So how do you segment your accounts?
What do you mean Ronan?
Well, when I look at your total business, I can see that you are generating 56% of your sales from your top 20 clients. Now you have 532 clients. So 44% of sales is from 512 accounts.
Yes, but I don’t understand the question, Ronan.
Well, every time we meet you update me on your week. And it would be fair to summarise your reaction as frustrated, stretched and reactive. Your too busy to handle everything.
Yes, we are snowed under.
But, you are not happy with your margin?
No, Ronan, the bottom line is not where I need it to be.
And if I said to you that you were losing money in your bottom 30% of customers. What would you say?
I don’t know the answer to that, but I would guess you are right.
What if I told you that those 160 accounts represent 4.2% of your total sales.
Seriously?
Yes. And my understanding is that your sales team call on every account every month at least.
Yes
Did you know that it would cost the business roughly €275 everytime a salesperson calls on a client? So, every year the direct cost of servicing that client is €3,300.
Is that true? Really?
It is not the full cost. It doesn’t factor in delivery costs, product costs, service and support costs. I estimate that you are losing money on each of those 160 accounts. And it is significant. You are generating good margin from your Top 100 accounts. But it is being eroded by the bottom fishers.
I’ve never seen it that way, Ronan. But what are you suggesting?
Why don’t you actively close unprofitable accounts?
Are you joking?
No, I’m deadly serious. What if you closed all of those accounts immediately. It would impact your sales volumes by 4% over a year. But you are growing at the moment by 9% a year. So you could absorb it easily. Best of all. You will have a more profitable client list. And you have freed yourself up from a problem. I’ll bet that those 160 accounts are among the slowest to pay. And quickest to complain?
Oh yeah. Big time. I have a pain in the arse dealing with at least 20 of those. They are nothing but grief.
So, why don’t we segment your customers into high profit, medium profit and unprofitable? And weed out the unprofitable. Then we can profile the most profitable clients and build our Sales Process specifically to address their needs.
You mean fewer clients?
Yes but more time to find new clients that we want to work with.
Sounds too easy, Ronan.
No, it won’t be easy. It will require a lot of courage. Huge levels of discipline. And some emotional goodbyes. And your sales team might be resistant.
Yes. But, the potential upside is very appealing to me Ronan. We are too busy to manage all of these accounts properly. And I’m sure the sales team would prefer to work with fewer clients who generate more revenue. There must be a win-win in this for everyone. I’m going to take a look at the numbers in more detail with our Financial Director.
Great and when you are ready to take some action, we can start to work on segmenting clients. And how best to serve each segment.
Perfect give me one week. Then we can talk again. Thanks, Ronan.
Regards Ronan
Call me on +353(86) 7732201
Ronan Kilroy | Insthinktive Sales Leadership Ltd. | Blanchardstown, | Dublin 15, | Office 01 8220523
More Sales, More Consistently, In Less Time
