Using Data To Find Your Best Clients

If I were to ask you, “who is your best customer?” would you be able to answer?

Would you have the right answer if we dug a little deeper?

When asked this question — most people talk about the customer that they have the best connection with. The person they are most comfortable getting a beer with, or a glass of wine. Most business-owners would say their best customer is the one they can ‘hang-out’ with.

The person they are most comfortable getting a beer with, or a glass of wine. Most business-owners would say their best customer is the one they can ‘hang-out’ with.

But is that really a good answer? I’d like to challenge you to another better definition of the best customers… and show you how your data can help you find your best client or customer.

Here’s my challenge to you — think of your best customer as the person bringing in the biggest cheque to your business. This is the client that makes up a significant chunk of your business.

But

Why Bother With Finding Your Best Clients

Without knowing who your best customers are in your life you won’t be able to serve the right people. You’ll spend too much time on serving the wrong clients — who won’t be the right fit for your business and will cost you more money than they make you.

If you do find out who the best clients are for you — you will be able to attract more clients to your business, be able to serve more people, at a higher level, and earn tons more money providing the same services that you are doing anyway.

Plus you will be able to get more leads.

This will allow you to grow your business bringing in more cash to your business.

But the biggest reward that you will get is by spending less time in the office, without having to deal with customer service nightmares.

In the end, jus the finding who your best clients are — and serving more of that ‘type’ of client you will have more peace of mind, a steady cash flow, and much bigger paycheques for you in the end.

But to do all this — you need to find your ‘Biggest Cheque’.

In a bit I’ll show you how to actually do this — and share some hard numbers with you can apply this… but before I do that, let’s look at

What Is Your Biggest Cheque

This is a concept I learned from the strategic coach Dan Sullivan — who talks about the biggest cheque. This is the average amount of money clients bring to your business over the past three years.

You can extrapolate this to a shorter or longer time period if you like, or have been in business longer. But I find three years is an ample amount of time to overcome cyclical cash changes that a client might bring to your business.

So the biggest cheque is the amount of money that you made in any given year divided by the number of clients in that year — and average this out over a three-year period.

But then you have to look at all the clients — and then find out the one who has brought the most amount of money to your business. This is the best client. The more of these you can have the bigger your best cheque is going to be — more about this in a minute.

But how do you find out who are the best people you can help — who are your best clients?

Today, I’ll share with you some numbers… and how to use the data that you already have to find out who the best customers are in your business.

Before we go any further — let’s look at a quick

Example With Actual Numbers

Here are a few screenshots from one of my clients (let’s call her Jane) who I was helping to find the best customer.  I’ve redacted (blacked out any sensitive information) so we can talk about this openly.

total-sales-by-client

Here’s a table of my client Jane — this is a report that I helped her extract from her sales data. This table shows a few things.

It shows the client name, the total sales over a period of 3 years, and it shows the percentage of revenue generated by each client.

I’ll explain the significance of this table to you in just a moment — but before we get into that I’d like to narrate a quick story to you about finding the best customer.

I asked Jane a little bit about her business and if she knew the following

  • her product mix (that’s the amount of sales she does across each product/service line)
  • her best client (that’s the client that’s bringing in the most money) and
  • her biggest cheque (that’s the amount of money she makes in total divided by the number of clients)

She confidently told me that she did.

  • Her product mix was 30% on Tier 2 Client Services, 50% on Tier 2 Services and 30% on Tier 3 Services.
  • Her best client was ‘Jack Successful’ and
  • her biggest cheques was $5,000 (again, biggest cheque is the amount of money you make in total divided by the number of clients)

Then we proceeded to look at the data — which is what’s included here.

ACTUAL PRODUCT MIX

Based on the data — over the last three years here’s her actual product mix

  • 47% from Tier 3 Service
  • 33% from Tier 2 Service
  • 8% from Tier 4 Service
  • 6% from Tier 2 Client Service
  • 6% from a mix of other services

Here’s the product mix screenshot

product-service-mix

You can see from the table above that her estimation of the product mix was way off from what it actually was.

What this means that instead of focusing on the clients that made her the most money, she was focusing on the clients who were only making her 6% of the money. This meant that her attention and focus wasn’t on clients that could actually make her money.

This means that she thought she was making 5 times more money from a particular type of client than she actually was.

If she kept focusing on this type of client and expecting more of these clients she would quickly go broke.

But that’s only the start.

ACTUAL BEST CLIENT

Based on the data her best client was

  • Cathy Consistent and not Jack Successful. Cathy Consistent is the top of the chart there, pulling in $66,525 over a 3 year period. Whereas Jack Successful is at the bottom of the chart there — pulling in a mere 11,610.

Here’s that table again

total-sales-by-client

She thought it was Jack Successful because Jack Successful always sent her a gift basket after each successful session — good for Jack, really really bad for my client.

She was paying attention to a client who was bringing in 5.7 times less revenue than the best client.

cathy-consistent

Imagine if she kept promoting and marketing to this client — who was from a completely different industry than her best client.

ACTUAL BIGGEST CHEQUE 

Based on the data her biggest cheques was — wait for it — $764

biggest-cheque

What this means is that she was overestimating the value of her clients by a factor of 6.5

What happens when you put the three of these together.

