I read about an insurance company that lets new clients fill out a form to determine their risk profile. After the assessment comes in they pass on the most high risk ones on to a competitor. They literally recommend a competitor to the prospect.
They do this because they understand that a Client Filter helps you decide which clients to work with instead of having clients do the choosing. When I started my first consulting firm, my plan was to give small business owners the same services that big corporations were paying for but at a lower price.
Many consultants will tell you that up to 90% of their revenue can come from referrals. This is great because of the goodwill that comes with it. This is having clients choose you because of the goodwill you have circulating in the marketplace.
What they don’t tell you is that you need a client filter to help you choose opportunities.
No one told me this when I was starting out. If a client asked for a meeting or wanted to work together because they had seen my portfolio, I would immediately jump at the opportunity as long as it paid well and I could do the work.
Thirty or so clients later, I did an appraisal and realized that only about 40 percent of those deals were worth it. I learnt that successful business people don’t just let clients choose them. They have a filter that sieves through the leads and selects the best ones.
The way to think about this is to take every new opportunity or client as an investment.
Great investors have a list of businesses and industries that they are willing to invest in. This takes out emotion and reactive thinking which many times leads to bad decisions. The Greeks call this Phronesis. It is having a mindset that lets you make the right decisions every time.
My personal Phronesis on this topic is to only work with the owner of the business or the one who makes the decisions. I added this to my filter because many times a consultant will be hired by a client and passed on to the CMO. The CMO usually has a chip on her shoulder because you are being hired to do what she should have done.
Secondly, I will only work with clients who have some skin in the game. It’s like the Pig and Chicken fable.
A Pig and a Chicken are walking down the road.
The Chicken says: “Hey Pig, I was thinking we should open a restaurant!”
Pig replies: “Hm, maybe, what would we call it?”
The Chicken responds: “How about ‘ham-n-eggs’?”
The Pig thinks for a moment and says: “No thanks. I’d be committed, but you’d only be involved.”.
Investors will tell you that investing in a startup that has traction can outperform investments in a startup that has no traction by 100x. Many investors will not give money to an entrepreneur who has a full-time job because they feel a backup plan erodes commitment.
I agree. Focus is one of the easiest ways to innovate.
When I started out in business, I would see so many opportunities that I thought I could make money from. I would buy domain names immediately I got a new idea without doing any keyword research and market segmentation. I once travelled for hours to see a farm with hopes of starting a business with a friend. The problem was that I had little to no expertise in agriculture at the time and I only liked the idea because it would make a lot of money.
The morale of this story is to only work on things you are uniquely equipped to succeed at.
Your client filter should answer the following questions:
- Which clients am I equipped to help the most?
- What kind of clients are a waste of my time?
(For eg. I personally will not work with clients who sell alcohol or tobacco. I know of business people who will not work with clients whose businesses require them being away from their families for an extended period of time. Define these parameters in advance.)
- What is the lowest amount of money that I will take for this kind of work?
(Have a minimum amount that you are not willing to compromise on no matter what. You will never have to complain about wasted time.)
Have this written down somewhere so you can refer to it every time an opportunity presents itself.
It will take you seconds to make a decision while others ponder over it for hours and even days.
P.S.: Always leave room to check your spirit or gut. No set of parameters can replace that.
What parameters are in your client filter?
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