Posted on Dec 01, 2015
There is a famous line from George Orwell’s Animal Farm: “ All animals are equal, but some animals are more equal than others”.
An interesting article arrived in our inbox this week which reminded us of the Animal Farm line. The article was both irrelevant to what we do on a daily basis, and at the same time very pertinent.
The article was aimed at copywriters – people who get paid to write for other people – and discussed the type of clients copywriters don’t want. Does that sound counter-productive? Don’t we all want more customers? The main thrust of the article was that it is possible to say “no” to clients – without burning your reputation forever. The writer was making the point that the wrong client would result in more damage than good. The specifics related to the technical side of copywriting, but the identification signs of the wrong client can well be related to other industries.
We have learned this lesson personally. Some years ago, in the shadow of a somewhat unsatisfactory year - in another business, in another industry. We conducted a full review, with conclusions as to what we needed to do to achieve better results. Foremost amongst the action points coming out of that review was the imperative that we needed to lose 20% of our clients.
Obviously the right 20%. We didn’t want to lose just any 20%. We needed to lose the 20% who produced the least G.P. (actually no G.P.), took up the most time, and caused the most hassle. And of course that 20% were always the slowest to pay. It’s the same in any industry. The bottom 20% of customers take the longest to pay, focus the most on price rather than quality or service, and demand attention the most.
We knew who this 20% were. We conducted the review internally. We didn’t bring in an outside consultant who didn’t know the industry or the business. We knew the late paying ratbags, the cheapskates and the whiners because we worked with them every day. But we had believed that the additional revenue they brought in gave us more buying power and leverage – even though they didn’t contribute to the bottom line. But after an honest review we realised that in fact they were actually dragging us down, and depleting our bottom line. So the decision was made that they had to go.
We set out on a mission – lose the 20%. We worked hard at the task. We explained to some clients that this was the service level we provided (which was market leading! ) and this was the price. If they were unhappy with the service we provided we could recommend other service providers. We raised prices to others, and if they were unhappy with the new pricing structure then we could recommend other suppliers. And there were some we just flat out had to say they we were unable to supply them in future and worked out a transition plan.
Ultimately we were unsuccessful. During the year, and despite our best efforts, we managed to lose only 15% of our customers. But the ones who decided to stay, stayed with the new found realisation that our service delivery and pricing were actually the best available, and that if they wanted them they needed to play by the rules.
What was the impact on the business? The bottom line was the most obvious – an increase in net profit of 25%. By losing the time wasters, the hagglers, and the bad payers, we freed up time and energy to look after our best clients even better. And we had time to go out and target new ones. Our efforts at bringing on new (good) clients was probably also helped by our competitors being bogged down servicing the unrealistic demands of our rejects.
So how does all of this relate to what we do? In the business Expedio is in – leasing buildings to tenants, buying buildings and selling buildings, we have relationships on an ongoing basis with a range of business partners. We term it that way because all of those partners contribute in some way (or deplete from it) our business performance. We have ongoing contracted tenants. We have sub-contractors who do maintenance, repair and construction work. We have lawyers, accountants and financiers we work with. And we have real estate agents who bring us properties to buy, and who sell and lease properties for us.
But if we are working with the wrong partners, or they are not doing their job as they should, then it drags us down as we expend time and energy managing their performance.
In the copywriting example, some of the warning signs (that you are dealing with the wrong client) were:
These may be specific to that industry. But then they may not be.
We know very well the number of time wasters in the buying, selling and leasing end of the industry. There are the ones who enquire about everything, and never buy anything. They want to view, and then never give feedback. Or want the information, and then won’t take your calls.
And then there are tenants who don’t want to pay on time, don’t look after the property, and have expectations beyond the tenancy agreement. I have no doubt that there are also landlords who don’t want to maintain their properties as well.
But in the contemporary economy, where much of the friction which formerly presented barriers to doing business have been removed, there is not a place for these attitudes and behaviours. That is not to say the ratbag element will disappear all by itself. They may well not disappear. But to be successful, we don’t need them in our business.
Which means the onus is on us to act out the scenario that “all business is not good business” and weed out the potential friction creators at any early stage. Which comes back initially to qualification of potential clients. We can all save ourselves both time and angst by recognising that whilst all enquirers (or responders to a TradeMe ad) may be potential clients, it doesn’t mean they are all equally as good prospects. All clients are definitely not created equal.
