The loss of any client is akin to a gut punch. The cost in dollars, energy, people power and effort to secure a client is always high. The original commitment of the parties that engaged with hope and the best intention for success is not to be taken lightly. When considering the effort expended, failure is not easy to swallow.
To begin, consider four powerful ways in which losing clients impacts your business:
1. Revenue Loss: Lost client revenue increases the pressure on the business development team to try to make the annual growth goal. The earlier in the fiscal year a loss occurs, the steeper the growth mountain becomes to attain the company growth projections.
2. Profit Loss: Lost clients make the annual bottom line projections more challenging to achieve. This puts pressure on other functioning partnerships to generate higher profit – at what expense?
3. Opportunity Loss: Clients that are under a service contract have a longer-term profit margin beyond the current fiscal year. This opportunity is also lost.
4. Brand Loss: Every lost client has a negative impact on your company reputation. People talk, including professionals. The reputation of the company is its most valued asset. As it declines, so will your business decline.
Current Clients - Where’s The Beef?
The best client relationships, or partnerships, are built on the foundation of mutual value, or win-win as it is called in B2B. Over time relationships evolve, often requiring the value between both parties to be re-evaluated.
The TRUE NORTH© methodology asks business leaders “When was the last time you reflected upon your existing clients for the value they bring to your company?” And if you are not receiving the value that you need, I bet you are likely not serving the client either. This then begs the question, who’s winning? It is excellent practice to step back and evaluate your partnerships on a value scale. Do adjustments need to be made and if so with which ones?
Below are four basic questions to include in your evaluation. The outcome helps you answer the question “should I stay and try to reposition, or should I go?”
1. Profit: Is the partnership generating a reasonable profit margin for your services? How does it stack up against fair market value and the competition?
2. Advocacy: Assuming you are meeting (or exceeding) expectations, is the partner a willing advocate of your company in their professional circles, and do they serve you as a reference to prospective clients?
3. Growth: Does the partner consider you a valued strategic partner, willing to provide you with more growth opportunities at their location? Should I invest in this partnership?
4. Client Success: Is the client receiving value from your services? How do you know?
Are there any other areas of value to your company that you should include in this exercise? Honest reflection about each client will help you decide how to proceed – exit, reposition, or invest.
Too Big to Fail – the 80/20 Rule
For many companies the Pareto Principle or 80% of the revenue arising from 20% of the clients is common. Is this true for your company? If so, who on your client list comprises that 20% and what is the risk of losing one of them? What measure are you using to determine the degree of risk? Are they at risk now, as you’re reading this?
Partnership Health Assessment – an Ounce of Prevention is worth a pound of cure
Working in the capacity of Vice President for Strategic Partnerships at a Fortune 500 company, it was my job, to accurately measure risk-of-loss with a portfolio of 8 partnerships valued more than $350M in annual revenue.
As part of my responsibility, I conducted an independent account risk evaluation, or “Partnership Health Assessment”. This effort includes two distinct parts - key stakeholder meetings, and data review. The key stakeholder meetings are a critical component because business is conducted between people, and people have emotions. Emotions lead to behaviors and actions.
The Partnership Health Assessment tool provides a measurement of the overall degree of risk. Third-party facilitation is often very helpful in conducting these assessments.
As was said earlier, it is completed in two parts:
1. Stakeholder Meetings are the opportunity to gauge the human connection between the partners, not as easily measured, but measurable, nonetheless. Actions and behaviors are a byproduct of human emotions and a reflection of emotional intelligence. The stakeholder meetings should be conducted with a cross-section of people in the client organization to get a more accurate assessment. Have prepared questions. Pay careful attention to what is said, but also to voice tone and body language while engaging in conversation with the stakeholders. The meeting is also an opportunity to determine if clients are actively engaged and aware of the actual performance metric outcomes.
2. Data Review is a compilation of empirical information around performance metric outcomes for the service or product deliverables. The data should reflect inarguable measurements of performance outcomes important to client success and identify Key Performance Indicators (KPI). For the client, it answers the question “am I getting what I expected”?
KEY TAKEAWAY: Your partners don’t want to make change – it’s interruptive, creates instability and is costly. But they certainly will if issues are not attended to, and the cost of change is seen as less painful than the cost to continue. This happens every day.
Early evaluation and intervention are the path to prevent this from happening. But you can’t prevent what you don’t see.
The outcome of the Partnership Health Assessment should be shared with the appropriate people in your organization, and plans established to either course correct, or invest in growing more business.
Strategic Account Manager (SAM)
Many organizations dedicate separate positions for the sole purpose of managing and guiding the health of specific partnerships based on the 80/20 concept. These positions typically report to the C-Suite in the firm such as a Chief Growth Officer. They work closely with the team delivering the service or product. They establish strong independent relationships with key stakeholders inside the client organization. They should be highly trained in their responsibility.
When I functioned as a Vice President of Strategic Accounts, each account naturally experienced a different degree of risk while based on my evaluation. When asked about my role, I described it as representing not one organization or the other in the partnership, but rather the mutual success of the partnership and the concept of win-win. This resonated with the client and kept me focused on what was essential.
