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A "client concentration" problem refers to having a single related source of work representing more than 25% of your gross profit (fees + markup income). That's usually the point at which the yellow light should blink on your financial dashboard. That same light should blink red if it moves to 35%, because my research shows that to be the median at which one-half of firms fail. In other words, one-half survive the loss of a client that represents ca. 35% and the other one-half fail. Maybe not immediately, but they can usually trace it back to that point if they were not prepared for it. This is meant to prepare you for it.
You either had, have, or will have a gorilla client. Don't be afraid of it, and don't say "no" to the work. A problem like this almost always comes from something great you've done and you deserve the accolades in the form of even more work. Don't get a huge head, though, because unusually high spikes in your top line revenue typically stem from a client concentration issue and not unusual and sudden strong new business skills.
First Step: Honesty
When I talk about this to clients, the first thing they always say is this: "Yes, but all this related work is coming from different departments, and even different contacts in the same department. In fact, they hate each other and we'd probably get more work if we lost one department!"
That's bullshit, if you'll pardon me, because it assumes....Read More >
There are thousands of tools for social media, and only a few dozen that strike me as useful. One of those is Tweriod, which analyzes your Twitter account, including when followers are most likely to interact with you, and thus when you should post. Best of all, it will auto-populate your account at Buffer, building the schedule for each of your accounts accordingly.
Click to download a 9-page PDF of the data from my account to illustrate what you'll see.Read More >
I had trouble getting to sleep last night, and for some reason I started thinking about how managing client relationships has changed over the years. I'm not talking about my clients, but your clients. Do you know the really important things about how to do it right? I'm not sure i would have figured all these out, but I have paid attention to the hundreds of firms I've worked with and tried to cull out the best practices that have been proven in the field.
Just for fun, I started writing these down as they came to mind in a stream of consciousness style. Here are a few of them:
- The only power you have in a client relationship is to withhold your expertise.
- The degree to which you have power in a relationship is directly related to how long it takes to replace you.
- There are only two ways to have more opportunity than capacity, which represents your ability to say "no" to prospects and clients: create more opportunity or reduce your capacity.
- The most important criteria in evaluating a prospective client is whether or not they've used a firm like yours before. Never be the first.
- Your cheap ass clients are the ones spending their own money. You want to work for clients with budget authority over someone else's money.
- The clients who trust you say: "I have $140,000 for this project. What's the most we could do with that money?" The ones who don't trust you say, "Here's what I need. What will it cost?"....
A great client recently asked me to outline my definition of success for their firm. I really enjoyed doing that, and below is a version that you can adapt to your own situation, putting your own stamp on it:
- Partner compensation equals or exceeds industry benchmarks.
- After that is achieved, you still 20% net profit.
- The more entrepreneurial employees are satisfied that their contribution to your gain is recognized and accounted for.
- Partners and employees in key roles will have already tasted competence in the area of your focus, or they will experience it within nine months of joining the firm.
- There will be few or no young employees who value variety over expertise.
- When employees talk about your firm, while still employed, their private comments will be complimentary.
- When partners and employees head out the door to work for the day, they look forward to the challenges, the companionship, and their participation in the overall culture.
- As a firm you will not require extraordinary people....
I was recently working with a firm under our new "Come to Nashville" program for a day and we were doing long-term planning, mainly, but with an eye on how that might impact the short term. I came up with some questions that turned out to be very helpful as they took a break from the continuous crazy days we all have, and then answered them honestly and seriously.
- How do you feel about the current positioning of your firm? If you could waive a magic wand and change it (without regard to current employees or clients), what would your positioning be?
- What are your biggest fears in just pursuing that positioning, even if it means doing so alongside your current firm and maybe even doing it all alone without employees?
- If I watched you on a typical day, would it look like you are taking care of clients or would it look like you were taking care of employees (who would then take care of clients if you did your job well)?
- Who are the two weakest employee links who probably should be dismissed in the near future?
- Who is the most talented person at your firm who is disruptive to the culture? Are they on the list, above, of people to dismiss?
- You likely started this firm to create an environment for yourself that allowed for more freedom, control, and money. Now that you have built it, to what degree are these three things true?...
I seldom give up my 17,000-person blog platform to guests. Keeping your attention is important and my primary marketing tool. But, I read a blog last week that Mark Busse wrote, and I thought it was brilliant. I'm sharing it here with his permission:
Rushing into starting your own design business can turn a dream into a nightmare.
Recently I heard from two former students of mine. As they entered the industry a few years ago we had some honest talks about their options, and against my advice they decided to skip internships or junior positions--which they felt were both beneath them--and went into partnership together with another classmate to form their own design studio. After some early success working for friends and family, their studio quickly fell into chaos, the partnership dissolved, and the company folded, leaving their clients in rough shape.
I'll spare you my story of how running my design business has still not brought the freedom, flexibility or financial reward I'd hoped for after 15 years--and I have a business degree--and how I often miss the days of just working for someone else. Instead, let's talk about how lazy, short-sighted and dangerous starting your own business can be.
You heard me: lazy, short-sighted and....Read More >
Forgive me for the ominous subject line of this email, but there are times when it's best to be objective and forthright. I've been talking with the executives of large associations and educational institutions in this field, hoping they'll drop the status quo and beginning offering real help to their members and graduates. So far I've made very little progress, so I'm just going to use my own platform (16,000+ of you).
Look around, think back through the last decade, and make a mental list of the firms you knew that are no longer around. Did any of them fail for lack of creativity? Even if you don't think they were that creative, the answer is a resounding "NO". Here is why those firms--and possibly yours, if you don't listen--will cease to exist, in descending order. I'm going to list seven reasons firms fail, and then seven things to keep a very close eye on.
What to Keep An Eye On
I'm 51, so I figure I'd better get this right pretty soon. :) I think about this a lot, though. The common thread through the last 25 years, though, is that I've worked for myself. That's a lot of years without a safety net, and it's also a lot of years to learn habits that would make it almost impossible for me to work for someone else.
About 20 years ago, though, I put together this list. At the time, I felt like most of my life was ahead of me and that I wanted as many options as possible. So there's very different from each other, and it was just me dreaming one day:Read More >