Learning to filter out your agency’s unprofitable clients

As an agency that’s looking to be profitable, it’s important to have a really rounded picture of your ‘ideal client’, so you can gradually refine the kinds of business you work with and grow a client base that you’re truly happy with.

So, how do you know which clients are the right clients?

Looking out for the negative client traits

As a creative business, you want to work with clients who inspire you – businesses where there’s a connection and where you can see ways to be innovative and create bold new ideas that fit their brief.

But the potential for innovation isn’t your only consideration when looking for new clients. There are other things that will define whether a new customer falls into the ‘good client’ or ‘bad client’ category – and that means asking yourself a few searching questions both before and after you’ve started working with a new business

• Is there a good relationship? – Working on creative projects is far easier when you ‘click’ with the client. When there’s a shared mindset and good working relationship, you can be confident that you’re both thinking along similar lines – and not fighting tooth and nail to get your ideas heard in every meeting.
• Do they stick to your processes? – If you’ve done your homework, you’ll have systemised your processes and agreed your terms re workflow and review processes with the client. If they constantly fail to stick to those processes, that quickly starts eating into your time – making the whole project unproductive and unprofitable.
• Do they come back to you quickly? – When a client is difficult to contact, or takes weeks to give you sign-off, that holds back your workflow and leaves you with unfinished, and potentially unbilled, work. And that creates problems when the client then expects their amendments ‘to be done yesterday’.

• Are they known for changing their mind? – Having a clear brief signed off is a must for a creative agency. But, as we know, some clients see a brief as a movable feast and will continue to change their mind and move the goalposts during the project – with every change and hold-up eating into your budget and profits.
• Do they pay their bills on time? – You’re running a business, not a charity, so it’s important that clients pay your bills on time. If a business is consistently paying their invoices late, or needs reminding to cough up the cash, this has an impact on cash flow – and that’s bad news for your day-to-day finances and your longer-term growth plans.
• Are you making the profit you should? – Sometimes discounting your prices to win a contract can seem like a good idea. But when your margin is low, any delays, problems and unplanned changes will soon turn this client from a money spinner into a hole that your profits slowly get sucked into.

By asking yourself these key questions right from the start of a project, and continuing to ask them as the relationship evolves, you’ll very soon start to see the clients that are making your life easier, and those that are dragging down the agency’s bottom line.

What makes a good client?

So what makes the perfect client for your agency? The specifics will be different for every agency owner, but there are some core attributes that every good client needs if they’re going to be an asset to your agency, and you’re going to be of value to their business.

• Personalities you can work with – it might seem obvious, but if you like the client, share a worldview and have a great relationship then that’s going to make everything you do on their projects that little bit easier and more fun.
• Organised and timely – clients who are slow and don’t stick to your processes just aren’t worth the bother. Your ideal client should be well-organised, happy to keep the workflow ticking along nicely and able to meet deadlines without prompting.
• Happy to listen and be advised – there are plenty of ‘armchair creatives’ out there (we’re sure you’ve met a few!). Your perfect client should have their own ideas, of course. But they should also be someone who’s open to listening to your ideas and following professional advice – after all, that’s what they’re paying you for.
• Willing to pay for the value you add – when your ideal client really understands the value you’re adding to their projects, they’ll be willing to pay for that benefit. Quibbling over fees isn’t a good use of your time, so work with people who can see the advantages you bring to their creative work – and who are happy to pay that price.

Balancing time, budgets and people

Time and labour will be two of your biggest concerns as an agency owner. And bad clients are a drain on both of these resources.

So you’ve got to be proactive in tracking and reviewing your customer base to find the clients that are nibbling away at your time and resources – and when you do, being as direct as possible about bringing them to heel, or letting them go.

As we mentioned in a previous Bristol Media blog, measuring your agency’s performance is incredibly important. By tagging the time spent, costs incurred and revenue made on each and every client, over time you’ll begin to see the trends and patterns that show you where your gold-class customers lie and where the silt that’s weighing you down is located.

KPIs to track will include:

• Average fee per client – get a good handle on your average fee level and use this to benchmark your customer base and see where each client sits.
• Hours spent per project – keep tabs on the time that’s being spent on current projects and see if each job is sticking to the budgeted hours, or if you’re missing your targets.
• Revenue per client – track what income each client is bringing in, and weigh this up against their fee, time and costs spent and whether you’re making the profit you need to.

Include these KPIs in your regular reporting and you’ve got a constant check on which clients are gobbling up your precious time and which ones are bringing in the revenues and end profits you need to meet your goals and keep on expanding.

Who are FD Works?

Here at FD Works our team of accountants and business advisors are here to help you understand the numbers behind your business and empower you to make bold decisions. Our team of experts work with clients in Bristol, Bath and the wider South West.