When was the last time you assessed your client base? While most PR and marketing firms would prefer to work exclusively with clients that pay appropriate fees, pay in a timely manner and appreciate the work you do, often times that’s not the reality. Our clients are human and may have occasionally missed the due date of a payment here or there. But when some clients’ failures to pay on time starts to impact the financial health of your business—or when they become more challenging to work with from a personality perspective—it’s time to reassess what makes a good client for you and your firm.
When we think of ideal clients, we often think about a particular profile, demographic or target market. This is certainly important, especially when you have mature and developed niches as well as established go-to market approaches. A specialized industry approach typically requires less long-term investment in time and resources to learn and understand a particular industry. Once you have assessed them from that standpoint, and before you bring them on board as a new client, you should evaluate whether they’re the right fit for your team and the services they’re seeking, just as they’re evaluating you. Are they looking for the firm charging the lowest fees? If they’re basing their decision solely or largely on cost, you may not want to take them on as a client. They are unlikely to find a firm that provides fast, accurate and inexpensive services, as it’s extremely rare to have all three. If responsiveness and accuracy are important to them, they should be evaluating based on the quality of work and not cost alone. Of course, everyone has a budget, so your services will still need to fall in the range they can afford.
Once a client decides to move forward with your firm it’s important that there is alignment on the expectations of services provided, in addition to the fees you’ll charge those services. Clients need to be willing to pay reasonable fees for your services, and an agreement outlining a clear payment schedule needs to be established upfront.
Over time, client relationships evolve, and the costs of operating your business will certainly increase. As a result, fees need to be adjusted throughout your relationship. How do your clients respond to fee increases? If you have clients that are understanding and truly value what you do, they’ll be less likely to push back on any fee increases.
We recommend performing a client analysis at least annually. The results of this analysis should be identifying which clients need to have fees increased, which clients need scope adjustments and which clients should be culled.
An important part of analyzing your clients is reviewing profitability, but how is this done? Does your firm track your time? While it’s not necessary to bill based on an hourly rate, monitoring and tracking time can be an effective way for you to measure profitability, utilization and revenue. An analysis should be conducted to properly identify how much time your team is spending to complete projects and service your clients. Ultimately, this time equates to dollars and it needs to be aligned with what you’re charging clients in order to maintain profitability. Which projects are the most time consuming? Do certain clients require more of your time? What clients expect more from you but do not think they should pay you more than they are already paying you?
Consider your labor costs, including salaries, benefits and payroll taxes. We often see a 3.3 times multiple—and sometimes more—applied to these costs to establish billing rates for team members. As technology costs continue to increase for PR and marketing firms, we oftentimes see a technology or administrative fee charged at a flat percent of revenue. This is another valuable way to recoup some of your costs and increase profitability.
While tracking time might seem like a daunting task, you can start small. The good news is that there are many scalable and inexpensive tools available on the market.
Ways to streamline billing
Now that we have identified who the right clients are for us and have analyzed profitability, we need to bill for our services. Is your billing process straightforward and client-friendly? Do you offer an easy and convenient way for clients to pay their bill? Managing client billings and following up on unpaid invoices can be very time-consuming and labor-intensive. Like timekeeping, there are many tools available on the market that can help to streamline the billing and collection process. Many even offer ways for clients to receive bills, review and pay them directly from their mobile devices. These solutions can send reminders on your behalf so you do not have to keep following up with clients.
Using technology for billing and collections can help reduce payment delays and the amount of time your team is spending on the process.
Beyond whether a client is appreciative of your work and pays on time, there are other things to consider. Do they refer business to you? Do they address issues upfront? Do they call you constantly, at all hours of the day? While you can’t necessarily assess these areas before taking them on as a client, these are items you can address upfront at the beginning your relationship.
Take the time to get to know the potential client you may be working with to ensure you feel like they’re a good fit for your firm. It can be challenging to turn business away, but in the long term, it will be better for your business. It’s important to establish policies and procedures so everyone is aligned going into the relationship. If you have built a strong relationship, it will be easier to overcome any issues that arise along the way.
Dominic Rovano, CPA is a partner at Janover LLC and leads the firm’s Professional Services Group.