(Product Mix) multiplied by (Best Client) multiplied by (Biggest Cheque) = Opportunity Cost

5 x 5.7 x 6.5 = 185.25

By focusing on the wrong things she was wasting her potential by a multiple of 185 times.

That means if she just focused more on the products that were her biggest sellers, focused on clients that were actually bringing her more money, and focused on her biggest cheque opportunities — she would increase her revenue by 185 times.

That’s a pretty big jump. Don’t get me wrong — this wouldn’t happen overnight — but it would happen over a period of time.

Now let’s look at

How Do YOU Implement This In Your Business (And Life)

In your business there is a ‘best client’, there is a ‘biggest cheque’ and there is a ‘product mix’.

Just as an exercise — I want you to write these down on a piece of paper, as a guess, a game with yourself.

Think about your product mix and think about what’s your best seller in your business.

Next, think about who your best customer is and write this down

Next, think about your biggest cheque — what do you feel is the value of your customers each year.

We’re just doing this for you and me. You don’t even have to tell me the results. I just want you to look at them for yourself.

Now that you’ve got that written down, let’s look at the data.

Download your sales report for the last three years and total up the sales from each client. Yet it might take a little time — but this is important.

This will help you get more of the kind of clients and cheques that you want and deserve in your life.

We’re going to look at the actual data and figure out who is the best client, the biggest cheque, and our real product mix.

By doing this you will get a real picture of your business — then in my next post, I will show you how you can take this exact data and find more of your ideal clients.

How Does This Apply To Me If I Don’t Have A Business

If you don’t have a business then chances are you’re doing one of two things — working for someone else or studying.

In this case, this exercise is even more important.

If You’re Working For Someone Else

If you’re working for someone else then that person is your only client. For that client, you’re doing some things that are more valuable than others. There are some activities that are higher valued than others.

For e.g. filling out a timesheet is probably not that valuable — though it does keep track of time.

On the other hand delivering a service that brings in the money is probably more valuable.

Look at your time over the last 3 – 6 months and do the same exercise. What are areas that ‘produce’ something in your work — and what are administrative tasks. This is the product mix for you.

You need to focus on your ‘production’ vs your ‘administrative’ tasks. Once you identify them you’ll be able to do more of them.

Then also look at what activity earns you the most — this is your biggest cheque. Do more of this. Plus, look at your biggest cheque — this is the about of money you brought in for your employer.

You get paid for bringing and creating more value for the business. The more you can identify this, and create this for your employer the bigger your paycheque will become.

If You’re Studying For Something

Same rules apply — when you’re studying you’re spending your time to learn, and reproduce. But there are a number of other activities that you’re doing which aren’t related directly to either learning or reproducing.

At this point, you probably won’t have a time sheet or a schedule. So what I would suggest is to start keeping a time log and implementing the same rules in your life.

Look at the tasks that are producing the best results for you. What study and learning habit are working best for you. Then do more of these.

(Leave a comment below if this is you and you would like more information on how to implement this in your study habits)

Let’s move on — and quickly take a

Big Picture Overview To Finding Your Best Customers

This will help you not only understand the process — but also look at how you can implement this in your business.

Here are the steps we’ll be taking to find our best customers.

  1. Download your sales data for the past three years — or shorter if you’ve been in business for a smaller duration
  2. Sort this into the products that have generated you most revenue in the last 3 years to find your product mix
  3. Then take the average sales per customer for the three years
  4. Take the top 10 customers based on the amount of sales revenue generated by each customer – look at the top 10% of customers — this is your best customer
  5. Next look at the amount of revenue generated each year and divide that by the number of clients in each year — this is your biggest cheque
  6. Do that now, and in my next post, I’ll share with you how to find more clients like this.

BUT A WORD OF WARNING!

Going through an exercise like this is not easy. It will be tough.

Not only to collect the data, put it together, and run through the numbers in the first place — but also to take a hard look at the data itself.

It will jar you.

Rest assured no matter how accurately you might be able to predict events — the data never lies.

And because the data doesn’t lie – chances are you might find that the person you thought was the best customer isn’t.

Or your favorite product isn’t the biggest money-maker.

At this point, we’re only looking to figure out what the data tells us.

So don’t let this jar you too much. It’s just telling you what has already happened and is happening in your business.

You can’t really change that — it is what it is.

But once you get a handle on this — once you start implementing this in your life — you’ll quickly come to realize the power of looking at data and making decisions based on the data.

You will gain new power and understanding in your business and quickly reach the successes that you want to attain.

So forge ahead. Go through this pin-prick of an exercise and your business will be better for it.

Action Items

  1. Estimate your current product mix, sales per customer, and biggest cheque
  2. Download your sales data
  3. Sort it based on product mix, sales per customer, and biggest cheque
  4. compare actual data with you estimations

Next Steps

In the next post, I’ll share with you how to use this data to find more customers for your business. However, doing this step first is important.

Without doing this post you won’t be able to find the ‘right’ customer for you — and you’ll spend your energy on clients and customers who don’t make you any money.

Quick Recap

In this post, we looked at

Why you must find your best customers

An example of the difference between actual data and estimation

What is your biggest cheque and how to find it in your business

Now It’s Your Turn

P.S. Let me know if you get stuck at any stage of this exercise — if you feel overwhelmed, or unsure about how to proceed, leave a comment below or send me an email. I’d love to help you out.