Which clients are actually worth having?
The profit each client produces once the full cost of serving them is counted. It regularly shows that a small number of clients generate most of the profit, while others cost more to serve than they pay.
Get a finance reviewClient revenue − (Delivery cost at full cost rates + Direct expenses + Write-offs + Servicing time)
No single benchmark. It is common for the top 20% of clients to produce more than 80% of profit, and for the bottom 10% to 20% to make a loss.
Revenue from each client less the direct cost of serving them: delivery time at full cost, subcontractors, expenses, discounts, write-offs and the time spent on account management, meetings and support. Clients are then ranked from most to least profitable, usually over a rolling twelve months.
Revenue by client is easy to see; profit by client rarely is. The clients who feel like the best relationships are often the ones who ask for most, negotiate hardest and pay slowest. Ranking clients by profit shows who to protect, who to reprice and who to let go, and it gives a clear picture of the kind of client the business should be trying to win more of.
Include the hidden costs: time spent on calls, revisions and chasing payment is real cost even when it is not billed. Plot the ranking as a cumulative curve; if the line rises then falls, the clients at the end are reducing total profit. Before letting a client go, check whether they cover fixed costs or lead to other work. Repricing is often better than walking away.
Most owner-managed businesses don't, or they work it out in a way that flatters the result. We'll calculate it from your own numbers and show you what it's telling you.
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