Client profitability - part 3, Who should stay? Who should go?

October 08, 2018


Excerpt from 'How to Wrestle an Octopus: an agency account manager's guide to pretty much everything'. Available now!
 

Just because you have clients, doesn’t mean you should keep all of them. Being able to assess and categorise your clients is the first step in figuring out which clients (or projects, or services) to keep and which ones that you need to say goodbye to.

Take a look at the PROFIT GRID below. You will see six sections and two axes. Your task is to take each one of your clients, along with each of the types of services that your agency offers (you may wish to create two separate charts) and plot each on the grid.

 

Let each axis guide you as to where you place your clients:

  • Vertical (x) axis = Ease of Sale/Popularity. Literally, how easy is it to make a sale to each client, or how easy is it to sell each service into the marketplace? The harder the sale, the lower in the grid you place your marker; the easier the sale, the higher the marker.
  • Horizontal (y) axis = Gross Profit (where gross profit = revenue minus costs of goods sold). Use this axis to plot how profitable each client or service is. The more profitable, the further to the right you will place your marker. Note that the zero point is some way along the x-axis. This is because (as you have just read), some clients and services are loss-leaders for your agency, and carry with it a low, zero, or negative profitability. Those with negative profitability will sit to the left of the zero line. Justifiable loss-leaders will sit higher in the grid, indicating those you will keep, whilst the ones in the grey zone you should seriously think of resigning.
The sectors
  • Loss leaders. These may be passion-projects, vanity clients, charity work, or bait. Whatever they are, there is sound logic behind keeping these clients/services on-board knowing that you have financial security through other, more profitable work.
  • The drain. Clients and services in this section cost your agency money without any sound logic to keep them running. It’s time to kick these to the curb.
  • Blood, sweat and tears. Low gross profit and a hard sell. These are clients or services in which you may invest a lot of time, money, and effort for low or no return – a time investment that would be much better spent elsewhere for higher gain.
  • Attractors. These are clients or services for which getting the sale is easy, even though the return may be low. They could be ‘bread and butter’ clients that you’ve built a solid relationship with, and that you can rely on to keep the cash flowing. Or it may be a popular (low profit) service that you can use as a gateway to other, more profitable, services.
  • Potential goldmine. These clients/services are a challenge to sell, but the gross profit is high, which makes them worth keeping. What can you do to push clients/services in this sector up into the Goldmine?
  • Goldmine. A.k.a client nirvana. High profitability and easy to sell – every agency should want that! If you have any clients/services in this sector, try to figure out what the secret ingredients are, and then try to replicate that success.

 





    Leave a comment

    Comments will be approved before showing up.


    Also in Latest Tips & Tricks

    Account Planning Strategy – what's it all about?

    June 12, 2019

    If you want to work strategically with your accounts, then learning to create and utilise an Account Planning Strategy (APS) is the best place to start. Here's how to do it.

    View full article →

    Problem-solving: Root Cause Analysis (RCA)

    May 27, 2019

    AgencyLand is a massive machine made up of moving parts, complexities, and challenges. Think about all the different types of things that could go wrong in a typical agency day (you won’t have to think too hard!). As an account manager, one of the many hats that you wear is ‘Chief Problem Solver’. Given that you will need to solve a great many problems during your career, a useful technique to master is Root Cause Analysis (RCA).

    View full article →

    Talent and location release forms

    April 28, 2019

    A ‘release form’ is a legal document which, when signed, gives your client or your agency the right to use the still photo, audio, or video footage of the person who signed the form. This is one form which every agency account manager, or marketer, who attends photographic or video shoots must carry multiple paper copies of. The easy-to-remember rule is that if you are shooting someone for commercial purposes, get a signed release.

    View full article →

    Our gift to you!

    SIGN UP TO THE AM-INSIGHT NEWSLETTER, AND YOU WILL RECEIVE 100% OFF THE PURCHASE PRICE OF ANY ONE MICROSOFT WORD OR EXCEL RESOURCE FROM THE AM-INSIDER WEBSITE. CLICK HERE TO SIGN UP NOW!