The secret to sustainable growth in business isn’t just about acquiring more clients—it’s about knowing which clients are worth your time. Regularly tracking client profitability is a habit that can transform your decision-making and maximise your returns. Here’s why it matters and how to start in 2025.
Tracking client profitability consistently allows you to make informed decisions that directly affect your bottom line. Without it, inefficiencies can slip through the cracks, leading to wasted time and resources.
By using our Client Value Calculator, you can uncover these insights and make smarter, data-driven choices to help your business thrive.
Incorporating profitability tracking into your routine doesn’t have to be overwhelming. Here’s how to build the habit and make it part of your ongoing process:
When you track profitability regularly, the benefits will become apparent over time:
Each industry has its own set of profitability drivers. Understanding these will help you measure profitability more accurately and ensure you’re tracking the right metrics for your business. Here are some examples of different industries and their limitations:
Limited by Time: In professional services, profitability often comes down to how many billable hours you can generate. Tracking the time spent on each client and ensuring you’re charging appropriately for that time is crucial. Look at metrics like billable hours per month, client retention rates, and average hourly rates.
Limited by Shop Space: Retail businesses are limited by the amount of physical space available for inventory and customer flow. Profitability often hinges on product turnover and the efficient use of this space. Metrics to track include sales per square foot, average transaction value, and inventory turnover rates.
Limited by Time and Materials: For trades businesses, such as plumbing, electrical work, and construction, profitability is a mix of the time spent on-site and the materials used. Tracking materials costs alongside time worked is critical to ensure you’re pricing projects correctly. Metrics include cost per job, time spent per project, and materials markup.
Limited by Subscription/Scalability: SaaS businesses face a unique challenge of scaling with low marginal costs after initial development. The profitability driver here is often customer acquisition cost (CAC) versus customer lifetime value (CLV). Metrics like churn rate, average revenue per user (ARPU), and customer retention rate are key.
Limited by Capacity and Service Efficiency: In hospitality, profitability often depends on maximising service delivery and customer volume, along with managing the cost of food, beverages, and staffing. Tracking metrics such as cost of goods sold (COGS), average spend per customer, and table turnover rates are essential.
Limited by Website Traffic and Fulfillment Costs: E-commerce businesses depend heavily on customer acquisition costs, conversion rates, and fulfillment efficiency. Key profitability drivers include cost per acquisition (CPA), conversion rate, and shipping/logistics costs.
Now that you understand the industry-specific drivers, here’s how to measure client profitability effectively:
By tracking client profitability regularly and measuring the right metrics, you’ll have a competitive edge in managing your business for sustainable growth. Using tools like the Client Value Calculator will help you stay on top of your numbers, allowing you to focus on high-value clients and grow your business strategically.
Make profitability tracking a habit today and position yourself for a successful and profitable 2025.
Every business owner encounters it- the realisation that a client isn’t profitable. Whether they require too much time, constantly push back on fees, or simply don’t align with your services, these clients can be unprofitable.
But what should you do next? Here’s how to turn this challenge around.
Before taking any action, ask yourself: Is it worth it? Do you really want to continue working with this client? This is the first and most important decision you need to make.
Assess whether they are a good fit for your business in terms of qualitative risks, reputation, cultural alignment, and whether you enjoy working with them.
If it’s clear that the risk outweighs the reward, or if the client doesn’t align with your values, you might decide that it’s not worth saving the relationship.
If you decide to continue working with the client, the next step is to pinpoint exactly why they are unprofitable. Regular profitability tracking is key here.
Use the Client Value Calculator to break down:
By gathering this data, you can uncover whether the issue lies in pricing, time investment, or the product mix you’re offering. Does the product mix still fit the client’s needs?
Once you have the numbers, approach the client with transparency. Here are a few options to discuss:
By framing the conversation around value, the client may be more open to adjustments that benefit both of you.
Step 4: Optimise Processes
Ask yourself: Can this client be served more efficiently? If they can, you could reduce your time cost.
Optimising these aspects will help reduce the cost of servicing the client, potentially turning them into a more profitable relationship.
Step 5: Make the Tough Call
If renegotiation and optimisation don’t lead to better results, it may be time to part ways. While it’s never easy, ending an unprofitable client relationship can free up resources better opportunities.
Conclusion
Unprofitable clients don’t have to be a drain on your business. By taking a proactive, data-driven approach, you can either turn them around or cut them loose. Start by using the Client Value Calculator to assess your client relationships and make smarter, more informed decisions today.
As a small business owner, your time is your most valuable asset.
Transitioning from focusing on client work to managing business growth can be a big step. The truth is- the secret to sustainable growth isn’t more clients – it’s more profitable clients.
Our Client Value Calculator is designed to help businesses like yours understand and optimise client profitability.
There are two different models, one for professional services or tradies and another for SaaS or subscription-based businesses.
Ready to unlock your business’s potential? Let’s explore how JD Scott + Co can help you work smarter and maximise profitability.
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JD Scott + Co is one of Sydney’s leading Chartered Accounting firms, we aim to help build your business and wealth, empowering you to reach your goals.
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