High-Value Clients and the 80/20 Rule
The 80/20 rule, otherwise known as the Pareto Principle, is a business principle which states that 80% of your results come from 20% of your effort. The principle can be applied to your clients as well: 80% of your work comes from 20% of your clients. (And, incidentally, 80% of your problems come from 20% of your clients, although clearly not the same 20%).
Not just any clients, but the best clients
If the Pareto Principle holds true, it pays to take some time to focus on the best 20% of your clients;those who bring you the best work and the most revenue. You want your best clients to keep coming back to you when they have a legal need, and you want them to refer you additional work. But for that to happen, you must ensure that lower value clients are not getting in the way or taking the place of your most desired clients.
If you have not analyzed your client list, now is the time to do it. Identify the individuals, businesses or industries that give you the best work and the largest revenue. Concentrate your marketing and business development efforts on attracting more of those kinds of clients specifically. Don’t make the mistake of thinking that being busy is the same as being successful or profitable.
Eliminate lower value clients
To make sure you can focus on your best clients, you also need to identify the bottom 20% of your clients. These are your least favorite people to work with, those who give you the most headaches, whose matters are worth less, who fail to pay on time (or pay at all), etc. Not only do you want to make a concerted effort to keep more of those kinds of clients from coming into your practice, but you also may want to consider actually firing some of your existing clients that fall into that bottom percentage.
Bad clients drive out good clients. If your practice is filled with clients who don’t value your work, who are price sensitive, or whose work you just don’t feel like doing, you won’t have room in your practice to take on the kind of work you really want. And you’ll shortchange your existing high value clients because you’ll be focusing on the ‘problem’ ones instead.
Getting rid of bad clients makes room for you to take on those whose work you enjoy doing. An added bonus: usually your higher value clients will be less price sensitive. That means that you can make more money with fewer high value clients than you can with high volume practice filled with lower value clients.