Q: After 14 years in business, my practice is successful and growing. But, my workload, staff and expenses seem to grow faster than my revenue. I keep thinking that if I get to the next revenue goal, things will even out. But every time I reach the goal, the problems are still there. I may have too many small clients from over the years, but I have no idea how to evaluate this, much less know what to do about it. How do I make sure my client base works for my business? --Busy Beyond Belief

A: Dear Busy,

As you've astutely observed, the longer you're in business, the more clients you have; consequently, the more staff, overhead and time you need to serve these clients. We think we'll grow our way out of the problem, only to find that the problems grow as well. This presents an interesting challenge: The more successful you become, the more demands you have to meet and the more you have to drive revenue to keep it all going. Somewhere along the way the pressure and frustration hit a boiling point, and it can feel like you're working harder just to keep pace.

I call this the client complex: The more clients you add, the more complex the business becomes, and it seems harder to make the business work. At some point in the evolution of almost every practice, the caboose (the overhead required to serve clients) becomes as large or larger than the engine (the revenue that drives your business), and there isn't enough steam to pull the load efficiently.

Our quest is to get you pulling your caboose more efficiently. Look under the hood of your practice to analyze your engine, and you'll see the clients you have, the services you provide, the fees you charge and your capacity. When the relationship between these areas is in balance, you can provide the right level of service to the right clients for the right fees, while maintaining the ability to do the work profitably. Creating a client model will help you achieve this balance.

GETTING DERAILED

In most firms we've audited, the client model needs some reworking, usually because of one of these problems:

• lack of profitability, indicating unprofitable clients, ineffective team structure or both
• out of balance fees-to-service ratio
• too many small or unprofitable clients
• transition from a commission- to fee-based model
• adding a second advisor
• service tiers that define which clients get what services

This last point is likely to raise a few eyebrows since there's a lot of buzz these days about creating service tiers. The problem with service tiers is that they don't tell you if your system works. You can define an A client as someone who generates $10,000 in revenue and receives two meetings per year, two phone calls and gets invited to the annual client event. But this won't tell you if you can provide this service profitably; how clients in this service tier compare to others; whether your team has the capacity to provide these services; and what will happen to your client model as you grow.

In your case, it sounds like it's time to lift up the hood of your client base and take a closer look at what's happening. If your practice is like many I've seen, service is provided intuitively rather than as a formal business structure. This is great for personal relationships, but makes it difficult to deliver meaningful, predictable, top-tier service proactively as you grow.

THE CLIENT MODEL

Remember, your "train" has these moving parts: clients, services, capacity, revenue and profitability. You need to quantify the relationship between these parts and build an operational infrastructure which will support meaningful client service that's aligned with business metrics and goals. Then you can project the likely outcome of the model over a five-year time frame to maintain the equilibrium between the moving parts of your train. The process may go something like this:

1. Define your clients by profile or by type.

2. Establish service groups--let's say A, B and C to keep it simple. Calculate average revenue per client.

3. Determine the average revenue for each client segment, the number of clients in each segment and the anticipated number of new clients in each segment each year. This way you can project how client growth will affect your time capacity. How many of each client do you have and how many do you anticipate adding each year? You can use the number and type of new clients you have added over the past three years as a starting point to project how many you will add for the next three years.