Client tiers are important! Not just for small businesses but also for large companies, but many times people forget about tiers.
It’s a great tool to keep you focused.
For this article, I’ll use a hypothetical one or two partner suburban accounting practice with 600 clients as an example. Let’s assume that there’s likely to be about 4 tiers (or value categories) of clients in this example:
Tier 4: about 60% of clients contribute less than $1000 a year to the practice – 360 clients
Tier 3: let’s say about a third contribute $1,000 to $5,000 per year in fees – 198 clients
Tier 2: say 5% provide between $5,000 to $10,000 a year in fees – 30 clients
Tier 1: a handful (2%) will generate more than 10K per annum to the practice – 12 clients
What are the reasons for setting and defining client tiers? What do tiers show you?
Reason 1: Tiers highlight where to spend your time to maximise revenue/billings
Don’t let smaller (lower tier) clients hijack your time and resources. Delegate to someone (less expensive than you) to manage, decide whether you can grow them to a higher tier, and if not, cull. I realise that small clients can sometimes become very large, but not all of them. Tiers help with your selection process and show you where you need to focus your time.
Reason 2: Tiers highlight resource requirements for managing large numbers of clients
You can’t manage all your clients directly in a productive and effective way, if you have a lot of clients. Top tier clients demand face to face management and attention, and access to the CEO/MD/Managing Partner when required.
If you have many low-end clients they still need attention, but this may be better delivered via phone with telemarketing specialists or with a support team, rather than accountants as in this example.
You don’t necessarily want to forego the revenue from these smaller clients, but you don’t want these clients to cost the business money either.
Reason 3: Tiers will keep you aiming higher
Without knowing what your client tiers are now, you can’t aim higher tomorrow. You can grow your business significantly by continuing to focus on how to push the limits of your top tiers, and move away from the low-end tiers.
If your top tier today is $10K plus, make it a goal to have top tier clients worth double that next year. Then today’s tier one becomes tomorrow’s tier 2.