70% Revenue from 30% of the clients?

How does time spent by you and your firm compare to the revenues each client generates?

Most designers are unable to tell me with any certainty the breakdown of how much time their firm actually spends working on each client’s projects. I understand that most designers (principals and staff) have very little patience for tracking time, especially if they aren’t billing their clients on an hourly basis. BUT – I always get a reaction when I do the following exercise with them.

When consulting I like to look at several years of a firm’s revenues and make a listing of each client’s NET Project Revenues (which is their total item sales plus time billing plus design fees minus the cost of items sold). This is the amount of money that each client has contributed to the firm’s revenues before overhead costs. Next, I take the net revenue for each client and divide it by the firm’s total net revenues, which gives each client’s contribution to the total net revenue as a percentage. Here’s an example of a typical company:

Client Name	Net Revenues	% of Total
Anderson	30,000	2.00%
Franklin	90,000	6.00%
Grant	210,000	14.00%
Harrison	75,000	5.00%
Ingle	60,000	4.00%
Jones	45,000	2.00%
Mason	90,000	6.00%
Lincoln	390,000	26.00%
Peters	60,000	4.00%
Stevens	450,000	30.00%
TOTALS	1,500,000	100.00%

The bulk of the revenues in interior design firms typically come from a small percentage of their clients. In the above example 70% of the revenues ($1,050,000) are coming from 30% of the clients (Grant, Lincoln, and Stevens).

When I review these charts with designers, I am told (usually with some fairly descriptive expletives) about HOW MUCH OF THE FIRM’S TIME the low revenue producing clients are taking up. [If your firm does keep track of time – compare the % of time spent to the revenue %].

It’s not to say you shouldn’t do the low revenue producing jobs – but you need to be smart about them. Every project requires personal attention from the firm’s principals and the staff. Contracts need to be written; design meetings need to take place; shopping will happen; the phone calls and questions the client has will need to be addressed; and of course all the orders will need to be placed and followed up on. You can’t ignore the client or be less professional in the way you treat them – just because they have a smaller budget or project scope. So what can you do?

• You can try to schedule small budget projects at times between when other major projects are ending and beginning.
• Make client meetings as time efficient as possible. Set firm meeting times (“I must be leaving at 2pm”) and show up with a specific agenda of what needs to be discussed and decided upon.
• Be much more aware of how much time you spend on the smaller dollar value purchases. Don’t spend hours shopping on items with $50 profit margins.
• Just keep in mind that the bigger budget clients are driving the revenue of the firm. Continue to focus business development efforts on projects like the ones that are most profitable.
• AND It’s OK to turn down jobs every now and then!