What is
Client Profitability, and Why is it Important?
This is important because your firm will need to keep an accurate track record of all client profitability in order to determine whether you should continue to work with particular clients. If the relationship is not to its desired level of profitability, you will want to take action before your assets and wealth begin to take a hit.
It is relatively easy to gather the data needed to begin a client profitability analysis. However, the tricky part is establishing a routine way to examine the data and determine the most logical and effective next steps.
establishing a routine way to examine the data and determine the most logical and effective next steps.
A typical data set will include the following items:
Client pricing (Rates and alternative pricing methods)
Client staffing efficiency
Overhead efficiency
Rate increase alternatives
Compensation
Lateral and merger analysis
Successions/Transitions
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A client profitability analysis helps your firm determine whether your clients are helping move your firm forward. It also helps determine whether or not your firm has the resources needed to make the partnership a fruitful one on both ends.