In my consulting work with CEOs optimizing their early stage tech ventures, and with expert consultants maximizing their practices, I train my over-committed clients to “work smarter.”   Here continues a series of articles sharing some of those tactics.

Watch your margins

I have seen my clients commit time and resources to the pursuit of opportunities (customers, clients, sales, deals, gigs) without assessing the value of the return they will receive on that investment.  It is as if all opportunities were created equal, each deserving the same attention.

Not true.  Some work you should turn away immediately, no matter how much you may need the revenue.  Some work returns nothing, and drains you of resources that could be focused on getting high-margin revenue.  You need to identify that kind of no-margin work very quickly.

Now, folks trained in sales, particularly with compensation based on profit margin, are experts at assessing where their best rewards will be found.  But many of us are not trained to think this way, and need some simple systems to assess a good prospect from a bad prospect — whether that is a sale, a client, or a customer.

To begin, this can be done simply.

• Define your ideal target customer, client or deal: what industry, what company size, who is the check-signer, how much will they buy, using what deal-terms, and how much effort does it take to close? From this ideal profile, you can determine what margins you will gain by closing this deal.
• Carefully assess the deals that may not return you any profit margin (or a very low margin).  This may be a high-maintenance client who demands more time than your retainer allows, or a product customer who needs multiple proposals or bids to win a narrow-margin deal. It could be a strategic ally that offers you access to an adjacent marketplace, but needs too much re-configuration of your product (at your cost) to make the deal worthwhile.
• Create a system, or just a profile or checklist, of those criteria which represent both your best and worst margin opportunities, and review each new client, customer or deal against this profile at each point of effort. Just begin —  you will learn more from this new context and you will refine the system as you go along.

With these tools, and a bit of discipline, you can sort which opportunities to follow and which to reject.  The secret is to apply these tools at the beginning of the sales cycle, not half-way or most-of-the way through the close.

When your assessment tells you the profit-margin is low, then avoid, refuse, or stop bidding on those opportunities which show you a limited return on your investment of time and effort.  These low-margin deals will deplete your resources and interfere with your closing the high-margin deals.