Why Your Biggest Client Could Be Your Least Profitable

I'll wager that most founders can name their biggest client without opening a report.

Ask which client is most profitable, and the answer may take a little longer.

Your largest account might generate impressive revenue while consuming an equally impressive amount of your team's time. Meetings, revisions, rush requests, and small favors can change the economics of a relationship without changing the invoice.

The client isn't doing anything wrong

The arrangement simply evolved beyond what you originally priced.

Consider two hypothetical accounts. One pays $5,000 a month and requires 60 hours of service. Another pays $3,000 and requires 20 hours. Before considering other costs, the first produces about $83 per service hour. The second produces $150. That comparison doesn't establish either account's final profit. But it does give you a reason to look beyond revenue. Here's a few easy steps to follow:

1. Start with five clients and review the same period for each.

2. Compare revenue, direct delivery costs, and the time required to serve them.

3. Include the work that rarely gets its own invoice: preparing for meetings, answering questions, coordinating approvals, and making additional revisions.

4. Use consistent assumptions and label estimates. If contractor labor is already included in direct costs, avoid counting that same expense twice.

5. The next step is understanding why an account takes more work than expected.

A few questions can help:

• Has the scope expanded without a price adjustment?

• Are revisions and response times clearly defined?

• Is your own delivery process creating unnecessary work?

• Are you providing additional services without discussing their cost?

Different answers call for different solutions. A pricing problem may need a revised fee. A process problem may need a better workflow. A scope problem may need a clearer agreement.

Before approaching the client, identify the specific change you want. "Our package includes two review rounds, but recent projects have required four" is a more useful opening than "Your account takes too much time."

Also consider the relationship's other benefits. Referrals, dependable work, and experience in a promising market can influence your decision. Name those benefits explicitly rather than letting them replace the financial review. You don't have to eliminate every demanding client. You do need to understand what you are choosing.

Want to understand which work is actually rewarding your business?

At Crunch Consulting, we provide bookkeeping and financial consulting to help business owners connect their financial information with decisions about profitability and performance. Our approach emphasizes personalized, one-on-one attention, not simply handing you reports and leaving you to interpret them.

Schedule a free 30-minute consultation to discuss your business and the support you need.