Firing Clients: It's Not You, Well...
12/15/23 • 40 min
Mark shares a trend he has become aware of in his business: his highest revenue clients are also his least time-consuming clients, and thus his most profitable clients. On balance, the clients who pay the least under his sliding scale fee structure end up taking the most time to process. This discussion begs the question -- when do you fire a client?
Jesse hashes out some ideas for a new fee structure so that Mark can retain higher-touch clients while incentivizing them to comply with the best practices that make them easier to process. They discuss the importance of focusing on the client's emotional state and how changing their behaviors to comply with Mark's system (such as opening accounts at banks that are easy to query for data, and minimizing the total number of accounts) can bring them value by reducing stress and increasing insight into the trajectory of the business.
Mark Butler, Virtual CFO
The Money School: https://moneyschool.works
YNAB
Mark shares a trend he has become aware of in his business: his highest revenue clients are also his least time-consuming clients, and thus his most profitable clients. On balance, the clients who pay the least under his sliding scale fee structure end up taking the most time to process. This discussion begs the question -- when do you fire a client?
Jesse hashes out some ideas for a new fee structure so that Mark can retain higher-touch clients while incentivizing them to comply with the best practices that make them easier to process. They discuss the importance of focusing on the client's emotional state and how changing their behaviors to comply with Mark's system (such as opening accounts at banks that are easy to query for data, and minimizing the total number of accounts) can bring them value by reducing stress and increasing insight into the trajectory of the business.
Mark Butler, Virtual CFO
The Money School: https://moneyschool.works
YNAB
Previous Episode
Diversification... or Distraction?
Mark shares a recent conversation with a client fixated on "diversifying" her business, which to her meant expanding her coaching services from 1-on-1 to group coaching. Diversification is one of those concepts that sounds wise (of course you should diversify!) and is a bedrock concept of investing. However, as Jesse points out, what most people think of as diversifying is really just expanding -- expanding product and service offerings, introducing new price points. The expansion still serves the same market. True diversification is decoupled entirely from the product or service, like using excess earnings to buy Treasury bills. The value of T-bills is independent from the performance of the business.
There is nothing wrong with expansion! It's natural as busineses grow and accumulate more institutional knowledge to seek out new opportunities to leverage that knowledge. But it's not diversification. That prompts Mark and Jesse to ask the question, why? Why do you want to diversify? What's the thought behind the thought? The answer can reveal the true nature of the problem -- maybe the business owner is worried about some risk exposure in the business and is trying to sidestep solving that problem (or perceiving the problem to be bigger than it really is), or perhaps the owner is simply bored and looking for a new problem to solve.
Whatever the answer, before you take steps to diversify your business, understand the why behind the motivation so you don't end up merely distracting yourself from the core business.
Acquired Podcast on Costco:
https://www.acquired.fm/episodes/costco
Mark Butler, Virtual CFO
The Money School: https://moneyschool.works
YNAB
Next Episode
New Years Resolutions and Why They're Awesome
Jesse defends the New Years resolution, and offers up of his own resolutions for the year, namely being kind. Mark resolves to try really hard, and be a better friend.
Harvard study on men's happiness (started in 1938!): https://www.health.harvard.edu/blog/the-secret-to-happiness-heres-some-advice-from-the-longest-running-study-on-happiness-2017100512543
Musical interlude courtesy of Kevin MacLeod:
"Investigations" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 4.0 License http://creativecommons.org/licenses/by/4.0/
Mark Butler, Virtual CFO
The Money School: https://moneyschool.works
YNAB
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