A new customer of mine had just crossed the $20,000 threshold in sales YTD. As a new salesperson, it was an important number to me because that was the minimum annual spend I wanted for all of my customers, so I watched carefully to see when a new customer exceeded it so that I could estimate annual spend.
But I winced. We were quoting way too many projects for this customer that weren’t converting into sales, and the projects that were turning into sales required endless hand-holding and multiple proofs. The customer was indecisive, demanding, and impatient. And even though I was working with a “decision-maker,” it seemed every project was passed through an informal committee. They were also heavy on spec and random sample costs, so I decided to do something I rarely did: I added up the freight and sample costs YTD. The result? $20,000 in gross sales at a 38% margin resulted in $7,600 in profit minus nearly a thousand dollars in specs and random sample costs (13% of the profit in samples and specs!), plus, the heaviest expense of all: a ton of my time.
It was a crossroads moment: Was this just an investment I was making with a customer that I could improve over time? Or was this the way business would be conducted forever?
At the time, I had ranked clients as “A, B, C” with the “A’s” as most important, which was a fatal mistake leading me down a frustrating sales path. I had yet to learn that I should only be working with “A” clients and never even have a “B” and “C” list. Only VIPs. Period. Mike Michalowicz, author of The Pumpkin Plan (and keynote speaker at our skucamp conference this fall) wrote about how to cultivate only the best customers:
"When figuring out which clients deserve VIP status, you can’t just go with your gut … you want clients who have potential, who are open to new ideas, who have the money to pay you what you’re worth, who respect you, who are going places and who want to be a part of it … and you most certainly can’t wait for your awful clients to suddenly realize how great you are and turn into awesome ones. That never happens. N to the E to the V to the E to the R."
- Mike Michalowicz
In hindsight, there was also a critical problem in my sales process.
Because I was hungry for business, I acquiesced to every demand and reacted to pressure, rather than proactively demonstrating how the process would work and how the client journey should go. I inadvertently put the customer in the driver’s seat. My default position was to “win the order at any cost,” and that’s exactly what was happening. I was winning the orders at any cost.
This problem with this new customer was a microcosm, a miniature model of what happens in even the largest distributorships with six and seven-figure clients. It’s also a recurring problem because salespeople are so busy responding to customer demands that they rarely can take the time to check the profit pulse on a customer along the way.
How do we prevent ourselves from working with the wrong kinds of customers and ensure that we only work with profitable clients?
Here are four keys to help you find your focus:
“Margin is an attitude,” is what Catherine Graham states frequently. You are not merely a resource for merchandise, you craft carefully tailored solutions that deliver results for your customer, just like an agency. Knowing your worth leads to confident increases in your margin, which increases your profit, which increases your value, not only your value to the customer, but your value even in your own estimation. (One simple problem in my “A, B, C” client structure was that I hadn’t realized my worth yet, I didn’t know that I should only be working with A clients.)
Begin now to develop your own list of the characteristics that comprise a good client. Your checklist should include things like minimum margin, minimum annual spend, average order size, healthy terms, percentage of sample costs to sales, and even intangibles like the freedom to create and to be proactive with sales, plus, the ease and openness of the working relationship. Then, establish a regular review of each customer's health, I recommend a six-month review that should be done with all of your team members who touch that client’s work.
Your best work will be done with clients who recognize your value and understand what differentiates you from the pack. Double down on your unique selling proposition. One of the most chronic problems in the promotional products industry is one of focus: because you can sell anything to anyone, you are tempted to try. Renya Nelson delivered an amazing session at skucon in Las Vegas on “How to Build a Kick-Ass Brand that Attracts Kick-Ass Clients” and said, “Know yourself, know your breed,” and “pick your lane, stay in your lane.” The best brands in the business have a focus, a specialty within the industry, brands like Boost Rewards and Recognition with their focus on employee recognition, QRG with their focus on print + promo through company stores, SoBe Promos with their focus on importing, or design-focused agencies like Planet Logo. Trying to become everything to everyone means you’ll eventually be nothing to nobody.
Sketch out a rough growth plan for your ideal clients. What growth trajectory do you desire? What percentage of increase would you like to develop annually with each client? How will the working relationship mature? What categories of sales can you grow into? How will you grow laterally into other departments, working with additional buyers? No one blindly starts a new business without a plan, even if it’s scrawled on a napkin, and you should treat new customers the same way, with projections of growth and a plan to scale.
Many people who find a modicum of success in the industry will typically stay in the industry, it’s compelling, it’s fast-paced, and it pays well. If you’re going to invest your talent and time and life in this business, you should ensure that you are only working with clients deserving of your time. Finding your focus, by knowing your worth and developing client criteria and expectations ensure you only work with the most profitable clients. And it will make all the difference in whether this is a miserable slog of a vocation or a life-long business journey that you treasure.
This post is the second installment in our series, The Path to Profit. You can review the first post, The Real Business of Winning, here.