How often as an entrepreneurial CEO do you get caught chasing revenue? I know I did. For a long time I had the mindset that revenue would correct profitability and take care of all sorts of problems. Some times a bit of additional revenue can help profitably but rarely that’s the case.
Many companies are trying to hire right now to service increased demand. Which may make sense. But what most aren’t doing first is, following the Top Grading Process put forth by Brad Smart for customers. The Top Grading premise is that having more A-Player team members will reduce time to manage, payroll costs, and help your company win more in the market.
“Good is The Enemy of Great”- Jim Collins
What most companies miss is applying the same process to customers before adding more customers or employees. I recommend companies do this once a quarter or more often depending on the pace of growth.
It’s really simple. Below is the matrix. Take your customer list, if theres more than 50, you will need to group by customer type. Have your CFO or controller run a waterfall graph of client profitability then with a broad range of people that work with the clients including client service/technicians, sales people, A/R person, CEO, and COO for example to place the clients based no where they fall in the matrix. No customer can be more than one grade. So as a team of no more than 6, identify where these customers fall, then take the actions below.
For A customers, create a plan to find more. What makes them unique? What specific needs do they have that you all fill?
For B customers, find ways to increase profitability or ease of workability with the team. This can be done typically through conversations with those in charge.
For C customers, it’s typically best to let them go to a competitor. They are killing profitability and making your team miserable.
While doing this process, keep the 80/20 principle in mind. In that typically 80% of your customer headaches come from 20% of your customer base.
If you’d like support top grading your customers, reach out!