Are you spending your time with the right customers?

Many commentators quote The Pareto principle (also known as the 80/20 rule). For example, 80% of our income comes from 20% of our customers or 20% of your people will be responsible for 80% of the businesses output.

Do these numbers equate for you? If so, are you spending your time with your key customers?

How do you decide if a customer is a key account for you?

Two measures commonly used are the percentage of Sales Revenue and the Desirability of the account to the business.

Your desirability for an account is likely to be a combination of Motivational and Hygiene factors. Motivation factors such as the relationship, recognition, margin, potential, opportunity or prestige considered together with the hygiene factors such as whether they are a good fit for your business, they pay within your terms and are consistent to work with.

A key account is likely to be one that is both highly Desirable and also a High percentage of Sales Revenue.

If the customer is both undesirable and low in sales revenue percentage, then they are unlikely to be the type of customers you desire and possibly a nuisance.

If they are not desirable customers but return a high sales revenue then the relationship is one that is necessary and usually managed on a basis. If the customer is desirable, but returns a low sales revenue, then this is a relatioship that you may wish to retain and develop for future opportunties.

It is always an interesting exercise to assess your customers with such a model. It will bring benefits when in situations such as sales meetings or negotiations, it will help you allocate the right resources and also help establish clarity about your customer portfolio and ideal customer profile.

The ideal customer profile is one of the areas we cover as part of our Business Improvement Programme.

Sage Accountant Partner Logoiris kashflowFreeagent