Not every prospect makes a good client. You’ve likely heard of the 80/20 rule, also known as the Pareto principle. In business applications, it suggests that 80 per cent of sales come from 20 per cent of clients. Alternatively, it may mean that 20 per cent of your clients take up 80 per cent of your time, and then never amount to a transaction.
How can this rule help you? It can be applied in many different ways, but the value for your business is knowing where it is impacting your profitability.
In my business, I’ve learned this value the hard way – spending too much time on clients that demand all your attention but who are unwilling to pay for all the extra time you spend with them. Identifying and paying attention to the red flags has saved me hours of heartache and allowed me to spend more time with clients I love working with.
Should you really turn away business? In a competitive industry like real estate, this may seem like a bad thing to do.
I used to feel the same way, but the first time I let go of a client, a tremendous weight lifted from my shoulders and I found I had more energy to give my other clients. And soon enough, new and better clients quickly took their place and my profits started to increase.
Clients that aren’t a good fit for you can drain your energy and take away valuable time better spent with other clients or prospecting for new ones. When you free yourself from the bad, you make more room for the good.
Determining if a prospect will be a good client is a bit like dating. You may need several interactions before you know if you’re going to like working with this person. Pay attention to your gut and look for early warning signs:
- Do they have big expectations but a small budget?
- Do they question everything you do?
- Do they take days to return calls or emails?
- They haven’t spoken to a lender and say they will have no problem getting approved for a mortgage.
- They are unwilling to sign a buyer representation agreement.
A good relationship involves trust. If you’re constantly being questioned, second-guessed or challenged it may mean your prospect has trust issues – a sure sign of problems to come. Conversely, if you feel they are not being completely honest with you or are holding information back, it could mean they are not serious about doing business with you.
Take a look at your existing clients and make note of the qualities you like about them. What made the transaction an enjoyable experience? Is there a common thread or personality type among your good clients?
Do the same for the bad ones and take note of any red flags that you might have ignored at the time you started working with them.
Use this information as a way to better qualify your prospects. Ask questions that will help you uncover the traits you like and identify the red flags early.
Being selective about who you work with is not only good for your state of mind, it’s good for your bottom line.