How many conferences over how many years have you heard a speaker admonish the audience to ‘Grade Your Clients’?
How many firms do you know who actually do that? Does your firm do that? Not many do.
So why do speakers focus on that topic?
It’s for three reasons:
- Grading clients focuses partners on where the profit comes from in the firm.
- Grading clients focuses partners on where further opportunities from within the client base are most likely to come from.
- Grading clients shows the firm how much of its portfolio falls well short of the desired level.
The important thing to know about grading clients is that there is no set formula that you have to use.
I’d advise you to pick 5 criteria that is most important to you (maybe fee size, geography, scope, capacity, referral potential etc).
Then score each of your clients against your criteria, awarding an A grade to those who score 5/5, a B grade to those who score 4/5, a C grade to those who score 3/5 and so on.
It’s a simple process, it can be done in small batches and if nothing else, you receive an independent method of evaluating where the firm really stands to compare against your confirmation-bias-influenced perception of where it stands.
If you don’t think confirmation bias existing in evaluating a firm, just go and ask a PE company how many over-inflated valuations they’ve received from partners of potential acquisition targets so far this year already.
Grading is a free way to sense check how your firm is doing and what it needs to do to get to where you want it to be.
Plus, grading your clients gives hope to conference speakers that they’re not wasting their breath on their audiences.
That’s got to be a win-win!
To your success,
Martin
