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Managing in a Downturn – Part I – Existing Client Management

January 7, 2009 1 comment

A company for whom I used to work spent, in one year, an average of $40,000 per customer acquisition.  Assume labor margins run 45% (on the higher side in our space when you factor in management salaries), and you quickly see that the first deal with a new client has to be about $89K in services just to break even.  Whereas, the next deal with that same client will cost…anyone?…Buehler? 

Well, not quite $0 but certainly less than the fully loaded cost.  And, before anyone gets up in arms about $40K being excessive, do this math:  Take the total cost of all sales salaries/taxes/benefits/401k Match (including sales operations), add to it commissions, add to that marketing and advertising (including any SEO, click through, site maintenance costs, etc.).  Add to that all direct selling expenses (meals, airline, mileage, social events, football tickets, etc).  If you are owner operated, don’t forget to allocate a portion of your compensation based on time spent in selling and marketing activities.  In essence, total all costs spent to bring your company to the attention of a new client.  Divide that total by the number of new clients acquired in the year.  Do it for the last three years.  Prepare to be shocked. 

With that point made, its clear your best source of new, higher margin, revenue is existing clients.  And, in theory, you’ve served them well in the past so you should have a leg up in selling them additional services in the future.  The question becomes, how do you do it?  Here are my suggestions, based on the assumption that the services team will own this effort rather than having the luxury of an existing client sales force.

  1. Rank your Clients:  Identify your top X (10, 20, 100, etc.) clients based on a combination of past revenue production, client size (gross revenue, employees, desktops, etc), and your best guess on the total opportunity size in the next 12 months.  You’ll have to determine the best way to weigh the components in the ranking scheme (and how you rank them), but you must get it to a simple A (“we need to talk to them right now”), B (“we need talk to them this year”), or C (“we’ll talk to them when we’re done with everyone else”) scheme. 
  2. Assign Account Owners:  Assign someone to own the call plan on each A account.  For B’s, discuss them only after you have started execution of a call plan around the A accounts.  The people you assign should be senior project managers, directors or the equivalent.  More importantly, they should be capable of talking about the client’s business, understand your value prop, and have the requisite knowledge and experience to pace through the following steps.
  3. Develop a Q1 Contact Plan:  In Q1, meet every A client.  Ask to meet you primary contact, but also ask to meet with related business owners (esp. if your focus is CRM, ERP or any other business related app).  In the meetings, don’t sell, listen.  Ask them about what challenges the coming year will bring, ask about the current business plan, ask them about what they fear in the current economy.   
  4. Meeting Follow-Up:  After the meeting, deliver a brief document that both outlines the meeting discussions, but also presents 3 things you can do to help them with the business challenges they have in the coming year.  Meet with the same team to present the follow-up plan.

The point behind this is simple: target your services to their business challenges rather than just trying to sell them “stuff you do”. 

In my current company, we actually have the benefit of an existing client sales team.  One person in particular, is VERY good at getting client meetings where she simply asks “How are we doing, how can we do better and how can we help you?”. She almost always takes a PM, Director or Senior Executive with her so as to have a technical resource with her to add immediate value in the discussion.   When combined with disciplined follow-up, its amazing how well she does at mining new opportunities our of her current account list rather than having to chase down new, expensive accounts.

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