Why More Isn’t Always Better For Small Businesses

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by Jeff O’Hara, author of “Have Fun, Fight Back, and Keep the Party Going: Lessons from a New Orleans Entrepreneur’s Journey to the Inc. 5000“

When we first started our corporate events business, we jumped at every new lead that came in the door, hungry for revenue and resume building opportunities. This was great in the short term, because we didn’t have anything else competing for our time. But time is a precious resource, and one that is not renewable. As our company moved from start up mode into growth mode, our lead-chasing  became a hard habit to break. After all, who wants to turn away business? And all of our clients loved us!

So certainly more loving clients is a good thing, right?

More is not always better.

More of the right kind of clients is a good thing. The kind of clients that drain your resources – especially your time – and don’t provide the relative amount of profitability are a hindrance on your growth. And when you are growing fast, your time and your human capital are at a premium. Continued growth will depend on how well you steward these resources of time and human capital.

In our business of corporate and incentive travel, an enormous amount of labor goes into creating a sales proposal that is customized for each client’s specific objectives, and in many cases that cost isn’t considered when the client looks at your value proposition. They look at what we charge for full service compared to what they can piecemeal on the Internet. Certain segments of the market are high maintenance and low margin, and others understand the value that business events companies bring to the equation and understand the costs involved with that.

I made a decision to identify the market segments that understand our value and are willing to pay for it, and to focus our sales efforts there. We would not pursue any players I identified as low margin, and, if they came looking for us, we would politely decline to bid on their business. This was not always well-received. However, in my view, if I approach a provider and they tell me they don’t want or cannot take my business, they have saved us both time.

Here are just a few ways I use to identify whether a client is probably the right client for our business:

1. Client knows what they’re looking for.

Clients who know what they need in a service provider will do research before sending a request for proposal (RFP), narrowing it down to two or three companies at most that are the best potential fits for them. When that list is longer than three, you know they have not done their due diligence and they may simply be looking to do just that in speaking with you. That’s not a good use of your time.

2. Client is open to hop on a phone call with us.

Every event is unique, and the better our business understands your goals and objectives, the better our proposal will be. If you can’t take thirty minutes to discuss it with us, you are likely just shopping price.

3. Client’s budget is realistic.

This speaks for itself. We are a high-level service provider, and we will never be the low-cost provider in any bid situation. We are wasting our time with any work spent in the low end of the pool.

4. Client’s deadline to create a proposal is realistic.

A quality proposal requires sufficient time for the provider. Clients who don’t understand the process or don’t respect our time may not be good partners in the short or long term.

While these markers are specific to my business, there are some sales universals that translate across industries. Salespeople hate saying no to anybody, and they naturally want to win every opportunity that comes in the door. But it is worthwhile to analyze how costs play out in the sales process, and to condition your team to the concept of sometimes saying “Thanks, but No Thanks”. The fact is, every minute they spend on a low-profit group is a minute they are not spending on a high-margin group.

Ensuring your sales team is aligned with your goals may require a change in your incentive plan.  In our case we added a metric to incentivize client profitability in addition to top line revenue. Voila! The team’s focus was clear so that when we had to reject a client, we were not derailed for long. The only thing you cannot get back once it is lost is time, so invest your time with the preciousness it deserves. Lead your team to understand this, and you will see your profitability grow.

 

Jeff O’Hara, author of “Have Fun, Fight Back, and Keep the Party Going: Lessons from a New Orleans Entrepreneur’s Journey to the Inc. 5000“, is president of PRA New Orleans, a business event management firm creating unique experiences for corporate groups.

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