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How To Identify Good Clients (and Avoid Bad Ones)

Peter Drucker is one of the most influential business writers of the last century. His ideas have shaped the ways we conduct business today. One of Drucker’s main ideas was the notion that without a customer, there is no business. Furthermore, customer satisfaction is the key to the success of any business, or in his words: “The single most important thing to remember about any enterprise is that there are no results inside its walls. The result of a business is a satisfied customer.”

To that, I say amen. Here’s the tricky part, though: satisfying all of your customers is simply not feasible unless you choose the right ones and let go of the rest. How do you do that? First, you have to setprinciples for identifying good customers. Then, evaluate potential customers against those principles, and bid farewell to those who don’t measure up… yes, even if you currently work with them.

Crafting Your Principles

The quest for good customers starts early on. It starts with deciding who your ideal customer is. Different companies have different ideals and cultures, and a variety of parameters are important for making this decision.

Here are the parameters to consider:

  • Size
    What sizes are the companies you have enjoyed working with? Do you prefer to work with small family businesses or large corporations?
  • Budget
    What is your minimum project budget? Will you take on a project with a tight budget if the customer is strategic?
  • Payment schedule
    Would you agree to receiving the full payment at the end of the project? If not, what’s the minimum up front that you require? This is often a pain point for small businesses and freelancers, and I strongly recommend following a harsh rule here with no exceptions.
  • Technical knowledge
    Are you willing to work with a customer who has minimal technical knowledge? How might this affect the outcome of the project?
  • Project dynamics
    Are you looking for a customer who will just give you the requirements and then wait for the deliverables, or would you prefer a more engaged client? On projects in which you collaborated with the client daily, were the results better or worse than those of projects with less interaction?
  • Length of relationship
    Are you interested in one-time gigs or a long-term working relationship? If you are thinking long term, estimate whether a particular customer would have enough projects to sustain that.
  • Personality fit
    What kind of people do you like to work with? Check with other companies that have worked with your prospective customer to find out whether there were any personality clashes during their projects.

Qualification Is Crucial

If you get this right, you will gradually see your customer relationships improve. More importantly, you will be less likely to wake up asking yourself why you are working on your current project.

To keep it simple, I’d recommend a total of four to five principles; but as with everything, tailor it to your own business. One effective method I have found is to set your principles in a spreadsheet, rank them, and then decide on a cut-off average for qualification. This is a great tool for identifying deals with higher average scores or for deciding between two potential deals. We’ve prepared an example of such a spreadsheet (Excel Spreadsheet).

A simple and efficient way to determine whether you’ve ranked your principles correctly is to look at past projects and make sure they align with your cut-off average. Specifically, make sure that past projects that really sucked get a low score, so that you avoid taking on similar projects in future.

Don’t be afraid to share your principles with potential customers. Some might show flexibility. A few years ago, when I approached a freelancer for a potential design project, he made it clear to me that he would charge 50% up front and 50% upon completion of the project. I told him we couldn’t accept such payment terms. He immediately wished me luck. You know what? I was so impressed by his confidence that I called him back and hired him anyway.

Self-Qualification

The qualification principles are important because they can also be a great time-saver. I call this self-qualification. The idea is simple. Now that you know what matters most in your relationships with customers, you can signal that on your website, filtering customers who you would never want to work with.

For instance, you can be clear about the prices you charge and the projects you’ll take on. Read this beautifully crafted message from Forty:

“We try to avoid very small projects (under $10k) because our process doesn’t work well at that scale. Likewise, we also pass on very large projects (over $300k) because they’re just not much fun to work on.”

via: http://www.smashingmagazine.com



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