Dealing with Smaller Legacy Clients

What do you do with smaller clients, especially the legacy ones? The acquisition cost is behind you, but should they occupy a spot on the roster? It's one thing to hire for additional capacity when you land a new client, but there's also a good argument for cleaning out your client base and freeing up existing capacity first.

What I hate to see you do is spend time and emotional energy deliberating about each of those clients. Instead, get a small group together and develop an internal way of thinking about it and then respectfully reverse some of the things you've let happen to you as a firm.

Start by getting all the data together that you need, which is primarily cost accounting. If principals and key leaders aren't participating in the timekeeping system, estimate their time to cover that. This is important because legacy clients have outsized relationships with principals because of the way accounts were handled in the past, before you grew.

Next, score each client in five categories:

1. Are they profitable for the firm.
2. Are they big enough. Typically you'd not seek a client that represented <4% of your fee base, annually, but you might dip down to 2% if there's a compelling reason.
3. Are you effective on their behalf.
4. Do they refer bigger, better work to you from within their own eco-system.
5. Do they resist playing within your newer streamlined systems or do you have to make exceptions to the norm for them.
6. Do they require an inordinate amount of time from higher level employees (i.e., more than they are paying for).

Whether the work is interesting or not shouldn't play an outsized role in your decision.

For those that you need to dismiss, follow these steps, in order:

1. Detail the process that you just went through and explain that you'll need to seek more work from them or set some sort of minimum. Be helpful and kind and not greedy. Just be transparent. Be especially grateful for the role they've played in your firm's history. In some cases you'll turn them into a bigger client, but hardly ever.
2. Explore the option of setting them up to do the work themselves, either with staff or software. Obviously you'd charge them the appropriate fee to do this.
3. Give them 2-3 months of notice so as not to leave them hanging.
4. Offer to introduce them to another firm that might be a better fit. You'll be doing the client a favor, and their new firm will appreciate the introduction. Don't ask for a commission--just be helpful.
5. Offer to put all of their work in a neatly organized archive (minus applications or fonts), as long as they'll cover you time, and make the transition easier. If you're worried about your intellectual property in this transaction you're probably worried about the wrong things--remember that this is a small, cheap client that's been good to you for years!

There you go. Some of the clients who got you to this point won't take you to the next level.