that we only had a few clients who were five or fewer users. As you might expect, the total revenue from that was not large. But when we added all the clients who had between six and nine users, the numbers got better fast.

As you can guess, we were considering moving to a minimum of ten users. Ultimately, we decided not to do that. Instead, we calculated where clients jumped in profitability. This was easy.

We'd already created a spreadsheet that listed all clients, how many users, and how many devices they had, along with the size of their monthly spend. When we sorted this table by total labor revenue, it was easy to see some break points where clients were paying enough to constitute a healthy portion of our income.

That number turned out to be (for whatever reason) $900 per month. Most had one server, some had more servers. Some had five users, some had ten users. They had unique characteristics here and there. But the common thread from a labor revenue perspective was that barrier of $900/month.

So rather than setting a minimum based on users, such ten, we set a minimum based on dollars. From then on, we only worked with clients who brought in at least $900 per month in labor revenue. Interestingly, that number stuck with us for five years, even when we started designing cloud service bundles.

In this case, we did not drop any clients, but we were very clear about our minimums. Then, quarter after quarter, we worked to take on clients who increased the average revenue per client. Which is to say, we tried to clients larger than our largest client.

And that strategy served us well until the recession that started in 2008 and was in full force in 2009.

Lesson learned: Minimums don't have to be based on users or even endpoints. In my opinion, revenue is the best measure of client "minimums." The served us well for many years. 

I introduced the concept of an "ideal client" in the last episode. Next time, we'll take more of a deep dive on that topic.

All comments welcome.

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Episode 43

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page. 

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