I participated in an advisory board meeting with a client recently. The goal of the advisory board is to bring together service buyers and service providers to foster mutually beneficial relationships. I’m sure it’s no surprise to you that service buyers and service providers see the world in very different ways.
A comment from a service buyer struck me. He said: “it’s important to me to build a reputation for being fair, for not being a jerk who’s ready to kick someone over the smallest thing. If I build that kind of reputation, no one would want to work with us. Having good relationships with service providers is crucial to MY success.”
I found this statement to be very insightful. As service providers, we tend to think about what we want out of a business relationship. We sometimes lose sight of what our clients want. That’s why you need to be intentional in building an ideal client profile. This not only allows you to serve clients better, it also protects your profit margins. Not sure what the link is between an ideal client profile and your bottom line? Let me explain.
The Three Kinds Of Money
I founded my firm in 1998. Over time, I’ve noticed that it seems like there are three kinds of money: hard money, fair money and easy money. Here is how I would describe these.
- Hard Money. This is the kind of money that comes either from engagements or clients that I nearly wish we had not taken on. No matter what we do, it seems like success and mutual satisfaction are always out of reach for my firm and the client. Hard money is nearly always low-profit money. It comes with regret.
- Fair Money. This is the kind of money that comes from striking a fair deal with a client, delivering services, producing client delight and getting paid. Everyone feels good about it. We didn’t get overpaid and the client didn’t get underserved. It’s fair.
- Easy Money. This is the kind of money that seems nearly effortless. While we didn’t overcharge the client or underserve them, the deal, the delivery and the dollar seemed like a breeze. This has been a rare bird for my firm, but once in a while we’ve seen it.
Of these three, here is how I feel about them. I hate hard money. It sucks, truth be told. I want to avoid it. Anything I can do to spot hard money before it shows up on my doorstep – I want to do that. Success in business is often more about avoiding difficult situations than it is about every deal and every client going perfectly. One bad client or deal can nearly ruin an otherwise great quarter or year.
I like fair money. It appeals to my sense of what’s right, my moral compass. Now I have to admit that my notion of fair money and my client’s notion of fair money don’t always match up. But part of what makes fair money fair is the willingness of the client to enter dialogue and try to see things from my point of view. I also do the same for them. That creates mutual sympathy for each other’s position. That also creates trust.
I like easy money, but, if I’m being honest, it doesn’t seem to like me very much. I could count on one hand the number of clients and engagements over the last ten years that just felt easy. I have resigned myself to the fact that we’re just going to have to work hard for every single dollar. When easy money shows up, I welcome it. But I don’t count on it.
THE SINGLE BEST WAY I HAVE EVER DISCOVERED TO ACQUIRE THE RIGHT CLIENTS AND TO AVOID THE WRONG ONES IS AN IDEAL CLIENT PROFILE.
Which Type Of Money Should You Build Your Business Around?
So this raises an interesting question. What kind of money can you build a professional services business model around? What kind of money and deals will scale? What kind will help you build a reputation where the market and people of influence hold you in high regard? What kind of money will help you attract the right partners and the right employees? What kind of money will allow you to look in the mirror and like what you see?
I think you probably already know the answer. Hard money hurts, your profits and possibly your reputation. Easy money is a fluke. You can’t count on it. That only leaves fair money.
Fair money, in my experience, is scalable. It breeds respect, both from clients and from employees who you need to perform at a high level for those clients. It gives you the kind of reputation that draws the right people to you.
I believe the key to growing a great professional service firm is in finding fair money, and lots of it. This is why you need an ideal client profile.
Looking For A Fit – Not A Deal
New client acquisition is a top goal for all my clients. It’s also one of my top goals. But it’s not enough just to acquire clients. To achieve strong profits and a scalable model, you need to acquire the right clients and offer them the right deals. Why? Because the wrong clients and the wrong deals stunt your growth. They cost you money. They slow you down.
The wrong clients and the wrong deals equal hard money. The single best way I have ever discovered to acquire the right clients, and avoid the wrong ones, is an ideal client profile.
Engaging in client acquisition activities without an ideal client profile is like a carpenter building a house without a tape measure. That carpenter would just be guessing and that house is likely to crumble in the near future.
An ideal client profile provides a measuring stick. It allows you to see how closely a prospect fits the kind of client that you want to serve. It allows you to compare how closely a prospective new client matches up to a profile of your existing great clients.
As I look back over the last ten years at all the deals and clients where hard money was involved, without fail the tell-tale signs of hard money were already evident in the relationship – BEFORE a deal was signed. Had I been looking for a fit more than a deal, I could have avoided those situations.
Seven Characteristics Of Ideal Clients
One of our first steps, when engaging with new clients, is helping them build an ideal client profile. To do this, we ask them to identify a list of top clients that they would describe as ideal. After conducting literally hundreds of interviews with these types of clients, we arrived at the core seven characteristics that define ideal client relationships:
- Impact: you deliver services that have a significant impact on their situation, usually their top or bottom line or both. There are also other types of impact, like peace of mind, goal achievement, stress reduction and a strong sense of progress toward goals.
- Budget: ideal clients easily afford your services and usually have already reserved a line item in their budget for those services.
- Profits: you earn a substantial profit by delivering these services.
- Insights: you understand what your ideal client needs often better than they do.
- Expertise: your ideal clients want and need your specific capabilities and have limited options for acquiring that expertise.
- Culture: there is a good fit between the way you do business and the way your ideal clients prefer to be served.
- Chemistry: your staff and your ideal clients’ staff work well together with few conflicts.
Why Culture & Chemistry Matter More Than Budget
Now you’ll notice that only two of these traits have to do with money: Budget and Profits. But of these seven characteristics, I have come to believe that Culture and Chemistry matter more than Budget. Why do I say this?
If a prospect does not have budget, you’re not going to take them on as a client. That is a given. But just because they have budget, this does not mean that they’re right for you. The cultural fit and the chemistry you develop determines whether their money will be hard or fair.
I have a client who often tells this story. Early in his career as a financial advisor, he had one simple criteria for taking someone on as a client. If they could fog a mirror, they were in. But as time went by and his practice grew, he became far more discriminating and only took on certain types of clients. Eventually, he grew a sizable practice working with entertainers and athletes in Los Angeles.
Over time, he figured out who he was best suited to serve. He liked actors and professional athletes and found that they seemed to like him. Eventually he grew that practice into an attractive business that resulted in a very nice liquidity event. A larger firm bought out his interests, leaving him with a hefty sum.
If he had not figured out who he was best-suited to serve, it is unlikely that he would have grown that very profitable business. He developed an ideal client profile that empowered him to go out and get the right clients. He had a great story to tell athletes and actors and became very referable in those circles.
I believe you can do the same thing. If you know who you want to serve, how you deliver great value to them and why they should choose you, you become irresistible. This knowledge is best encapsulated in a detailed ideal client profile.
To help you build a great ideal client profile, I’d like to recommend an Action Guide I’ve developed called 7 STEPS TO DOUBLE SERVICE FIRM REVENUE. This free resource includes seven videos and more than ten downloadable tools. One of those tools shows you exactly how to build the type of ideal client profile I’ve describe here. If you like the ideas in this article, I know you’ll love the Action Guide.