One of the best pieces of business advice I was given a few years ago was about firing clients and defining an ideal client.
When people are new to an industry, they often want any clients. We all have to live, and put food on the table, after all.
I was the same. I wasn’t picky before. And that is fine for the first few years, but over time, it makes sense to become more selective.
Some of the most successful businesses in the world, after all, reject certain clients. Some of the best nightclubs refuse to enter people with certain dress codes.
Many companies are not flexible on price, for example lawyers and the fees they charge.
Some companies actually fire clients. They cause too many problems, break too many rules and abuse a previously trusting relationship. They take up too much of your time, for little reward and payoff.
Beyond that, going into business in any industry, a company and individual needs to picture their ideal client and be brave enough to say no to those that don’t fit that ideal.
For me, who are my ideal clients? Here is a list of what I look for in clients. If clients don’t meet these criteria, I refuse the business, as they will cause too many problems:
- They are focused on the long-term. They aren’t short-term investors. At least 5 year horizons. 10 years+ is ideal. A very long-term relationship lasting decades is most preferred.
- They have at least $500 a month or $35,000 as a lump sum to invest — soon to be raised to $40,000.
- They are not cynics. This excludes many lawyers, journalists and several others who assume the world is a dangerous place, full of scams! It is human nature to like people who are more like yourself. I don’t assume the worst. I don’t read every piece of small print. The reason is simple; my time is money and most people are intrinsically good. I tend to be most skeptical about how the media makes us all skeptics! Research has shown that if you lend money to a complete stranger, there is a 80%-90% chance they will pay back. The average person assumes the chance is only 50%. Crime is falling in most countries, but most people assume otherwise. The point is, the very worst cases like scams are 1% of total cases. People who assume otherwise before they are in, just cause more problems when they are clients.
- They understand the value of doing things online. Most face-to-face meetings are a waste of time and money. Things can be done cheaply and more efficient online.
- They realize location isn’t important. This is linked to points 3 and 4. Somebody who is overly cynical likes to deal with somebody they know — maybe at the expat bar or another location — even if they deep down know better options may exist. This is the better safe than sorry idea. My ideal client understands the value of saving them time and money, by doing things online
- They realize how you dress isn’t important. Pointless meetings, ties and business cards should have been discarded in the 1990s.
- They realize the importance of time — they are proactive. They realize, in the words of the both Dale Carnegie and Sir Alex Ferguson, that if a decision is to be made, it should be made quickly. As soon as they have enough information to make a decision, they make it decisively, just like I do. They don’t procrastinate and think about things for weeks — also known as analysis paralysis.
How about you and your industry, who are your ideal clients? Who causes 80% of your problems?
Being selective about these problem clients by refusing to take new ones in the first place, will solve many of your business problems.