We all like a ‘good client’, whether it is an existing client, or a big one we hope to land. But what exactly are the attributes of a good client and what do we do about them if they aren't as good as we thought they were? Indeed, why did we take them on in the first place?
When working with partners on pricing strategy, an exercise that involves amongst other things, pricing client files that are active at that time, some of our pricing suggestions can be greeted with, "oh, I can't do that, this is one of my good clients!"
Really? And what exactly is a good client pray tell? More specifically, why have you endowed this client with the mantle? We are then presented with one or more of the following:
- "They have been with the firm for 20 years", or
- "They spend £/$XX with us each year", or
- "It looks good to say that we act for them", or
- "They represent a substantial chunk of my annual fees"
Not to suggest that these issues don't have some significance, but they rather miss the point. Perhaps an empirical and subjective analysis of the client might prove more enlightening. For example:
(a) How long have they been clients of the firm and has that relationship been fruitful for both of us?
(b) Irrespective of how many years they have been clients of the firm, are we instructed on matters regularly or only when something significant happens every 5 years?
(c) What exactly are the fees that they have contributed each year over the last 5 years and what is the trend? Is it static, increasing or decreasing?
(d) If they use more than one law firm, what is our share of their legal spend and what is the trend? Is it static, increasing or decreasing?
(e) Leaving aside the question of gross fees generated by the client, what is the profitability of this client by practice area? Indeed, are we even capable of answering this question?
(f) Is this client a good ambassador for the firm, referring others to us?
(g) Do they pay their invoices in keeping with our normal terms of trade or do they perpetually reside in the 90/120 day columns? If they are late in paying, what is the cost of the firm's resources (partner, staff and otherwise) spent chasing them?
(h) Do they argue over and contest every estimate, quote and bill?
(i) Are they reasonable in their expectations?
(j) If this is a 'show-pony' client are we getting a demonstrable return from our investment in the relationship through the resulting acquisition of more profitable clients from the same sector?
The list could go on but you get the drift. This is a very different set of questions. Let us share with you what we perceive to be the reality of (not all but) many of these organisations and individuals that partners are all too quick to characterise as 'good clients':
- They have been with the firm a long time and this has gone from being something positive to a situation bordering on familiarity breeding contempt.
- The client treats the firm and the individuals within it as a combination of doormat when they want something done and whipping boy when something goes wrong.
- The greater the exposure of the firm and individual partners to the fees generated by this client, the more demanding, belligerent, discourteous and downright bullying they can be. They know that they are important to you and they cynically exploit it.
- The chances are that in 2008/2009 they laid into you with aggressive demands for savage discounts to which you agreed because revenues were dropping generally and the prospect of losing this client was untenable. They are still on the same rates 5 or 6 years later and you are now terrified to raise with them the prospect of an increase
- They are unreasonably demanding, always requiring their work to be done before anyone else's and indifferent to your other obligations.
Once again, the list could continue but you get the general idea.
Not all clients are good clients and not all fees are good fees. Whether they are or aren't, is often left to the discretion of individuals with insufficient objectivity.
Whether they are an existing client or a prospective new client, 'trophy' clients are a necessary component of every firm's client list. Apart from anything else they provide vital sector credibility which helps bring in second and third tier work from clients who are often less demanding, provide just as interesting work if not more so, have less buying power and will therefore pay properly and are generally easier to work for and with.
For a variety of reasons however, firms often have an overexposure to 'trophy' clients that is not only costly but is also frequently unnecessary. The same reputational effect can often be achieved with considerably reduced exposure to those clients. To use a culinary metaphor, 'trophy' clients are like garlic or truffle oil; use sparingly or the result is overpowering.