Editor’s note: This is the ninth installment in an exclusive ArchNewsNow series to provide A/E professionals with practical tips for a more successful, profitable practice.

 

Most of us have heard of the Pareto Principle, more popularly known as 80/20. According to Quality Management pioneer, Dr. Joseph Juran, it is the theory of “the vital few and the trivial many.” The idea is that 80% of results are produced by 20% of the efforts. The 80/20 rule has been broadly applied as a management principle for almost all facets of business: time management, inventory, personnel management, business development, and client relationships. Former management consultant and entrepreneur, Richard Koch has written several books on how to identify and leverage the 80/20 principle.

 

Why should architects consider the 80/20 rule? Architects can’t afford to spend time on projects that aren’t working, especially as they’re subject to unique pressures that often result in diminished budgets and strained cash flow. By recognizing that client relationships directly influence profitability and paying close attention to their best assets, firms can move forward with stability and confidence.

 

Focus on what matters. You may find that you spend only 20% of each day actually designing and the other 80% lost in tedious tasks. This is because you lack clarity and you’re not making the right business decisions. In school, you learned how your designs could change the world, but what you didn’t learn were strategies necessary to attain the work you desire. When you’re clear about what you want, how you and your team are going to execute tasks, and you’re selective with clients and projects, it’s likely that you’ll end up with more projects you want and can reasonably manage.

 

Invest in existing relationships. Many firms choose to spend 80% of their marketing budget and client development efforts to get new clients, and 20% on existing clients. Firms should consider focusing their investment where they are getting work. Spend time and effort on your current clients. The 2012 AIA Survey reports that for larger firms 70% of their business comes from repeat clients; for smaller firms the figure is around 50%. Those figures only reflect actual repeat clients and do not take into account the relationships that can be gained from investing in your top clients – they can introduce you to their contacts who might also prove to be top clients.

 

Be selective. Choose the clients you want. Make a list of your top 20 to 30 clients. Divide your list into three groups: A, B, and C. It is probably easy to choose your top five clients. The following questions can help you classify the others. Does the client appreciate interesting projects? Do they choose value over cost? Are they actively involved in the project and disciplined in terms of what they expect? Are the contracts reasonable? Do they pay on time? How likely are they to bring new repeat business, or introduce your firm to potential clients?

 

Identify what you want. Once you have identified your A-list, focus on your top five clients. What are the common factors among this group? Which of these characteristics would you like to see in all your clients? Spend some time thinking about strategies to leverage the relationships you have with your top. Make concrete plans to preserve the good relationship you have with these clients.

 

Cultivate your clients. Next, turn your attention to the B group – which of these clients could potentially move to you’re a-list with some cultivation? Invest in building chemistry with these clients. Your goal is to build trust through your relationship with the client. One strategy for building chemistry is to create a client experience map. Chart the stages of contact and desired outcome from each of those stages.

 

Have a clear focus on the message you want to deliver to your clients. Make certain everyone on your team who has contact with clients is able to coherently discuss your firm’s brand and identity. Many clients can be confused about the building process – be prepared to discuss the projects in plain and simple language.

 

Choose wisely. Take a look now at your C group. Can you realistically envision moving some of these clients into the B group? If so, then create a written plan to do it. If not, evaluate them again to see if they truly belong in your C group. Maybe they can’t be developed. For the clients that don’t make the cut, think about whether or not it is profitable to continue the relationship. Take a look at your overall “spend” in both money and effort. Invest 80% in the clients you like to work with.

 

If you’re still not convinced, think of it this way: Juran demonstrated that 80% of any business’s profits are generated by 20% of its customers. By keeping strong client relationships and discarding unprofitable alliances, firms free up time and energy to devote to their top 20% clients, resulting in greater financial stability overall.

 

 

Steve Whitehorn is managing principal of Whitehorn Financial Group, Inc., the creator of The A/E Empowerment Program®, which helps its clients develop a more significant legacy and empowers them to achieve greater impact on their projects, relationships, and communities.

 

See also:

 

Nuts + Bolts #8: Best Friends Don't Make the Best Partners
For the successful partnership, it's all a matter of balance.
By Michael M. Samuelian, AIA, AICP

 

Nuts + Bolts #7: Leveraging Your Passion
Principals already know what they love to do. It is learning to let go of the other, more mundane tasks that they find difficult.
By Steve Whitehorn 

 

Nuts + Bolts #6: Changing Habits: The Secret to Successful Time Management
Some practical steps to make time for business development when you've been avoiding it or aren't sure how to fit it into your day-to-day practice.
By Donna Maltzan

 

Nuts + Bolts #5: Why Mid-Sized Design Firms Should Hire a Director of Operations
Hiring a DOO has the potential to significantly increase revenues while creating an environment where designers design, not manage!
By Michael Bernard, AIA, and Mary Breuer

 

Nuts + Bolts #4: Spring into Growth Mode: Organize Your Process to Maximize Your Potential
Internal organization, clearly defined workflows, and a focused approach to the things you do best will put you on the right track to long-term growth.

By Steve Whitehorn

 

Nuts + Bolts #3: Focus on the Future: Keys to Steady Growth in a Slow Recovery
Business forecasts are looking brighter, but steady, measured growth is still your best strategy for success.
By Steve Whitehorn

 

Nuts + Bolts #2: You Can't SELL If You Can't TELL
You talk all the time but are you communicating clearly? Use your words effectively to build your influence.
By Tami D. Hausman, Ph.D.

 

Nuts + Bolts #1: Mission Possible: Increase Your Value Without Lowering Your Fees
Fact or fiction: Lowering your fees makes you competitive? You decide.
By Steve Whitehorn