Understandably, many firms have responded to difficult market conditions by stringent cost cuts. In many cases of course, this will have been appropriate.
But what drives the future health of firms? When you get down to basics, it’s the ability to generate sustainable and growing revenue from larger numbers of (more) satisfied clients. Without this, you don’t succeed. So, future vitality depends on more than cost cuts, but thoughtful investments in the right areas in business development, marketing, and client management. Investments that pay a return – and indeed, help you to make other investments wisely.
This short article gives an overview about where firms should concentrate their efforts, if they wish to sustain and even grow revenue. While an upturn may not be far away, focus and discipline will be needed for an environment which may look very different from that of 2001-2007.
How do firms determine the wisest strategy and the marketing tactics worth spending on? And, given the situation many firms find themselves in, how can they compensate for a drop in revenue in some areas of the business?
There are 3 key aspects. These are reviewing the client portfolio, understanding key opportunities and needs across your clients, and effective client relationship management.
Reviewing the client portfolio
Analysing the client portfolio is a key discipline which many firms forget. Here it is worth starting with the well-known 80/20 rule, and thus identifying those clients that make up 80% of revenue.
You should link this with other elements of your strategy. For example, which clients (and indeed sectors) represent the greatest potential growth over the next 3-5 years?
Review those where you are perceived as the main firm used, and those where you are at risk of losing (or have lost) the relationship. Why did the relevant clients fall into these categories? Learn what enabled you to become the main firm, and replicate this where you can across other key clients.
Are there clients which have a particular need for specialisms you do not currently provide them with? Are there some clients where you feel you have not gained your “fair share” of profitable business?
By doing this, you should create an initial view of the specialisms and sources of revenue with the most demand in the short and medium term. In which of these do you have a credible capability, and in which can you quickly build it? This can enable you to compensate over the reduction in revenue from some services. But this of course requires that you have identified what is needed by the market, and how your firm fits these needs.
If you don’t identify what your market really does want, then you increase the risk of spending marketing (or indeed any other) budgets unwisely.
Understanding key opportunities and needs across your clients and markets
Clients are rethinking their own plans, and accordingly their needs for services from firms are changing.
The only way to tap into this is to have an effective dialogue. When clients are asked what the firm could do to enhance its chances of being used for more work, often the response is “understand our business more” or “build a deeper relationship with us”.
Some of this is through client relationship management. However, all firms genuinely wanting to sustain and improve financial results should consider the use of client and market research. When properly done this can identify key areas of growth, and how to secure this. Independent researchers can ask questions of clients or prospects which are difficult for the firm or client partner to ask.
You should consider client research if you would like to:
- Identify opportunities for further work from key clients
- Improve your approaches to cross-selling
- Improve the effectiveness of marketing, business development, and client management efforts
- Generate more revenue
- Minimise client loss (in one recent case, 25% of a major practice’s revenue was “saved” through client research)
- Understand client and market knowledge of your firm and specialisms, and identify the key ones you need to promote more effectively
- Understand which specialisms and services have the greatest short and medium term potential
In this, you shouldn’t forget referrers and the impact they can have in boosting your revenue. Make sure that the research you conduct identifies the likelihood of you firm being recommended, and any “hidden” opportunities in your client or prospect base.
Put bluntly, a key outcome of the research should be “how can we gain more business?”. The insight gained should allow you to begin to improve results very quickly.
Effective Client Relationship Management
Firms who have invested in client relationship management and indeed, have a clear vision about how it will be carried out, report they have achieved the following improvements – both in direct financial terms, and in the overall health of their practice:
- Increased turnover
- Far higher growth of revenue from key clients
- Greater revenue momentum from key clients
- Fewer complaints/better relationships with clients
- Significant reduction or complete ceasing of client loss
- Increased ability to cross-sell
- Increase in staff satisfaction
- Improvement in communication between people, across functions and offices.
Clients include elements such as keeping them informed of progress, and rapport with the team and the key contact as key to their continued usage of a firm. So firms need to manage these to lessen the risk of losing key clients and painful losses of revenue.
Think about the measures you adopt. Should they include your share of the clients business, whether you are viewed as the main firm they use, or reducing the extent and risk of client loss?
Also, defensively, ensure you have a “client retention strategy” which has identified all significant clients where you are at risk of losing business. And, work to not only identify actions to reduce this risk, but set accountability and deadlines for when they will be done.