An article in this month’s Direct Magazine discusses how B2B service firms can approach determining customer value. The example included is a print/mailing house, but the model can be applied pretty well to B2B law firms.

The article discusses a five point assessment stategy for understanding who the most profitable clients are through the following criteria:

1) revenue dollars

2) payment terms (30,60,90 days)

3) pricing terms – for how complex/customized the job is

4) impact on the organization – how many people are involved

5) the relationship – opportunity for long-term partnership

What’s interesting is that customer value isn’t necessarily a function of sales volume when you calculate any direct and variable costs that can eat into revenues. Knowing which accounts are the most profitable allows you to focus more of your efforts towards them (and cross selling to them), but if you have accounts that aren’t quite profitable but have potential to become profitable, you can work towards bring that account into profitability.

» Read Article: Net Worth

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