Whatever a win-win looked like; it was my responsibility to cultivate such an environment to ensure the continuation of the agreement. This often resulted in added business.
KEY TAKEAWAY - If you are a company with 80% of revenue is derived from 20% of your client base, or thereabouts, having dedicated Strategic Account Managers will pay enormous dividends to protect your business.
If your organization does not have separate SAM (strategic account management) positions, then I recommend training all account managers in these concepts to maximize account retention.
If you are one of the companies where 20% of your client base drives 80% of your total revenue, then I strongly recommend having dedicated SAM positions committed to that 20%. It will pay dividends, and you will sleep better.
3P Sensor Methodology
Scientists believe that a dog has from 10,000 to 100,000 times better sense of smell than humans. Dogs have an estimated 125 to 250 million smell receptors compared to a human’s 5 million. I can’t fathom this, can you? I was once told that my dog could smell a drop of blood in my 22,000-gallon pool! Wow! Imagine having senses this powerful?
When I was the Vice President for Strategic Accounts, part of my job was to use my experience to “sense” partnership risk. In my experience, I grew to view clients through three distinct lenses that have served me well in account management. They help me to sharpen my senses, organize my observations, and this then would shape my actions.
They are now a key foundation of the 4xi Consulting TRUE NORTH© methodology.
PROFESSIONAL RELATIONSHIPS – relationship components are critical in any partnership. The basic tenants are trust, respect, loyalty, and candid communication. If these attributes exist, almost any obstacle can be overcome - even a failure to deliver or missing payments. When the foundation changes it can be very difficult to restore, and the relationship is threatened. Account managers must pay very careful attention to professional relationships, ensuring that any misstep is redeemable.
PERFORMANCE OUTCOMES – As discussed above, partnerships typically include Key Performance Indicators (KPI) that should have been co-authored to accurately reflect the measures for client success. These are the measurable deliverables as expected by the client.
PERCEIVED PERFORMANCE – As the saying goes, “perception is reality”. It is challenging to reveal how the stakeholders feel about your company. “Are you easy to work with”, or “are you responsive to their special requests”, “are you highly knowledgeable of my organization and invested in my success” are three examples of human perceptions that you work to uncover during stakeholder meetings. Unresolved negative perceptions increase the risk for loss.
Risk Indicators or Red Flags
Seeing risk before it becomes unreversible is essential to preventing losses.
If certain risk factors are not addressed early, the ability to mitigate or change the course becomes almost impossible.
There are some obvious “red flags” that account managers should activate their sensors and be prepared to act upon should they occur.
Red flags may also be opportunities to strengthen the bond with your client.
Some examples to look out for:
Changes in your team, particularly those closest to the client.
Changes in stakeholders within the organization.
Restructuring or reorganizing inside the client organization.
Acquisition of the client’s company.
Unplanned fiscal challenges your client partner encounters.
Changes in the marketplace your partner does business in.
Obvious stakeholder behavior changes.
Change can be positive or negative. Not everything that happens is within our capacity to control. At their core, partnerships are human relationships that naturally experience ebbs and flows. Healthy growth certainly requires change.
The professional strategic account manager has a highly developed ability to see changes that may be a threat or maybe an opportunity. They use their skills to influence change. They leverage their experience, emotional intelligence, and knowledge of human relationships to be alert to risk or opportunity.
To learn more about 4xi, strategic account management, and TRUE NORTH© you can contact Ed directly at edsnowden@4xiconsulting.com or visit our website to learn more about who we are, what we do, and how we inspire a brighter future, together: www.4xiconsulting.com
ABOUT THE AUTHOR
ED SNOWDEN Strategic Business Consultant
Sales Growth and Client Retention Ed has over 45 years of progressive growth in leadership responsibility at two Fortune 500 management services and hospitality companies: ServiceMaster and Aramark.
At both organizations he was regularly promoted based on his performance and was awarded several awards in both sales and operational roles.
As Vice President of Operations, Ed provided leadership for a hospitality team of over 500 people and an operating budget of over $60MM which he successfully renewed for five years. He has extensive experience in a multitude of business capacities including strategic account management, sales, and growth leadership.
As Vice President of Strategic Partnerships, Ed was responsible for cultivating professional relationships for the company’s largest healthcare clients in North America valued at over $350MM annually. In that role he assisted in the writing of a living Strategic Account Management Playbook.
At 4xiGlobal Consulting, Ed co-authored the TRUE NORTH© Strategic Learning Academy centered on creating a new mindset for developing and retaining the best business partners, winning better, retaining better business.
4xi Global Consulting & Solutions is a team of talented leaders from both the client-side and service provider side, impacting the Human Experience (HX) for people at work, in education, rest, and at leisure.
We believe in a people-first, experience-led philosophy. Whether client, employee, or guest – their experience is the fundamental foundation of success.
We work with corporations, service providers, and innovators:
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Evolving Experiences© - Employee (EX) & Customer Experience (CX)
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Explorers Innovation Directory: Gateway to Innovation
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4xi is proud to be Chair of WORKTECH Academy for North America and a member of its Leadership Advisory Board. 4xi is a Global Ambassador for WORKTECH Academy.
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